Virginia Booksellers Urge State Leadership to Enforce Sales Tax Laws

On Thursday, February 26, a group of Virginia-based independent booksellers wrote to their state leaders to urge them to enforce existing sales tax laws by requiring Amazon.com to collect and remit sales tax for sales made in Virginia. Amazon.com operates two facilities, a fulfillment center and data center, in the state. In the letter, the booksellers stressed that "both federal law and the Tax Code of Virginia clearly state that any company with a physical presence in the Commonwealth -- via an office, warehouse, or a sales agent -- is required to collect and remit sales tax."

The booksellers' letter was sent to Governor Tim Kaine; Virginia State Sen. Charles J. Colgan, senate president pro tempore; State Sen. Richard L. Saslaw, senate majority leader; State Sen. Thomas K. Norment, Jr., senate minority leader; State Del. William J. Howell, speaker of the house; State Del. H. Morgan Griffith, house majority leader; and State Del. Ward L. Armstrong, house minority leader. (Read the letter.)

In September 2008, Sarah Pishko of Prince Books in Norfolk, Virginia -- one of the letter's signatories -- contacted state authorities, including Tax Commissioner Janie E. Bowen and State Del. Paula Miller (D-Norfolk), and, noting Amazon.com's two facilities in the state, she asked legislators to require Amazon.com to collect and remit sales tax for purchases made by Virginia residents. ABA also contacted both Bowen and Gov. Kaine in September regarding Amazon.com's nexus status, and provided Virginia bookstore members with a template that they could adapt and send to their own senators and delegates.

In January, Pishko's e-fairness efforts and Amazon's tax status in the state were the focus of a front-page news story in The Virginian-Pilot. In the Pilot article, Virginia Department of Taxation spokesman Joel Davison noted that the requirement to collect and remit sales tax includes out-of-state companies that take Virginia residents' orders but have a warehouse or other operation in Virginia. "They've got nexus in the state, then," Davison told the Pilot.

Nonetheless, Amazon.com does not collect and remit sales tax in Virginia, as it contends that its physical facilities in Virginia are "silo businesses" with no connection to its online retail operations. To challenge that contention, the booksellers included with their letters a job advertisement for Amazon.com's Ashburn facility, taken from the Amazon.com website. The job description noted that the position of "data center manager" is for Amazon.com's Ashburn facility and whoever is hired in this role would work for Amazon.com.

In their letters, the booksellers wrote: "By any standard, it is undeniable that Amazon.com has a physical presence in Virginia. However, because the online retailer argues that its Virginia facilities are 'silos' with no connection to Amazon.com, Virginia has allowed Amazon.com to skirt sales tax laws at the expense of the Commonwealth's own businesses and the communities they serve. Frankly, at a time when Virginia is facing a projected $2.9 billion shortfall and is considering cutting support for public schools, colleges, and healthcare, accepting the validity of this legal shell game extends unlawful special privileges to a non-Virginia retailer at the direct detriment to Virginia's in-state businesses and residents. If other Virginia-based businesses with subsidiaries used this same silos argument, it would mean they could exempt themselves from collecting and remitting sales tax."

The Virginia-based booksellers who signed the letter are: Kathryn Adkins of the Kite Koop & Book Store in Chincoteague Island; Kay Allison of Quest Bookshop, Inc. in Charlottesville; Ruth Erb of Book People in Richmond; Alina Gawlik of Aladdin's Lamp Children's Books and Other Treasures in Arlington; Danny Givens of Little Dickens and Givens Books in Lynchburg; Kelly Justice of The Fountain Bookstore, Inc., in Richmond; Stacy Madalena of Eastern National Bookstores in Alexandria; Christine Myskowski of Salt & Pepper Books in Occoquan; Anysia Oswald of Sacred Circle Books in Alexandria; Sarah Pishko of Prince Books in Norfolk; Ronald W. Ramsey of Bookworks in Staunton; Sharon Ritchie of Chapters Bookshop in Galax; and Lelia Taylor of Creatures 'n Crooks Bookshoppe in Richmond.

