USA: West Virginia – Affiliate nexus adopted for sales and use tax to cover also Internet-based business

Effective January 1, 2014, West Virginia expands the definition of a “retailer engaging in business in this state” for sales and use tax purposes to include affiliates which operate a website or Internet business within the state.  Specifically, “any retailer that is related to, or part of a unitary business with, a person, entity or business that . . . is a subsidiary of the retailer, or is related to, or unitary with, the retailer as a related entity, a related member or part of a unitary business” that meets one of the following criteria will be required to collect and remit taxes in West Virginia:

  • maintains an office, distribution house, sales house, warehouse, or other place of business in West Virginia pursuant to an agreement with, or in cooperation with, the related retailer
  • performs services in West Virginia in connection with tangible personal property or services sold by the retailer, or any related entity, related member, or part of the unitary business
  • performs services in West Virginia (by any agent, representative, or employee) in connection with tangible personal property or services sold by the retailer, or any related entity, related member or part of the unitary business
  • solicits business in West Virginia for or on behalf of the retailer, or any related entity, related member or part of the unitary business, either directly or through an agent, representative, or employee in West Virginia.

The new law includes within the definition of “service” the following:

  • customer support services;
  • help desk services;
  • call center services;
  • repair services;
  • engineering services;
  • installation services;
  • the service of operating a website or Internet-based business from an in-state location;
  • and the service of operating a telephone, Internet, or other remote order business from an in-state facility.

The takeaway

The West Virginia legislation follows many other states in the attempt to expand sales and use tax nexus provisions. West Virginia has chosen to use standard unitary and related party concepts in its affiliate nexus law, which should impact retailers with remote selling subsidiaries. This law stops short of where other states have recently gone by passing nexus laws that include agency activity involving unrelated parties, which could be viewed as more broad and arguably over reaching.  However, retailers with affiliates that are involved in ecommerce in West Virginia should look closely at their business activities to determine if nexus has been established under these new guidelines.

About Jennifer Jensen

email: jennifer.jensen@us.pwc.com Mobile: +1 240 678 0226 Office: +1 202 414 1741

Jennifer is a state and local tax director in PwC Washington National Tax Services specializing in sales and use and indirect taxes. Her industry focus is in technology, entertainment, media, and communications. Jennifer helps lead the firm’s cloud computing initiative and is the state and local subject matter expert in this area. Jennifer provides both internal firm and external client sales and use tax training in such issues as eCommerce, the taxation of digital products, and, of course, cloud computing. She also summarizes relevant legislation or other tax law changes to disseminate both externally and internally and writes thought leadership pieces for external publication by the firm.