The 2012 regular session of the General Assembly is ongoing, and several taxation bills are under consideration. Following is a description and status of significant tax legislation:

General Assembly Forces Amazon, Governor, Back to the Negotiating Table

  • In what appears to be the direct result of the Senate's rebuke to an earlier agreement between Gov. McDonnell and Amazon, a new deal requiring Amazon to collect sales tax on retail sales to customers in Virginia was announced and incorporated into the Senate's proposed bill on February 22.

    Under the original agreement reached in December 2011 between Amazon and Gov. McDonnell, Amazon would spend $135 million and bring 1,350 jobs and two new distribution centers to suburban Richmond, but would never have to collect sales tax. Amazon already has a web-services facility and a fulfillment center in the Commonwealth, but is not required to collect sales tax based on a 2007 ruling by the Department of Taxation.

    However, in January 2012, Sen. Frank Wagner (R) introduced legislation effectively requiring Amazon to collect sales tax. The bill, S.B. 597, creates a legal presumption to require registration by a dealer for collection of sales tax if any commonly controlled person maintains a physical location within the Commonwealth that facilitates the delivery of property sold by the dealer to its customers. The Senate passed the bill February 10 and it came to the House Committee on Finance for consideration.

    On February 22, Amazon, Gov. McDonnell, and members of the General Assembly, with the support of in-state retailers, agreed to suspend Amazon's sales-tax collection responsibilities until September 1, 2013, unless federal legislation is passed sooner. The same day, the House Committee on Finance voted 17-2 in favor of the amended bill. The amended version of S.B. 597 is currently being considered by the full House, and is considerably more likely to be enacted in light of the latest agreement.

Other Highlights from the 2012 Session:

  • Single Sales Factor: In what could be considered an additional incentive for Amazon to expand within the Commonwealth, H.B. 154, passed by the House (February 9) and the Senate (February 17), phases in single sales factor apportionment for retailers under the corporate income tax for tax years beginning July 1, 2012, and fully phased in for tax years beginning July 1, 2015. The bill is awaiting approval by the governor.
  • Advanced Conformity. H.B. 516, passed by both houses and signed by Gov. McDonnell (February 7), advances Virginia's date of conformity to the Internal Revenue Code (IRC) from December 31, 2010 to December 31, 2011.
  • Major Business Facility Job Tax Credit. H.B. 714, passed by the House (January 9) and Senate (February 17), extends the time during which the major business facility job tax credit may be taken over a two-year period from taxable years beginning January 1, 2009 through December 31, 2012, to taxable years beginning January 1, 2009 through December 31, 2014. The bill is awaiting approval by the governor.
  • Interest on Refunds Paid by Localities. H.B. 117, passed by the House (February 2) and Senate (February 23), enables localities to provide that no interest shall be paid on refunds owed to a taxpayer that are due as a result of errors made by the taxpayer, but only if the locality does not collect interest on taxes that are delinquent due to errors made by the locality. Although the bill applies to taxpayers and localities alike, we suspect that localities will enforce this measure in their favor. The bill is awaiting approval by the governor.
  • Reduction of Period of Limitations for Collection of State Taxes. H.B. 35, passed by the House (January 26) and Senate (February 23), reduces the period of limitation for the collection of state taxes from 10 years to seven years. The bill is currently awaiting approval by the governor.

Reed Smith's State Tax Team will be following the status of these bills on a daily basis, and Reed Smith attorneys are actively involved in legislative matters. Virginia businesses and taxpayers are encouraged to contact us with any questions or comments about pending legislation.

This article is presented for informational purposes only and is not intended to constitute legal advice.