Designer Skin LLC v. S & L Vitamins, Inc., et al.
Private Letter Ruling of Virginia Tax Commission dated April 14, 2000
Va. Ruling of Comm'r PD 00-53
In a private letter ruling, the Virginia Tax Commission states that the presence of a server in Virginia on which a taxpayer's web site is hosted does not, by itself, constitute a nexus with Virginia sufficient to subject the tax- payer to Virginia sales and use taxes.
The taxpayer is an out-of-state company with no physical presence in Virginia engaged in the sale of auto parts. The taxpayer uses web sites to sell its products. Products sold to Virginia residents are shipped from locations outside of Virginia.
In its ruling, the Virginia Tax Commission stated that the taxpayer will not become subject to Virginia sales or use taxes if it hosts its web sites on servers located in Virginia that are either (a) owned by a web hosting company that provides connectivity to the Internet, (a Managed Hosting Service) or (b) owned by the taxpayer and located on the premises of a web hosting company providing such connectivity services (a Co-Location Hosting Service). Such would be the case because the presence of such servers, by themselves, does not constitute a nexus with the forum sufficient under the Commerce Clause to permit Virginia to obligate an out-of-state company to collect sales and use taxes on sales to forum residents. Said the Tax Commission: