When Amazon.com sells a book for $10 or a television set for $1,200 to Virginia consumers, the retailer charges no sales tax.
Amazon.com Inc., based in Seattle, operates a fulfillment center and a data center in Virginia. According to federal and Virginia law, a company with a physical presence or "nexus" in the state must collect sales tax on purchases there, even if the business has headquarters outside the state.
Sarah Pishko, owner of Prince Books in downtown Norfolk, said that means Amazon should have to collect the 5 percent state sales tax, as she does. She discovered Amazon's operations in the state late last year and has asked state authorities why Amazon isn't paying.
"I think people need to be aware that states are losing a lot of money that they should have," Pishko said.
Amazon has a warehouse in Sterling and a data center in a Virginia location that the retailer won't disclose, for "security purposes," said Patty Smith, an Amazon spokeswoman. The company's Web site has listed job openings in the past year for a network engineer and sales positions based in Ashburn.
"Now, more than ever, we need the money," said Del. Paula Miller, D-Norfolk, who heard from Pishko about Amazon.
She believes the state Department of Taxation is investigating the issue, she said.
In a letter responding to Pishko's concerns, Virginia Tax Commissioner Janie E. Bowen said appropriate tax collection is important. "I assure you this matter will be referred to our audit compliance division, where it will be properly addressed," Bowen wrote.
The Virginia Department of Taxation cannot by law discuss a specific taxpayer, spokesman Joel Davison said. In general, he said, the requirement to collect the sales tax includes companies based outside the state that take Virginia customers' orders but have a warehouse or other operation in Virginia.
"They've got nexus in the state, then," Davison said.
Amazon charges and remits sales tax in five states: Washington, North Dakota, Kentucky, Kansas and New York, Smith said. The company isn't legally required to do so in Virginia, Smith said. It's unclear why. Under the Virginia Retail Sales and Use Tax Act, any "dealer" with "sufficient activity" in the state would have to register as such to pay sales taxes. A business qualifies as a "dealer" if it "maintains or has within this commonwealth, directly or through an agent or subsidiary, an office, warehouse, or place of business of any nature."
QVC Inc., the cable TV shopping network that also sells products through its Web site, operates a call center in Chesapeake and a warehouse in Suffolk. A recent purchase from QVC online showed that the retailer charged Virginia sales tax. QVC officials did not return calls this week to their headquarters in West Chester, Pa., to discuss their sales-tax practices.
Amazon does not break out sales by state, so it's uncertain how much Virginia would gain if the company collected sales tax. Amazon's sales in North America, including its Web sites in the United States and Canada, were $2.3 billion for the third quarter of 2008.
Independent booksellers like Pishko are among many merchants that have struggled against Internet competition. By avoiding the 5 percent state sales tax, Amazon has an automatic price advantage over her store, Pishko said.
The Virginia Retail Federation, the legislative lobby arm for Hampton Roads' merchants, recently raised the Amazon question with Gov. Timothy M. Kaine's office. Facing declining state revenues, Virginia should pursue any avenues to collect sales taxes from out-of-state retailers, said Margaret Ballard, the federation's vice president of advocacy.
"The governor is aware of the issue and is sympathetic," said Gordon Hickey, a spokesman for Kaine. "But right now, it doesn't look like there's much that can be done about it."
He said companies have ways to "circumvent" the federal rules. Other states have become more aggressive about collecting sales taxes from Internet retailers. New York recently began requiring out-of-state online companies to collect sales tax if they have at least an "affiliate" in the state - even one person who links to the company's Web site and receives commissions for related sales.
Amazon has collected sales tax in New York since June but sued to challenge the constitutionality of the law. On Tuesday, a New York Supreme Court justice dismissed the suit, saying Amazon had no basis for legal action.
By law, Virginians who buy products online without paying sales tax are supposed to remit the tax as part of their state income tax return. In practice, though, the tax department has no way of knowing how many consumers fail to declare those purchases on their tax returns, Davison said.
The Associated Press contributed to this report.
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Having just gone through a sales tax audit
I have just recently completed a sales tax audit of my Va business by NC. And yes I had to pay, even though I have paid Va sales tax on the materials already, NC did credit me the taxes I paid to Va. But we must by law pay taxes on materials we buy, if an out of state retailer does not charge us tax we must send the proper amount of tax to the state, get audited, and the penalties are worse than any tax.
I think the point is valid tho, internet users should be paying sales tax on their purchases. If not, the online retailer is at a 5-6% advantage on the brink and mortar stores. And besides that point it is the law. They have a physical presence in Va. They should be paying the same taxes as the local competition.
I have heard it would be just too much trouble for the business to keep track of the taxes, but it is just as troublsome for the local retailer to do it. If they want to sale to 50 states, they need to be prepared to accept the paperwork.
I do not think it's a case of service, or price, I think this is a case of fairness and what is right.
Cowpower misinformed
DontBuyIt is right when he says "As I understand the sales & use tax law, if you purchase furniture in North Carolina and have it shipped to Virginia to avoid sales tax it is breaking the law if you do not declare and pay a sales tax to the Commonwealth of Virginia."
