Which commonly controlled out-of-state dealers had to begin collecting Virginia sales tax on September 1, 2013?

Plain-English summary

Tax Bulletin 13-11 announced a rebuttable collection presumption for certain commonly controlled out-of-state dealers beginning September 1, 2013. The rule applied when another member of the controlled group maintained a Virginia distribution center, warehouse, fulfillment center, office, or similar location that facilitated delivery of property sold by the dealer.

The bulletin defined common control by reference to the same controlled group of corporations or an equivalent ownership relationship for another entity form.

An affected dealer could rebut the presumption by showing that the commonly controlled person's Virginia activities were not significantly associated with the dealer's ability to establish or maintain a Virginia market. Dealers unable to rebut it had to begin collecting Virginia sales and use tax on Virginia sales on the stated effective date.

What this means for you

• This bulletin describes a historical 2013 affiliate-nexus rule, not necessarily current remote-seller law.
• Identify shared ownership and every Virginia facility maintained by related persons.
• Determine whether the facility facilitated delivery of the dealer's tangible property.
• Preserve evidence if claiming the related person's Virginia activity did not support the dealer's market.

Common questions

Q: Did any related Virginia presence trigger the presumption?
A: The bulletin focused on specified facilities that facilitated delivery of the out-of-state dealer's property.

Q: Could a dealer challenge the presumption?
A: Yes. It could show the Virginia activities were not significantly associated with establishing or maintaining its Virginia market.

Q: When did the bulletin say collection had to begin?
A: September 1, 2013.

Citations and references

• 2012 Va. Acts ch. 590 (Senate Bill 597).
• Virginia Tax Bulletin 13-11.

Subject

Important Information Regarding Sales Tax Collection Requirements for Certain Out-of-State Dealers

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 13-166

Original ruling text

TAX BULLETIN 13-11

Virginia Department of Taxation

August 23, 2013

IMPORTANT INFORMATION REGARDING

SALES TAX COLLECTION REQUIREMENTS

FOR CERTAIN OUT-OF-STATE DEALERS

EFFECTIVE SEPTEMBER 1, 2013

BACKGROUND

Virginia law currently sets out the standards for requiring out-of-state dealers to collect the Virginia Retail Sales and Use Tax on sales made into the Commonwealth. Maintaining a business place in Virginia, soliciting business through employees, agents, or independent contractors in Virginia, or regularly making deliveries into the state are among the activities for which a dealer may be deemed to have substantial nexus with Virginia, and thus be required to register for and collect Virginia’s Retail Sales and Use Tax.

LEGISLATION

Legislation enacted during the 2012 Session of the Virginia General Assembly (Senate Bill 597, Acts of Assembly 2012, Chapter 590), creates a rebuttable presumption that effectively requires certain out-of-state dealers to register and collect Virginia Retail Sales and Use Tax for sales made into Virginia. In order to be subject to this requirement, the out-of-state dealer must belong to a commonly controlled group in which a person or entity maintains a distribution center, warehouse, fulfillment center, office, or similar location in Virginia that facilitates the delivery of tangible personal property sold by the out-of-state dealer.

The statute defines “commonly controlled person” as any person that is a member of the same “controlled group of corporations” as the dealer, or any other entity that, notwithstanding its form of organization, bears the same ownership relationship to the dealer as a corporation that is a member of the same “controlled group of corporations.”

Affected out-of-state dealers can rebut this presumption by demonstrating that the activities conducted by the commonly controlled person in Virginia are not significantly associated with the dealer’s ability to establish or maintain a market in the Commonwealth for the dealer’s sales.

The legislation provides that it is effective on the earlier of September 1, 2013, or upon passage of federal legislation granting states the authority to require remote sellers to collect taxes on goods shipped to in-state purchasers. Because no such federal legislation has been enacted, the effective date for this legislation is September 1, 2013. Thus, all affected out-of-state dealers must begin collecting sales and use taxes on sales made into Virginia on September 1, 2013.

Further Instructions

For additional information, please contact the Office of Customer Services at (804) 367-8037 or through the “Live Chat” service on the Department’s website, www.tax.virginia.gov .