01 Sep ‘Amazon tax’ takes effect Sept. 1
The long-standing Amazon.com sales tax holiday will end on Sunday, Sept. 1 for Virginia shoppers.
The “Retail Sales and Use Tax” bill passed the Virginia General Assembly earlier this year with an implementation date of Sept. 1, 2013.
The measure clarified the law to require out-of-state sellers that have a distribution center, warehouse, office or similar location in Virginia to collect sales tax from its customers. That means Amazon shoppers in Virginia will begin paying sales tax on Amazon purchases.
Sales tax for Hampton Roads residents rose from 5 percent to 6 percent in early 2013, as part of a transportation package backed by the governor.
In what is commonly referred to as the “Amazon bill,” the change was a direct result of Amazon’s 2012 announcement that it would build two new fulfillment centers in Chesterfield and Dinwiddie counties.
The original agreement, led by the Virginia Economic Development Partnership and the governor’s office, left out the obligation to collect sales tax and was subsequently battered by Virginia retail associations, and, in particular, the Hampton Roads segment.
“The Virginia Retail Federation is very happy that this law will go into effect Sept. 1, 2013,” says Kate Baker, director of government affairs for the Norfolk-based group. “Our members believe that the collection of sales tax on Amazon.com purchases in Virginia will level the playing field between the brick-and-mortar retailers in Virginia and a large Internet retailer with a physical presence in Virginia.”
The only other known business to be affected is backcountry.com, a Utah-based retailer that sells sporting equipment. Other out-of-state sellers, such as QVC, already collect sales tax.
An impact statement by the Department of Taxation, released at the time the bill was passed, said the state could see as much as $24 million in revenue.
On a national level, the “Marketplace Fairness Act,” a law that would require all Internet-based businesses with sales of $1 million or more to collect sales tax for all states, is in the process of making its way through Congress. In May, the bill passed the Senate. It has moved over to the Judiciary Committee in the House of Representatives.
The federal bill is supported by most large brick-and-mortar stores and Internet giant Amazon.com. Smaller operations like Gloucester-based retailer Peace Frogs could go out of business because of the law, says Catesby Jones, president of Peace Frogs.
The logistics of reporting sales tax for almost 50 states is too much for a small business to handle, he says.
On the state level, Virginia’s “Amazon bill” was heavily supported by both Republicans and Democrats.
Sen. Frank Wagner, R-Virginia Beach, sponsored the bill and said that it wasn’t a new tax, but a new way to collect sales tax.
Virginians have been obligated to report most tax-free purchases — on a consumer use tax form — when they file their taxes each year. That law, however, has been largely unenforceable.
The law will affect his business, says Jerry Tietjens, owner of crazytowndeals.com. Tietjens’ website acts as an affiliate marketer for Amazon.com, and other retail websites, pointing out good deals on items and receiving a cut of the purchases made through his website.
“My guess is that with more emphasis on promoting other sites we will continue to do well there,” he says. “As small business owners, we have learned to roll with the punches.”
Some local shoppers say the change could affect their shopping habits this holiday season.
“I used to do 95 percent of my holiday shopping through Amazon,” says Dana Cochran of Suffolk. “But, now with taxes, I may just go back to regular stores. We’ll see.”
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