Legislation to close the ‘Amazon loophole’ in Virginia unanimously passed the Senate Finance Committee on Tuesday. Senate Bill 597, sponsored by Senator Frank Wagner (R-Virginia Beach), says that online retailers that operate warehouse or distribution centers in Virginia cannot use tax complex corporate structures to avoid collecting and remitting the state sales tax.
“The legislation will create a more level playing field for Virginia retailers,” said Senator Wagner. “Companies with a physical presence in the state should all play by the same rules,” he said.
Current Virginia law says that companies, including their subsidiaries, that operate warehouse or distribution centers are required to collect and remit the state sales tax. Amazon.com is the only known retailer in Virginia that has created a separate distribution subsidiary for the presumed purpose of avoiding the sales tax obligation. When Amazon or other retailers do not collect and remit the sales tax, consumers are legally obligated to remit the use tax on their annual state income tax filing.
“We are extremely pleased with today’s vote,” said Rob Shinn of the Virginia Alliance for Main Street Fairness. “It demonstrates the strong will of state legislators to close the loophole and treat all retailers on a consistent basis.”
Amazon maintains distribution centers in about 13 states. They currently operate one in Northern Virginia and will operate two additional centers in central Virginia in the near future. Amazon has entered into voluntary agreements with four states – California, South Carolina, Indiana and Tennessee – to collect the tax as early as this September 1. Pennsylvania is also requiring online retailers with a physical presence to collect and remit the sales tax by September 1 of this year. Other states including Arizona and Texas have assessed Amazon notices of delinquent taxes stemming from similar corporate structures. They acknowledge physical presence in Washington State. Legislation is also pending in several other states.
“States are moving quickly to address this loophole,” said Shinn. “If the issue plays out in Virginia similarly to how it has in other states, the state can get both the jobs and the uncollected tax revenue.” The official legislative Fiscal Impact Statement has determined that Virginia could recognize $24 million in uncollected tax revenue on an annual basis if the bill passes.
The Alliance for Main Street Fairness (AMSF) in Virginia is a coalition of retail companies and organizations dedicated to promoting the fair taxation of retail goods in the Commonwealth.