Should Amazon Collect Sales Tax for Virginia?

Virginia – Democratic leaders in the state House of Delegates said that the governor’s economic development package for the Internet giant is a bad deal for the state and unfair to other merchants who pay the tax.

$135 million will be spent, bringing 1,350 jobs and two new distribution centers to suburban Richmond, announced Amazon and Gov. Bob McDonnell. Amazon will received more than $4.3 million in financial aid and other incentives from the state.

Online retailers will cost the state between $200 million to $420 million in revenue next year due to uncollected sales tax.

House Minority Leader David Toscano and other legislators pointed to Tennessee where Amazon also is building two new distribution centers but struck a deal with Gov. Bill Haslam to begin collecting sales tax from Tennessee customers in 2014.

Toscano said, “we think the governor could have and should have made a better deal. Remember, this is not a new tax. Sales taxes are intended to be paid on Internet purchases just as they are paid on purchases made at a local store. We hope that Amazon will collect and remit the tax – just as our Main Street businesses are already doing.”

Virginia retail industry groups have argued for years that Amazon should be required to collect sales tax and forward to the state. Virginia law specifies that dealers with any kind of physical presence in the state must collect and turn over tax on their sales. Amazon has two facilities in Virginia: a warehouse in Sterling and a data center at an undisclosed location.

Amazon will not be required to collect and remit sales tax because it’s business units in Virginia won’t handle sales, a McDonnel spokeswoman explained based on a 2007 ruling from the state’s Tax Department.