<p class=ldtitle>A BILL to amend and reenact § 58.1-635 of the Code of Virginia, relating to retail sales and use tax; penalty and interest for certain dealers.</p>
Summary
SB 766 would amend Virginia’s retail sales and use tax penalty statute, § 58.1-635, to create two targeted limits on how penalties and interest are applied in certain situations. First, it would protect remote sellers and marketplace facilitators from liability for incorrect sales tax amounts, including penalty and interest, when the error resulted from reasonable reliance on information provided by the Commonwealth. Second, it would provide special treatment for dealers that operate event venues without overnight lodging when they fail to report and pay tax on transactions containing both taxable and nontaxable items, limiting penalty and interest to the unpaid tax amount rather than the full lump-sum transaction amount, so long as there was no willful intent to defraud.
The bill leaves intact the existing framework for late filing, fraudulent returns, and interest accrual under § 58.1-635. It does not change the general six-percent-per-month late-filing penalty, the 50 percent fraud penalty, or the prima facie evidence rule for underreporting gross sales at 50 percent or less of actual amounts. Instead, it adds narrow exceptions intended to reduce disproportionate penalties in specific compliance scenarios involving remote commerce and event-venue operations.
In terms of impact on state law, SB 766 would narrow the Commonwealth’s ability to assess penalties and interest against certain dealers by carving out statutory relief where tax errors stem from state-provided information or where mixed taxable/nontaxable event-venue transactions are involved. The practical effect would be to reduce exposure for remote sellers, marketplace facilitators, and qualifying event-venue operators, while preserving the Tax Commissioner’s authority to assess tax, penalties, and interest in cases involving ordinary noncompliance or fraud.
The bill appears to have had a mixed but ultimately unfavorable reception in committee. It was reported as passed by indefinitely in the Senate Finance and Appropriations Committee by a 10-5 vote, which suggests some support for the targeted relief but not enough to advance the measure. The absence of recorded committee transcript discussion limits insight into the debate, but the vote indicates the proposal was controversial enough that a substantial minority opposed it.
The main point of contention is likely whether the bill appropriately balances taxpayer fairness against enforcement and revenue protection. Supporters would likely view the measure as preventing unfair penalties when dealers rely on state information or when venue transactions include both taxable and nontaxable components. Opponents likely viewed the bill as creating special exceptions that could weaken tax compliance enforcement or complicate administration of the sales and use tax system.
Impact
SB 766 would amend § 58.1-635 of the Code of Virginia, which governs civil penalties and interest for failure to file or pay retail sales and use tax. The bill would add two new statutory exceptions: one for remote sellers and marketplace facilitators that undercollect tax due to reasonable reliance on information from the Commonwealth, and one for certain event-venue operators without overnight accommodations when penalties and interest are calculated on mixed taxable and nontaxable transactions. These changes would reduce penalty and interest exposure for the affected taxpayers while leaving the general penalty structure and fraud provisions otherwise unchanged.
Sentiment
The available voting history suggests the bill received some support but not enough to move forward, with the Finance and Appropriations Committee voting 10-5 to pass it by indefinitely. That outcome indicates the proposal was viewed favorably by a minority of members but met enough resistance to stall. Because there are no committee transcript excerpts, the broader sentiment can only be inferred from the vote: the bill was not broadly embraced, but it was also not rejected unanimously.
Contention
The likely points of contention were the scope and fairness of the proposed penalty relief. Supporters likely argued that remote sellers and marketplace facilitators should not be penalized when they rely on incorrect information supplied by the Commonwealth, and that event venues should not face penalties based on gross lump-sum transaction amounts when only part of the transaction is taxable. Opponents likely worried that the bill would create special carve-outs, reduce deterrence for tax compliance, and make enforcement more difficult for the Department of Taxation. The 10-5 committee vote reflects that the issue was divisive, with a meaningful minority favoring the targeted relief and a majority declining to advance it.