January 18, 2012
Virginia agrees to let Amazon skip paying taxes, retailers organize in response
by Dennis Johnson
After California, Texas, New York and Indiana all enacted legislation forcing Amazon to start collecting the taxes and imposed deadlines to do so, Virginia startled observers of the Amazon-tax-scofflaw issue by announcing just before Christmas that it would allow the company to skip collecting state sales tax despite having a physical presence in the state.
But as a report in the Richmond Times Dispatch details, retailers are crying foul. According to the report, “Amazon already has distribution operations in Northern Virginia, and now traditional retailers believe that the company’s plans to open two distribution centers in Chesterfield and Dinwiddie counties this year only bolsters the argument that its physical presence in the state is clear — and it should collect sales taxes from Virginia residents.”
A Washington Post story notes the state “spent more than $4 million to lure the company to Virginia,” which culminated in an announcement from Governor Bob McDonnell just before Christmas that the state had convinced Amazon to bring the two new warehouses, expected to employ 1,350 people, to the state—in return for not having to collect sales tax.
But the Virginia Retail Federation, a coalition of state brick-and-mortar retailers, issued a statement saying “It is not appropriate for state and local tax dollars to be used as economic development incentives unless Amazon agrees to collect and remit state sales taxes. If they do not make this agreement, Virginia is likely to be a net job loser with this deal.”
A Norfolk Pilot report says bookseller Sarah Pishko, owner of Prince Books in Norfolk, filed a complaint with the state’s Department of Taxation over the situation, and has gained the support of at least one state legislator, Del. Paula Miller. Says Pishko, “I think people need to be aware that states are losing a lot of money that they should have.”
In a Lynchburg News & Advance report, another bookseller, Kelly Justice, owner of the Fountain Bookshop in Richmond, says, “I wish that our local governments were as accommodating to small, locally owned businesses as they were to large, behemoth corporations.”
How accommodating have they been? According to an editorial in the Newport News Daily Press,
… despite Gov. McDonnell’s recent praise for their new expansion here, Amazon’s extended tax holiday represents a huge missed opportunity for a state government hungry for general fund revenue. Conservative estimates of uncollected sales tax in Virginia from Amazon alone start at $25 million annually; with the company’s North American sales increasing by 50 percent per year, potential tax collections could grow substantially.
Meanwhile, the Daily Press report notes “estimates that bricks-and-mortar businesses, both small retailers and national chains, create about twice as many jobs as purely online retailers. Many of these businesses also provide service and leadership to their communities.”
Concludes the editorial? ”Ante up, Amazon.”
Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives