Does your business make remote sales of tobacco products (“OTP”) into Virginia? If so, you should consider whether a recent enactment requires you to pay Virginia’s OTP excise tax.
As part of the recent special session’s revisions to the budget for the current biennium, the General Assembly extended the Commonwealth’s OTP tax to remote sellers starting January 1, 2021. See 2020 Va. Acts, ch. 56, Item § 3-5.21(F) (spec. session I). As described by the Virginia Department of Taxation, the law will include among the “distributors” required to pay OTP tax “any non-Virginia company who ships tobacco products to wholesale or retail customers in Virginia and meets certain sales volume thresholds during the current or previous year.” The alternate thresholds are $100,000 in revenue or 200 separate transactions.
This enactment resembles legislation that has been proliferating across the States following the Supreme Court’s decision in South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018). As previously noted on this blog, “[m]any States have set thresholds for determining whether a remote seller must register and collect and remit tax, so the seller will have to evaluate its sales activity against the particular State law.” While much of this legislation has focused on sales and use tax, Virginia’s extension of its OTP excise tax to delivery sellers meeting certain thresholds is relatively unique at this time.