The days when Virginians could avoid sales tax by buying on the Internet are over. A new state law went into effect Sunday that requires Internet retailers that have business operations in Virginia to start collecting the same 5.3 percent sales tax that brick-and-mortar retailers charge.
Amazon, by far the largest Internet retailer, has two distribution centers in the Richmond area and is in the process of opening a Amazon Web Services data and administration center in Herndon. You’ll still be able to buy from smaller, out-of-state online merchants but most larger online sites — like Walmart and BestBuy — have operations in Virginia so avoiding the tax won’t be easy.
And of course, local merchants and governments say you shouldn’t try to avoid the tax in the first place, as sales taxes go to support vital government programs. Technically, consumers are supposed to pay the sales tax directly to the state if the online merchant doesn’t collect it but this law has proven about as effective as speed limits.
For years, Amazon fought efforts to make it collect local sales taxes. It used the tax-free pricing advantage to help it scale up to its current colossal size. But now Amazon wants to develop same-day delivery service, which it thinks will be an even bigger attraction than the savings from not paying sales tax. Doing that requires local warehouses, which makes it subject to state taxes in most states.
Level playing field
Virginia retailers lobbied the General Assembly to put the tax bite on online retailers, using the “level playing field” argument. State officials estimate Virginia will make as much as $24 million in additional tax revenue and local merchants think they will see more sales, which may be debatable.
â€œReally, the impact on the retail industry is that it finally levels the playing field, at least with Amazon,â€ said Nancy Thomas, president of the Retail Merchants Association in a Richmond Times-Dispatch report. â€œThis is a great first step. What we really need is a federal bill to level the playing field for good,â€
States around the country have passed similar laws and retailers are now lobbying Congress, where pending legislation — the Marketplace Fairness Act — would require all online retailers to collect state and local sales tax, whether or not they have a physical presence in the state where a purchase is made.
Amazon has fallen into line behind those supporting the Marketplace Fairness Act but eBay has put together a coalition that is actively opposing it.