West Virginia to tax remote sales starting January 1, 2019

Certain out-of-state sellers with no physical presence in West Virginia will be required to collect and remit sales tax in West Virginia starting January 1, 2019. The West Virginia State Tax Department counsels remote sellers required to collect and remit sales tax to complete the registration process at least three weeks prior to January 1.

Like all other states, West Virginia has long lacked the authority to tax sales by remote sellers. In a 1992 decision (Quill Corp. v. North Dakota), the Supreme Court of the United States held that physical presence in a state was a requisite for taxation, and that remained the guiding principle until the Supreme Court overruled Quill’s physical presence rule in South Dakota v. Wayfair, Inc. (June 21, 2018).

The court ruled in Wayfair that the “economic and virtual contacts” the remote sellers had with South Dakota were sufficient to establish sales tax nexus, the connection between a state and a business that triggers a tax collection obligation. States are no longer restricted to taxing sales by businesses with a physical presence in the state.

Since Wayfair, more than 25 states have imposed a sales tax collection requirement on remote sellers. All have adopted an economic nexus policy similar to the South Dakota law that triggered the repeal of the physical presence rule. It provides an exception for small sellers and prohibits retroactive enforcement of economic nexus. West Virginia will do the same.

Small seller exception

West Virginia State Tax Department Administrative Notice 2018-18 imposes a sales and use tax collection obligation on remote sellers that sell tangible personal property and/or services for delivery in West Virginia. Under the small seller exception, the collection requirement does not apply to a remote seller that during calendar year 2018 had:

• Gross sales of tangible personal property and/or services for delivery into West Virginia of $100,000 or less, or*
• Fewer than 200 sales transactions for delivery in West Virginia

Due to growth, remote sellers that currently qualify for the small seller exception may not always qualify for it. According to Administrative Notice 2018-18, “Vendor responsibility for collection and remittance of these taxes … will be determined annually each year thereafter. The requirement will be imposed for a given calendar year based on the vendor’s attainment of either of the stated thresholds in the immediately preceding calendar year.”

Wholesalers

Wholesale businesses that make no retail sales in West Virginia are not required to register with the state and collect and remit sales tax, even if their sales into the state surpass the small seller exception. However, if a wholesaler also makes retail sales into the state, it must commence collection activities once the small seller exception has been surpassed.

The state does not explain whether wholesale sales are included in the threshold determination.

No retroactive enforcement

According to the West Virginia Tax Department, “If a remote seller is required to register based solely on the U.S. Supreme Court's decision in South Dakota v. Wayfair, Inc., the remote seller is not required to collect and remit sales or use tax on sales that occurred prior to January 1, 2019.”

However, the department invites remote sellers to voluntarily register with the state and commence sales tax collection and remittance prior to January 1, 2019.

Local sales tax

Remote sellers are required to collect applicable local sales taxes in addition to the state tax. The rate is based on the ship-to address. Most municipalities in the state impose a local tax of 1 percent, though some impose a local tax of 0.5 percent.

State and local sales and use taxes apply to shipping and delivery charges in West Virginia.

Streamlined Sales Tax (SST)

West Virginia is a member of the Streamlined Sales and Use Tax Agreement, also known as SST. As an SST member state, it has taken steps to simplify and reduce the costs associated with sales and use tax compliance.

Remote vendors may register to do business with the state with the Virginia State Tax Department or through the SST. SST certified service providers (CSP) can also help with registration. A remote sellers can also use a CSP to perform its sales or use tax responsibilities. Learn more about CSPs and SST.

South Dakota v. Wayfair is rocking the world of retail. Learn more about it, and its potential impact on your business, at this Avalara resource page.

* Administrative Notice 2018-18 states that a tax collection obligation is triggered if either threshold is met. However, the Tax Department states that both thresholds must be met in 2018 to trigger a tax collection obligation starting January 1, 2019, but that in subsequent years, a tax collection obligation is triggered if either threshold is met.