Businesses that conduct remote sales in Virginia – with exceptions for small businesses – will have to register with Virginia Tax starting on July 1 and collect sales or use tax. This includes remote sales via the internet, phone, magazine or other means.
The requirement affects any remote seller that receives more than $100,000 in annual gross revenue in Virginia or conducts 200 or more transactions in the commonwealth annually. It also affects any market facilitator that facilitates or conducts sales at the same threshold.
Stephanie Benson, the communications specialist for Virginia Tax told The Center Square in an email that the department does not have any information on the registration numbers or the effect on the market, but the new tax is expected to generate more than $150 million in revenue annually.
“Virginia will receive an estimated positive revenue impact of $155 million in Fiscal Year 2020, $175 million per year for Fiscal Years 2021 through 2023 and $180 million for Fiscal Years 2024 and 2025,” Benson said.
The 2020 estimate is based on the number of out-of-state remote sales that are not currently taxed and the later estimates are based on the expected increase in sales.
Virginia is one of many states that has passed or is working on passing legislation to create a sales tax that affects remote sales. Virginia's legislation was passed through the Legislature in February and signed by the governor in March.
These pushes come after a U.S. Supreme Court ruling that overturned precedent that had prohibited state governments from taxing a business unless that business had a physical presence in the state. In South Dakota v. Wayfair, the Court changed that standard, and now permits states to implement these taxes as long as the taxes do not seriously impede interstate commerce.
The South Dakota legislation that was ruled constitutional had the same small business threshold that the Virginia law does. Despite some states having bigger markets than South Dakota, many of the other states have also adopted this threshold.