‘Amazon loophole’ bill would level the playing field for retailers, advocates say

State Sen. Frank Wagner (R-Virginia Beach) is the chief patron of legislation submitted today to fix the Amazon loophole in the state sales tax collection system.  The legislation, Senate Bill 597, is needed to clarify that retail companies in Virginia that have a physical presence in the state, such as a warehouse and distribution center, cannot use complex corporate structures to avoid collecting and remitting the state sales tax from customers.  The bill is co-sponsored by a strong bipartisan group of senators.

“The legislation will create a more level playing field for Virginia retailers,” said Wagner, who is the chief patron of the bill.  “Companies with a physical presence in the state should all play by the same rules.”

The bill is similar to legislation that passed in 2011 in Texas.  The legislation says that companies with a substantial ownership interest in a warehouse or distribution center have the physical presence required for them to collect the tax.  The Virginia legislation is regarded as more narrow than approaches used in New York and other states that deems affiliate relationships with website venders in a state as constituting physical presence.

Amazon has entered into voluntary agreements with four states to collect the sales tax. Amazon will begin collecting the sales tax in California as early as September 2012.  Eight other states have also passed bills to close the loophole in different ways.

“States are moving quickly to address this loophole,” said Rob Shinn of the Virginia Alliance for Main Street Fairness.  “It is simply a matter of fairness that will allow free market competition to determine winners and losers in the marketplace.”

The Alliance for Main Street Fairness in Virginia is a coalition of retail companies and organizations dedicated to promoting the fair taxation of retail goods in the Commonwealth.