Sales Tax Obligations of Sellers in Virginia

April 13, 2006

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Virginia imposes various requirements on sellers doing business in the state. We recommend that you go through the items below to help you with the most frequently asked questions concerning sellers and sales and use tax issues.

Procedure for accepting resale certificates. Virginia Forms ST-10 through ST-20 are exemption certificates issued by the Virginia Tax Commissioner. Unless you, as the seller, receive an exemption certificate from the purchaser, you have the burden of proving that the sale of tangible personal property is not taxable. The resale exemption certificates should include the following information:

signature of the purchaser
name and address of the purchaser
the number of the certificate of registration, if any, issued to the purchaser
a description of the tangible personal property

Procedure for accepting blanket certificates. Certificate holders regularly engaged in making tax-exempt purchases may furnish a certificate to the seller specifying that all tangible personal property subsequently purchased will be for the purpose shown on the certificate. This blanket certificate will relieve the burden of executing a separate certificate for each individual tax-exempt purchase as long as there is no significant change in the operations. A blanket certificate describes the general nature of the property purchased for resale and remains in force until revoked in writing.

Sales and use tax liability for out-of-state mail order and catalogue retailers. Out-of-state mail order catalog purchases totaling $100 or less during any calendar year are specifically exempt from use tax. Otherwise, Virginia has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Virginia. To determine if you have physical presence, ask yourself the following:

Do I have retail facilities, a warehouse, or any office space in Virginia? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
Do my employees or I enter Virginia for purposes of taking and transmitting orders from Virginia? If your employee or independent contractor goes into Virginia to take or transmit orders, your business may have physical presence in Virginia. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
Do my delivery vehicles frequently enter Virginia for purposes of delivering property? Frequent deliveries in Virginia by your trucks will give you physical presence in Virginia.

Sales tax "bracket system." The following bracket system may be followed by sellers in computing the gross receipts tax due upon a particular sale. This bracket system is the combined state and local sales tax table that is currently in effect. We have provided the combined table, because currently all local governments charge the additional 1 percent sales tax.

Amount of Sale	Tax
0.00 to 0.11	no tax
0.12 to 0.33	0.01
0.34 to 0.55	0.02
0.56 to 0.77	0.03
0.78 to 0.99	0.04
1.00 to 1.22	0.05

Absorbing the tax — using a "no sales tax" advertising strategy to drum up business. In Virginia it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.

Claiming refund for excess tax payments. As a seller you may request a refund for sales and use taxes erroneously or illegally collected by the Department of Taxation. It must be shown that you paid the tax and did not pass it on to the consumer or that you collected the tax and later refunded it to the consumer or purchaser. Requests for a refund must be made within three years from the due date of the return.