State of Wayfair: Virginia Eyes Mid-2019 Start for Online Tax

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Tripp Baltz

Virginia is targeting mid-2019 as the deadline for out-of-state vendors to start complying with requirements to collect and remit sales tax.

Aubrey L. Layne Jr., the state’s finance secretary, told Bloomberg Tax the administration is working on a bill that would include a small-seller exemption and marketplace provisions. The draft legislation, which lawmakers won’t consider until next year’s session, won’t apply retroactively, he said.

Gov. Ralph Northam (D) and administration officials will find lawmakers to sponsor and advance the measure, the details of which are likely to be unveiled in December, Layne said.

“My guess is it probably won’t be effective until July,” and it would only apply to transactions occurring after that date, he said.

The bill is expected to include a provision addressing tax collection and remittance by online marketplaces such as Inc., Etsy Inc., and eBay Inc. that host sellers on their sales platforms, Layne said.

If Virginia uses the South Dakota thresholds as a benchmark, the state would generate an estimated $250 million in annual revenue, according to Layne.

However, he said, “we’re a little larger state,” and a higher, proportional threshold is under consideration.

By including the small-seller exemption and eschewing retroactive application, the bill would align with principles identified in the U.S. Supreme Court’s South Dakota v. Wayfair decision. The June 21 ruling—which tossed out Quill Corp. v. North Dakota, the court’s 1992 physical presence threshold for when states could tax remote sales—has many states looking to expand their authority over online sales taxation.

The majority in the 5-4 ruling suggested strongly that South Dakota’s law requiring remote sellers to collect sales tax if they had more than $100,000 in in-state sales or 200 transactions would pass constitutional muster. Even though the court didn’t rule directly on the validity of South Dakota’s law in the absence of Quill, the decision has prompted dozens of states to pass copies of South Dakota’s law or enforce existing nexus laws and rules they already have on the books.

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