Storing Inventory in Virginia? Your Business Will Now Have Nexus

Posted on March 07, 2017

Nexus is defined as having a sufficient physical presence in a taxing jurisdiction. It is used to determine whether sellers are required to collect sales tax from purchasers and remit the tax to the jurisdiction. Nexus laws vary by state or local government.

Recently the General Assembly of Virginia amended and enacted § 58.1-612 of the Code of Virginia (H.B.2058). The Code defines the term “dealer” and is used to determine nexus in the state. The updated law determines businesses who “own tangible personal property that is for sale located in this Commonwealth or that is rented or leased to a consumer” now have sales tax nexus. In other words, storing inventory that will be for sale within the state creates nexus in Virginia.

One positive for out of state sellers in Virginia is they are an origin-based state. This means that sales tax is determined based on the seller’s location, not the ship to location. The current state sales tax rate in Virginia is 4.3%, but there are several different county, city, and district taxes within the state. The burden will be on the seller to research all warehouse locations to determine the correct tax rate to charge their Virginia customers. 

The new law takes effect July 1, 2017, so sellers have until then to register for a Virginia Sales Tax Permit and begin remitting tax.

Allyn Contributor:  Penny Ott

Tips for the Taxpayer

Stay up-to-date with state and local tax rates. In an audit, the taxpayer will be responsible for the correct tax rate. Stay current with your state, county, and city legislation. Look for planning opportunities and exemptions that might be applicable to your company.

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