More ‘Amazon taxes’ advance in states

Attention online shoppers. States are moving forward in their efforts to collect sales taxes on items purchased from remote retailers.  

This week, the Virginia Senate approved a measure that would require Internet retailers to collect the Old Dominion's 5 percent sales tax. 

Virginia lawmakers say they are justified in demanding their version of the so-called Amazon tax, named after the popular online retailer, because the Seattle, Wash.-based company has two facilities in Northern Virginia.

The bill goes further, however, by also citing presumed nexus, or physical presence, in the state based on a company's agreements with affiliates. 

In this case, a business is presumed for Virginia retail sales and use tax purposes to be transacting business in the state if it enters into an agreement with a Virginia resident who directly or indirectly refers potential customers. This referral could be, under the bill, as simple as a link on an Internet site.

Don't freak out yet shoppers and Virginia bloggers with Amazon ads on your sites. 

Despite the estimated $18 million in sales tax revenue the Virginia Retail Federation says the new tax could bring in, Virginia's House is not likely to pass the bill.

Up the road in Vermont, lawmakers have introduced their own Amazon bill that presumes nexus for sales tax purposes.

Both the Virginia and Vermont measures would exempt smaller companies and would be "rebuttable." That is, the presumption that the online site was an agent of Amazon or other remote seller could be countered by proof that the state resident who operates the site did not engage in any solicitation on behalf of the remote retailer.

Congressional interest, too: Meanwhile, federal lawmakers also are taking a look at Internet sales taxes.

At a roundtable earlier this month in Washington, tax experts agreed that Amazon laws are not the best solution. State-by-state nexus bills chip away at the problem, but the best move would be federal legislation that would streamline state tax collections nationwide. 

Unfortunately, noted most panelists at the session, Congress appears unwilling to act on a streamlining bill for the foreseeable future.

The session, sponsored by Tax Analysts, came on the heels of the House Judiciary Subcommittee on Commercial and Administrative Law hearing looking into the role of Congress in defining tax nexus.

In written testimony, Joe Henchman, the Tax Foundation's Counsel and Director of State Projects, lent his support to the Streamlined Sales and Use Tax Agreement. 

"It is not new for states to seek revenues by shifting tax burdens away from the majority of voting residents, such as with changing nexus rules," said Henchman. "Because economic integration is greater now than it has ever been before, the economic costs of nexus uncertainty are also greater today and can ripple through the economy much more quickly."

The better solution, said Henchman, is Congressional adoption of a physical presence standard that would prevent burdens to interstate commerce. That would accomplish two things:

1. It would limit "destructive and likely unconstitutional state efforts to export tax burdens," and 
2. It would decrease transaction costs for interstate commerce, especially for small businesses using mail and the Internet.

Henchman also warned that as electronic commerce has increased, "some seem to view it as a golden goose that can be squeezed without adverse effects on economic growth. It must be understood that the availability of many items in electronic commerce could be hindered if states are permitted to adopt economic nexus standards."

Related posts:

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• Amazonian sized state tax battles
• Chicago demanding amusement taxes from online resellers
• Court watches as state tax collectors dip into Capital One's wallet
• Illegal downloaders, beware the tax man
• Streamlining various state sales taxes

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