By Peter Galuszka

Christmas, regretfully, is forced, propagandized consumerism under the guide of market capitalism, albeit in new forms. One is digital sales, of which Amazon is dominant.

Amazon also is about to become a big player in Virginia since it will open distribution centers in Chesterfield and Dinwiddie that will cost $135 million and employ 1,350. Gov. Robert F. McDonnell announced the projects with great flourish. Typically, the Richmond Times-Dispatch played its role as McDonnell’s personal “Pravda” and bannered the news to make us all understand just what a great jobs magnet our photogenic governor is.

To its credit, however, the RTD did break some news. It turns out that Amazon, which is getting $3.5 million from the Governor’s Opportunity Fund and $850,000 from the tobacco fund, will not be required to pay any states sales taxes on the goods its ships to Virginia customers from the two centers.

If you are a traditional, non-digital retailer, you will have to continue charging and paying the usual 5 percent sales tax. You may be competing for the same market with Amazon (2010 sales of $34 billion) but Amazon automatically gets a 5 percent advantage. That, dear shoppers and taxpayers, is Bob McDonnell’s idea of free and unfettered market capitalism.

To be sure, very few states charge a sales tax on goods traded over the Internet. The rationale was, back in the 1990s, was that the Net was waaay too cool to tax. The guys who developed it are waay cool types with a 60s hippie bent, like Bill Gates of Jeff Bezos, and if you make them play by the usual rules, well that’s like, soooo Old Economy. Everyone bought into this nonsense, especially George Allen who lobbied not to tax anything on the Net.

Of course, a lot of these Net heros are really conservatives or libertarians who don’t wear neckties. They are not out for the betterment of mankind, rather the betterment of their bottom lines. Meanwhile,  routine mortals, such as journalists like me,  have seen our free lance pay plummet because we are forced to accept far less or nothing at all for our content posted on the Web rather than in print. Anyway, that’s my private hell.

This kind of “The Net is Sacred” thinking is McDonnell’s excuse to land needed jobs. No argument about the need. Dinwiddie is mostly rural and can use jobs. Chesterfield has an imbalance of too many subdivisions and not enough industry.

The hypocrisy of the McDonnells is that while they play free market and tight budget and stick it to the schools and retirees and Medicaid recipients, they have no trouble handing out goodies to big firms like Amazon, that have no trouble taking care of themselves. Other states seem to be driving tougher bargains than Virginia. Tennessee got a similarly-sized distribution center from Amazon but also starts getting its sales tax from Amazon in 2014.

Also, it’s not as if big distribution centers are unheard of in Virginia. Back in the early part of the past decade, China was exploding with exports of consumer goods. Hampton Roads was booming. Mid-Atlantic distribution centers were going up from Suffolk and others spots for Wal-Mart, QVC, Target and other big box, mass retailers. I believe they did have to pay the 5 percent sales tax.  Of course, the recession cooled that trend and Hampton Roads is stuck with the big box centers while competitors like Baltimore and Savannah eat Virginia’s lunch with other cargo. That’s another story, however.

Among the groups rightly angry with the big Mickey D are members of Richmond’s Retail Merchants Association, who still have to pay that pesky 5 percent sales tax. “The bottom line is that we just want a level playing field,” says Nancy C. Thomas, the group’s CEO and president.

Well, not in Virginia and not with Mickey D.


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Comments

4 responses to “Merry Christmas, Amazon.com!”

  1. This is a tough one. The law is such that a business without a physical presence in a state is not required to collect sales tax for any state. It’s a question of basic fairness. That’s what the U.S. Supreme Court has held. Opening facilities in Virginia would seem to me to be a sufficient presence to trigger application of a duty to collect sales tax on Amazon sales to residents of Virginia.
    On the other hand, bringing jobs to the Commonwealth is important and, as Uncle Sam starts cutting back on spending, even more important. I’m glad I don’t need to vote on this one. It would take considerable soul searching. If you held a gun to my head, I guess I would vote to apply the tax.

  2. it actually illustrates how the model for states is outmoded with the 21st century economy.

    Not that health care is already caught up in this outmoded model also.

    note further that the 21st economy of buying online vs bricks&mortar combined with the housing devaluations bodes ill for local govt finances that depend quite substantially on sales taxes and property taxes for funding essential services and infrastructure.

  3. Larry, it’s more than a changed economy. It’s the myriad of state and local variances in the application and rate of the sales tax. If you run a retail operation in Fredericksburg or Tysons Corner, you know the rate(s) and the application. But suppose you sell over the Internet in other states, some of which have local option provisions? Nationwide compliance would be essentially impossible.

  4. “re nationwide compliance” well,no more no less that other activities regulated at the national rather than state level.

    the question is – has the world changed such that you need national policies in areas where State policies used to work?

    there are numerous examples of this ranging from drugs ( legal and illegal) to standards in food…. imports, health insurance per state rather than one per nation, interstate highway regs…auto safety and emissions, etc….

    unlike many.. I do not see the states as having a truly legitimate reason for existence to start with given the King of Englands hand in establishing the reasons why we have a Md and a Virginia and one with strict Dillon and the other with weak Dillon..almost home-rule…the elemental original difference between the two was a border designed to allocate lands to the gentry.

    Europe is now dealing with the same issue in trying to develop standards that flow and apply across ancient borders.

    my view is that the 21st century has made borders – impediments – and the more we recognize that they are artifacts.. the more we remove our own self-imposed stumbling blocks.

    Not to say we should do away with states but to recognize that even way back when it was recognized that Interstate Commerce was a reality that had to be dealt with… and now we have the 21st century which even more so will penalize those who insist that borders mean more than they should.

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