Complaint: Amazon.com should charge tax for sales in Va.

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.