The Letter Signed by Virginia Booksellers

February 26, 2009

Dear [NAME]:

As independent booksellers in Virginia, we the undersigned strongly urge you to enforce existing sales tax laws by requiring Amazon.com to collect and remit sales tax on Amazon.com purchases made by Virginia residents. Amazon.com has two warehouses in the state, and both federal law and the Tax Code of Virginia clearly state that any company with a physical presence in the Commonwealth -- via an office, warehouse, or a sales agent -- is required to collect and remit sales tax.

By any standard, it is undeniable that Amazon.com has a physical presence in Virginia. However, because the online retailer argues that its Virginia facilities are "silos" with no connection to Amazon.com, Virginia has allowed Amazon.com to skirt sales tax laws at the expense of the Commonwealth's own businesses and the communities they serve. Frankly, at a time when Virginia is facing a projected $2.9 billion shortfall and is considering cutting support for public schools, colleges, and healthcare, accepting the validity of this legal shell game extends unlawful special privileges to a non-Virginia retailer at the direct detriment to Virginia's in-state businesses and residents. If other Virginia-based businesses with subsidiaries used this same silos argument, it would mean they could exempt themselves from collecting and remitting sales tax.

Va. Code 58.1-612 C is very clear regarding nexus requirements: "A dealer shall be deemed to have sufficient activity within the Commonwealth to require registration ... if [the retailer] [m]aintains or has within this Commonwealth, directly or through an agent or subsidiary, an office, warehouse, or place of business of any nature." It also states that a retailer has nexus if it "[s]olicits business in this Commonwealth by employees, independent contractors, agents, or other representatives."

Clearly, Amazon.com meets these criteria, and then some. Amazon.com has two physical bricks-and-mortar facilities in Virginia. In the past, Amazon.com has advertised jobs for these facilities (see enclosed job advertisement), and the online retailer has noted the facilities' existence as Amazon.com companies on its website. Amazon.com has countless online affiliates that act as solicitors in the state. By any definition, Amazon.com has nexus in Virginia and should be collecting and remitting sales tax on purchases made to Virginia residents. By not doing so, the company is in clear violation of the Tax Code of Virginia, Code 58.1-612 C, subdivision 1 and subdivision 2.

We are frankly dismayed that Virginia would allow Amazon.com to perpetrate this legal fiction -- and at the expense of the Commonwealth's own businesses, all of which would most certainly find themselves in serious legal trouble if they attempted a similar ploy and stopped collecting and remitting sales tax.

These days, Amazon.com stands alone in its contention that its bricks-and-mortar offices are somehow separate from its e-commerce business. While in the past, some retailers attempted to use the argument of "separate" e-commerce business operations to skirt sales tax laws, today both locally owned bookstores with their own e-commerce sites and huge chains like Sears.com recognize their responsibility to collect sales tax.

Independent booksellers in Virginia represent a critical component of the Commonwealth's economy: The American Booksellers Association reports that its member bookstores in Virginia realize approximately $84 million annually in sales; employ approximately 900 people, with an estimated payroll of more than $14 million; and collect approximately $4.2 million in sales tax. To undercut a state's independent businesses by selectively deciding what laws to enforce and what laws to ignore is just plain wrong.

If this situation continues, more and more consumers will eschew locally owned businesses for the tax-free shopping offered by Amazon.com and other out-of-state online retailers and commercial resellers. Left alone, this exodus will be devastating to Virginia's economy. It will force an increasing number of Virginia's businesses to cut staff and close each year, which will accelerate the decline in state revenue from sales, personal, and corporate income taxes.

This is a very serious matter. Indeed, as elected officials throughout Virginia are forced to make wrenching decisions that will cut back on the ability of police officers and firefighters to serve their communities, or that limit the resources available to teachers, Virginia taxpayers will have to shoulder increased burdens -- and will question why a retail giant like Amazon.com is able to evade its legal obligations. That hardly seems fair to us.

Thank you for your time.

Sincerely,