I bought a nice dining room set from NC and had it shipped to my house in Yorktown. Since the point of delivery wasn't in NC, no NC state sales tax was charged. However, I was responsible to VA for the taxes, something which VA "gently" reminded me a few weeks after I took delivery in the form of a tax letter citing the amount I owed.
Cowpower - your example of moving to Ohio and paying additional taxes - apples and oranges. Not even a close example.
Small Retailers Can't Compete
This is no different than when WalMart spread across the United States and ran all the little retailers out. My father was a retailer with a store the size of a city block. He met Sam Walton at a Chamber of Commerce meeting in Arkansas and then came home immediately to discuss what he had heard with my mother. At the time Walmart had 2 locations but their plans for "superstores" was a concept my father knew he could not compete with because Walmart had bypassed the distributor and gone direct to the manufacturer and would be able to sell goods for less than my father could buy them. So, he sold out his stores...sold lots of his land and put everything he had into Walmart before it went public. It is impossible for Prince Books to compete on price. The only way Prince Books could possibly compete is on convenience. I have ordered books through Prince and they never had what I ordered in stock so I had to wait for them to get it in, in order for them to ship it to me in Virginia Beach. So, I order from Amazon and Barnes and Noble. Also, I like friendly service and I did not find these folks friendly. In the global internet driven economy we will see old concepts go out and t
It is dissapointing to see
It is dissapointing to see how many commentors turn this from a discussion about internet based taxation to an attack on tiny Prince Books and a defense of humungous Amazon. I buy stuff from Amazon all the time and love it as much as anyone, but that does not lead me to distain Prince books (where I seldom shop) or its manager. Anyone who understands the phrase "economy of scale" which should be all of you with a High School education understands why Prince will inevitably have higher prices and fewer books. To be more concrete, simply in terms of floor space Prince books could not fit as money books into their facility as one of the chains could fit into their big box. But none of you prince haters ( actually more like general malcontents as some of you seem to hate everything and everyone the paper mentions except for a few personal "saints") hints at even one iota of understanding of these basic principles of economics (let alone physics). Part of your problerms must be you haven't invested enough time in bookstores or libraries.
People are crazy
I managed a small specialty bookstore for a time. What amazed me was the number of people that would drive 30 minutes just to save a couple of dollars! It all comes down to convenience and pricing and it is hard to beat shopping online for that. Customer service, on the other hand, is another issue altogether. The box stores have it all over the internet companies that way. Prince Books is way too small to begin to compete with Amazon. That doesn't excuse Amazon from having to charge and pay sales tax in Virginia though.
Joe Warehouse thanks you..
People keep seeing this as a way to bleed a dime out of a large company. To which, I'm going to complete overlook the whole "taxation for using the internet" issue, because this really comes down to local businesses not wanting to be competitive. And, since they've got expert legal advice I'm sure (nudge nudge wink wink), they've chosen to complain instead of compete. Fine and dandy. What I'd like to know is what places like Prince Books are going to do to help the unemployed folks that their ruckus may cause. "Sorry Amazon, you have a warehouse and data center in the state giving people jobs, so we're going to have to get more money out of you" "Orly? Well then. We regret to officially announce the closure of our Virginia facilities and will be relocating them to Florida along with your carrier. Or across the border in Maryland. Oh heck, let's go to WV maybe. They'd appreciate the work. Thanks and enjoy the harsh economy." Splurging with lottery money that was supposed to be for education only, pet projects, and a few other things are not a good enough reason to cost people their jobs right now to make up the state's failure of a budget.
Amazon is better than Prince books
Prince Books is very expensive and has poor customer service. I can have a book from Amazon in three days or less w/o the hassle and expense of going to Norfolk. A 5% difference between Amazon and Prince Books would not make a competitive difference. Amazon is far superior.
Greedy Governments
Greedy Governments will tax us into oblivion.
CUT SPENDING.
I saw an eBay sale with the item in British Columbia, Canada with the notice ; if shipped to British Columbia, add 28% tax.
People are leaving high tax states now.
I'm starting to look for another country, just so I can survive being inpoverished by Federal, state, local governments. Not to mention taxing districts.
On the other hand
It's interesting that credit card company's will set up a small office in a state that has no cap on interst rates just so they can charge that higher rate to customers who live in a state that limits interst rates.
I doubt seriously that Prince Books
expects a surge in business if Amazon has to charge sales tax. It is a matter of fairness. If you do business in a state, have a presence in a state, and sell to residents in the state, the avoidance of collecting and filing state sales tax increases the burden on the rest of the taxpayers.
It is sort of like all the government owned land in Norfolk that pays no property tax. It adds to the cost for the rest of us to carry that property on the books for free.
If we are dependent upon sales tax for substantial revenue (and it is a very fair tax since everyone pays the same rate), then to have a percentage of goods exempt will ultimately cause the rest of us to have to pay more in possibly increased sales tax or reduced services.
Submitted by curiousenough
Submitted by curiousenough on Wed, 01/14/2009 at 4:06 pm.
