The spotlight is on sales tax fairness as Amazon is now collecting sales tax in the state.
In April, House Bill 2754, a sales and use tax clarification bill, was passed by the West Virginia Legislature and signed into law by Gov. Earl Ray Tomblin.
This legislation established that out-of-state retailers that have a physical presence in West Virginia — a store or a distribution center — and do online sales must collect the 6 percent sales tax.
This applies to Amazon, which operates a customer-service center in Huntington. In October, Amazon began collecting the sales tax on orders shipped to West Virginia.
Other states have established similar laws. The proposed federal Marketplace Fairness Act of 2013, which is awaiting action in U.S. Congress, would give states the authority to require that all retailers collect sales taxes for Internet purchases, whether they have a location in the state or not. That money would go to the state where the shopper resides.
Ty Rogers, spokesperson for Amazon, provided the following statement: “Amazon strongly supports the federal Marketplace Fairness Act, which would resolve the sales tax issue and protect states’ rights to make their own revenue policy choices while allowing them to collect more than a fraction of the revenue already owed.”
At the time House Bill 2754 was being considered by the West Virginia Legislature, the state Chamber of Commerce asked different online businesses what they thought about the tax. The concensus from the companies was that this was a fair and reasonable tax and West Virginia should join the other states that had already adopted proposals like this, said Steve Roberts, president of the chamber.
“We did not find opposition to this tax,” he said. “Most of the companies felt that it is not problematic. They have to collect it and pay it in many other states.”
Bridget Lambert, president of the West Virginia Retailers Association, explained that the state law clarified who has to remit the sales tax to the state. It established tax fairness for all retailers.
“We definitely supported that tax change because we feel that it’s very important for retailers to be on a level playing field,” she said. “Main Street merchants are important to West Virginia’s retail industry.”
Sales tax disparities impact the businesses on Main Street and also affect the state budget, Lambert said.
“It put our local merchants at a competitive disadvantage, and we felt that it was important that (the law) be clarified,” she said.
Lambert said the law will allow West Virginia to collect money that is owed to the state.
John Deskins, director of the West Virginia University College of Business and Economics’ Bureau of
Business and Economic Research, said most of this change is about leveling the playing field.
Local mom-and-pop stores have always had to collect sales tax, but online retailers like Amazon previously didn’t have to apply the tax unless they had a physical presence in the state, he said.
Some people have said that practice is unfair to the local brick-and-mortar establishments. Deskins believes it’s much more fair and makes sense to require all entities to collect taxes in the same way and comply with the same rules.
Internet retailers often have difficulty keeping up with the different sales tax rates for the various states, and states also have variations on what is and isn’t taxable, he said. The complexity of the situation can make it very costly for online companies to comply with the rules.
Deskins said some states have moved to try to streamline sales taxes in recent years, but there have been arguments about this idea.
Dr. Amy Godfrey, assistant professor of economics in Fairmont State University’s School of Business, agreed that this tax change will put Internet retailers and normal businesses on equal footing.
“As the popularity of online shopping has drastically increased, internet retailers have been able to sell their goods without having to collect and pay sales taxes to states,” she said. “This change will require these retailers to collect and pay sales taxes on the goods purchased by West Virginia residents. This will causes these retailers to incur an initial cost of establishing a database of state sales taxes and a system to collect the correct tax and relay it on to the state.”
Godfrey believes that the taxing of Internet sales could cause a few individuals to move from shopping online to visiting regular businesses, but those businesses will feel a minimal effect. Convenience is more of a factor for people who shop online than the prospect of not having to pay sales tax.
“I believe that this change can only have a positive impact on sales tax revenues,” she said. “With many other states also collecting taxes on sales of goods to their residents, we, as a state, would be missing out on these revenues if we didn’t also collect them. I do not believe that this will have a significant impact on businesses in the state.”
Jonathan Rider, owner of Rider Pharmacy in Fairmont, said he thinks it’s necessary for the states to collect sales tax from online purchases, because it means lost revenue if they don’t.
“It’s something that I’m for,” he said. “I’m glad they’d doing it, because I think the revenues are going to the right place now.”
This change gives small businesses like Rider Pharmacy that have an online presence the same opportunities as Internet retailers.
Email Jessica Borders at email@example.com or follow her on Twitter @JBordersTWV.
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