Virginia Senate Passes Bill Implementing Remote Sales Tax
The Virginia Senate recently passed Senate Bill 1083, a new law that would allow the state to start collecting sales tax from remote sellers out of state. Originally introduced to the Virginia Senate at the start of the 2019 legislative session, the bill has now passed and is expected to be signed by Governor Ralph Northam in the coming weeks.
When signed, this bill will make Virginia the latest of more than 30 states to implement some form of remote sales tax on out of state sellers, something that was considered unconstitutional until very recently. While vendors work to fully understand the implications of these laws and the different ways they are being implemented around the country, new ones are going into effect regularly.
The Shift Caused by Wayfair
Since June 2018, dozens of states have implemented, started enforcing, or began discussion of remote sales tax laws. Once the US Supreme Court released their decision in the Wayfair case, the flood gates opened, and a seismic shift occurred in how states collect sales tax from remote sellers, primarily online.
Before the Wayfair decision, there were already dozens of these laws in place or actively being considered in state legislatures around the country. The Supreme Court case was in direct response to a law in South Dakota that retailers were fighting against. Other states, however, like Virginia, had been waiting for a moment such as this when there would be able to pass such a law.
What Virginia’s New Law Will Include
While the Wayfair decision opened the gates for these laws to go into effect, it was not completely open ended. Language in the decision indicated that such laws needed to provide safe harbor for small sellers to avoid excessive burden on companies with limited resources. Other states have also taken it upon themselves to keep reporting and compliance in general as simple as possible and to not be overly aggressive in the enforcement of the new requirements (though some face struggles with this).
Virginia’s own law is aimed to be small-business friendly as well, with the following provisions to ease companies into the new requirements:
- Only remote sellers with more than $100,000 in annual sales or 200 or more transactions in Virginia each year will be subject to collecting and remitting sales tax.
- Enforcement of the law will be delayed until July 1, 2019 to give companies time to acquire the necessary sales tax registration and start collecting.
- Several lines are included in the bill to provide the Virginia Tax Commissioner with guidance on streamlining implementation. These include ample notice of rate changes, a system to provide software providers with the information needed to support small businesses, and that only one return per month at the most be required.
In addition to these requirements, Virginia’s new law will include a marketplace facilitator requirement. This will require any marketplace facilitator that has at least $100,000 in sales or 200 or more transactions in Virginia to collect and remit sales tax on behalf of the sellers who use their platform. Similar laws have been implemented in several states already to further remove the burden of collecting sales tax in multiple states from small and medium sized businesses.
The Next Steps in Virginia
While ample guidance is provided in the law on how it should be implemented, who will be subject to the requirements, and when reporting should be conducted, some other components remain up in the air. The enforcement of the law at the state level, as well as who will be eligible for waivers and how those waivers will be obtained still need to be worked out.
The new bill is expected to be signed by Governor Northam soon, and will go into effect at the start of July later this year.