I find it intriguing that this small business had the pockets to file this suit. I'm all for a David and Goliath fight, but come on, it seems the real problem with Prince Books losing business isn't due to an Amazon.com tax advantage. I wonder if it is coincidental that the VP of Prince Books is listed in public record as Bernard Pishko. Norfolk has a city attorney with the same name. Interesting that the fact checker of this article wouldn't address that.
-----------------------
It's no secret to those who have been around that Sarah Pishko is married to Bernard Pishko. Big deal. That has no bearing on this article. And she hasn't filed suit. She's just asking the question of the appropriate authorities. I'm interested in hearing the answer. All emotions aside regarding "sour grapes" let's hear what the law has to say.
No way
DontBuyIt sez:
"As I understand the sales & use tax law, if you purchase furniture in North carolina and have it shipped to Virginia to avoid sales tax it is breaking the law if you do not declare and pay a sales tax to the Commonwealth of Virginia."
This can't be true. If I then relocate to Ohio with that furniture do I have to pay Ohio sales tax, too? Can't be.
At any rate, aren't you paying the NC sales tax when you first purchase it in NC?
Everyone is criticizing the Store Owner but why??
Everyone is criticizing the store owner for identify a real issue. If Amazon was collecting and paying the sales tax it is supposed to collect maybe the little stores could prosper more and lower their prices and improve their selection. And if people do not like the sales tax why not push to have it eliminated. After all sales taxes, like all consumption taxes (including the proposed "Fair Tax"), take a bigger bite from the lower income earners than the higher ones.
But she brought up a legitimate point. Amazon has a facility in Virginia and thus they have an obligation under state law to collect and send sales tax to the State of Virginia.
As for the store employee who was talking about nothing but politics did the person get flagged to the owner? I bet this is the first time the owner heard about.
Remember, business are supposed to compete on an even playing field and Amazon appears to be getting an unwarranted advantage.
Whistle Blower or Citizen Sell Out?
I'm not a Virginia resident, but if I were I would be very upset right now with this Virginia small business owner. The article does not directly quote her, but her intentions for complaining to the state about Virginia customers not paying state taxes to Amazon.com presumes that more customers would be willing too shop at local retailers, including her own store, if amazon was forced to. This is a complete falicy and I find it to be not only ludicruous but outrageous.
What makes it worse is that there are actually a number of people in this forum that are defending her because of the state tax law or even worse because the economy is in a poor state at its present condition.
Small business may be a direct conduit to the state treasuries but it makes no sense that funneling any more money to either state or federal treasuries is going to help the little guy who would have to pay the 5% tax in the first place. If the state really wanted to help out the economy, which is nothing more than a statistical reporting based on the ratio of debt to income of american citizens, then they should allow citizens to not have to pay state taxes for companies that advertise soley on the int
I wasn't aware...
I was curious but no aware of said law. I wondered why Apple Inc charges me state sales tax when I purchase something from their online store instead of at the MacArthur center, while Amazon never did Interesting! This could Va's big chance to squeeze some money out of a big corporation... watch them blow it! LOL
Interesting ...
I find it intriguing that this small business had the pockets to file this suit. I'm all for a David and Goliath fight, but come on, it seems the real problem with Prince Books losing business isn't due to an Amazon.com tax advantage. I wonder if it is coincidental that the VP of Prince Books is listed in public record as Bernard Pishko. Norfolk has a city attorney with the same name. Interesting that the fact checker of this article wouldn't address that.
Remember the movie "You've Got Mail"?
It's very unfortunate for small business owners today. Pishko is not alone. The big box stores have put many, if not most mom-and-pops out of business.
As others have said though, people are going to look where the best selection and prices are, not whether it's tax free. Honestly, I never really have paid attention to the fact I'm not taxed on Amazon. I remember the item on last year's tax form asking about the online shopping where I wasn't taxed but I don't keep records of that stuff.
This year I did all of my Christmas shopping at Amazon for out-of-town family. In one hour, I was done. I got great stuff at incredible prices, qualified for free shipping and even had them gift-wrapped. Taxed or not, I'll continue to shop there, or Ebay, or where ever it is I can get the best deal with the most convenience.
What is wrong with some of you people?
This lady brings up a legitimate issue. AMZN is apparently skirting paying VA tax, revenue that is needed, especially now, and you attack the whistleblower? Saying that she is ruining it for people? What, you can break the rules if you are big enough? Sad, very sad.
Don't fight the intarwebs,
Don't fight the intarwebs, embrace them! Put your business online, use the barcodes/ISBN to automate inventory. Every book I've bought on amazon came through some small bookseller. It's almost always been a pleasant experience. Buying used you risk a booger or a pube, but otherwise you can find the odds and ends. Eventually the gov't will move to tax online purchases. Then the game is over. In the meantime, we all know who holds the patent on one click shopping.
Have to agree
with most of the posters...I do not shop at Amazon.com to avoid sales tax. A ludicrous thought. All of my reasons mirror everyone else's. Bring on the sales tax, I don't mind. Prince Books...never heard of it; if I need immediate access to a book, I shop Borders and/or Barnes and Noble. The "boutique" style stores offer me nothing but astronomical prices. Good luck.