New Virginia legislation went into effect on September 1, 2013. It requires online sellers to collect sales tax if they have physical or affiliate nexus in the state. However, this legislation was passed and signed into law on April 4th, 2012 but Amazon worked with Virginia to slow the legislation down as much as possible through some negotiations and deals. As of September, all online sellers with ties to Virginia need to collect sales tax and remit it. Amazon has done some tricky things in the past to avoid collecting sales tax, including creating a separate subsidiary to handle distribution. In 2007, the Virginia Department of Taxation ruled that Amazon was not required to collect and remit sales tax under a subsidiary agreement that doesn’t handle sales.
Amazon, at the time, had a distribution center and data center within the state’s borders. When Amazon announced plans to build distribution centers in Chesterfield and Dinwiddie counties, brick-and-mortar retailers were much more than simply upset. A December 2011 announcement positioned Amazon as the biggest source of growth in jobs since 2004 and they worked a deal for a number of printable kickbacks with the Governor, including $3.5 million in grants from the Governor’s Opportunity Fund and $850,000 from the Virginia Tobacco Indemnification and Community Revitalization Commission. Bills to require Amazon to pay because of affiliate marketing were already in the works in 2010 but legislators knew it would do nothing to capture the sales tax dollars they were after. A fiscal impact statement noted that nexus through affiliate advertising might have actually decreased revenues in the state because Amazon would have pulled the plug on programs as they did in other states.
But by January 2012, Main Street was fed up with Amazon. Sen. Frank Wagner (R) introduced S.B. 597 and created a legal presumption that linked commonly controlled companies together to force sales tax collection for businesses with distribution operations in Virginia. The Governor’s deal, however, was very attractive to Amazon and they worked with the legislature to push the date of sales tax collection to September 1, 2013, with an amendment. Amazon has since announced other plans to expand its business in Virginia with other efforts. While this legislation specifically targeted Amazon, this is a good time to make sure your company doesn’t have any nexus issues with Virginia.
