United States

Virginia enacts law targeting inventory stored by remote sellers

Inventory held by fulfillment service establishes sales tax nexus


On Feb. 20, 2017, Virginia Gov. McAuliffe signed House Bill 2058, revising the statutory definition of ‘dealer’ for sales and use tax purposes to include, and/or clarify, that remote sellers with inventory located in the Commonwealth for sale is ‘sufficient activity’ to establish sales and use tax nexus. House Bill 2058 is effective July 1, 2017.

The Virginia Department of Revenue previously provided guidance on remote, on-line sellers with inventory in the state (such as those businesses that purchase online marketplace fulfillment services to store, package, ship and manage a seller’s inventory) through Sales and Use Tax Ruling 15-194, issued on Oct. 16, 2015. Ruling 15-194 was a request for guidance from a remote seller who maintained an inventory of products located in fulfillment warehouses throughout the Commonwealth. The seller maintained ownership of the products but had no other physical presence in Virginia.

Based on the existing law at the time, the department determined that the inventory stored in fulfillment warehouses was not sufficient activity to require the remote seller to register, collect and remit sales and use taxes on their sales to Virginia customers. The department further concluded that the fulfillment warehouses did not act as independent contractors nor were in an agency relationship with the remote sellers. Additionally, the department identified that the existing statutes did not include ‘maintaining a resale inventory’ in Virginia as a nexus establishing activity.

House Bill 2058 essentially overrules Ruling 15-194 by deeming dealers that own tangible personal property “for sale located in [the] Commonwealth” as sufficient activity to require a remote seller to register, collect and remit sales and use taxes on sales to Virginia customers.


Remote sellers that utilize fulfillment services for the sale and shipment of their inventory, such as from a provider like Amazon, should be aware that House Bill 2058 clearly establishes sales and use tax nexus when that inventory is stored in a fulfillment warehouse located in Virginia. In the past, it was often difficult for remote sellers to identify the location of their inventory when provided to a fulfillment service provider, however, many fulfillment providers use online and cloud-based tools that allow for real-time tracking of inventory. Remote sellers should understand how to use those tools and identify locations where their inventory may be establishing nexus in addition to Virginia.


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