Amazon to start collecting sales taxes

Online retail giant Amazon.com would start collecting and remitting sales taxes in Virginia on Sept. 1, 2013, under an agreement announced by Gov. Bob McDonnell's office and advanced by a House of Delegates committee Wednesday.

The agreement comes as groups representing traditional retailers in Virginia were pushing hard for state lawmakers to pass legislation that would require Amazon to collect sales taxes on purchases made by Virginia residents.

The deal reverses a statement that McDonnell's office made in December when Amazon announced plans to build two huge distribution centers in Virginia. The governor's office said then that the retailer would not have to collect the 5 percent state sales taxes.

The state Senate had already passed legislation requiring Amazon and other online retailers to charge the tax if they have a physical presence in the state. The bill, sponsored by Sen. Frank W. Wagner, R-Virginia Beach, is backed by a coalition of retail trade groups.

Wagner brought the deal — worked out by the McDonnell administration and Amazon — before the House Finance committee as a substitute bill on Wednesday. The committee advanced it to the full House by a 17-2 vote.

"This is not a new tax. This is a different way of collecting an existing tax," Martin Kent, McDonnell's chief of staff, told the committee.

Kent said it was important to enact legislation because of a 2007 ruling by the Virginia Department of Taxation dealing with in-state operations controlled by out-of-state online merchants. That ruling enabled Amazon to avoid collecting the tax.

Under current law, Virginians who buy items from online retailers aren't necessarily charged sales taxes. But residents are supposed to pay the tax on their own when filing their annual personal tax returns.

Bricks-and-mortar retailers, who are required to charge and remit sales taxes, argue that puts them at an unfair disadvantage to online merchants.

Virginia could receive as much as $24 million in additional state and local sales tax revenue if the legislation passes, according to a fiscal impact statement prepared by the state Department of Taxation, which based the amount on a survey of retailers that would be affected.

If the legislation passes, Amazon would be collecting the taxes about 10 months after it plans to open the distribution centers in Chesterfield and Dinwiddie counties.

The Seattle-based company announced in December that it plans to invest $135 million to open the centers, which would employ about 1,350 people. Site preparation is under way for the construction of the centers, which are slated to open by November.

"Amazon is very grateful to Governor McDonnell for his focus on Virginia jobs and for his efforts to work with other governors toward national resolution of the sales tax issue this year," Paul Misener, Amazon's vice president of global policy, said in a statement.

Amazon has said it favors federal legislation that would address the online sales tax issue, which has spurred debate and legislation in other states.

Under the legislation advanced Wednesday by the House committee, the start date for Amazon to collect sales taxes could be Jan 1, 2014, if federal legislation is passed.

The state legislation also creates a legal presumption that other out-of-state online businesses with a physical presence in Virginia such as distribution centers must collect sales taxes.

"Amazon is certainly the one that has been most prominent in people's minds," Wagner said.

Several dozen retail store owners and representatives of retail organizations in Virginia attended the committee meeting.

Several of them said after the meeting that they were happy with the agreement as a compromise, even though they had hoped that Amazon would start collecting sales taxes before this year's holiday shopping season.

"This is certainly one more step in the process and much further than we got two years ago," when similar legislation failed in a House committee, said George Peyton, vice president for government relations for the Virginia Retail Federation, the lobbying arm of the local Retail Merchants Association and the Retail Alliance in Hampton Roads. He expressed optimism that the legislation would pass.

"We think it strikes a reasonable balance in addressing the level-playing-field issue while also preserving economic development considerations," said Rob Shinn, a spokesman for a coalition of retailers called the Alliance for Main Street Fairness.

One of the two delegates who voted against the bill said he did so to make sure the legislation would go on the regular calendar in the full House, instead of a list of uncontested bills that are typically passed in a block vote.

"I just wanted to slow the train down a bit so that we can take a closer look at it," said Del. Mark L. Cole, R-Spotsylvania.