Tax Development Dec 22, 2016
On December 16, Virginia Governor Terry McAuliffe introduced a budget that included three tax initiatives, two with significant sales and use tax implications.1 Perhaps the strongest sales tax item was the support offered for the Marketplace Fairness Act (MFA), which would make online sales subject to state sales taxes. In his budget proposal, Governor McAuliffe speculated that the passage of the MFA might recover the $250–300 million dollars a year that the state is currently missing in untaxed online sales. In addition to signaling support for the MFA, the Governor indicated he would propose legislation requiring out-of-state merchants using warehouses or fulfillment centers located in Virginia to register as dealers and to collect and remit sales tax on sales to Virginia residents.
On a slightly more technical matter, the budget proposal also called for the accelerated sales tax threshold to be rolled back to $4 million for payments to be made in June 2018. The accelerated sales tax requires businesses with liabilities above the threshold for the previous June to make payments equal to 90% a year in advance. The dealer or permit holder then receives a credit for the amount paid.2
The Governor also proposed an amnesty program, slated for 2018. In keeping with past amnesty programs, the last of which was in 2009, penalties and half of the interest due would be waived for qualifying entities owing back taxes who successfully complete the program. We will update this technical development when the program guidelines are issued.
1 Governor Terry McAuliffe Budget Proposal, December 16, 2016 available at https://governor.virginia.gov/newsroom/newsarticle?articleId=18552.
2 Guidelines for the Accelerated Sales Tax Payment, Virginia Department of Taxation (April 22, 2015).