Virginia to Enact Amazon Tax, Too?

February 22, 2010

Earlier this month, our own Joseph Henchman spoke during a discussion panel at the National Press Club entitled "State Taxes on Internet Sales: Are 'Amazon' Laws the Answer?" Henchman reiterated our warning that Amazon taxes are unwise and likely unconstitutional.

On Tuesday, Virginia's state senate approved a bill to adopt its own Amazon tax. If the House of Delegates approves it, then Virginia will join New York, Rhode Island, and North Carolina as the states that have this law on their books.

In the context of the nation's troubled economy, the Amazon tax, currently termed as Senate Bill 660, may come off as a blissful "quick fix" solution. However, the possible revenue generated by this law would only cover a fraction of the state's budget gap. Given that Amazon canceled its associates programs in Rhode Island and North Carolina (see "New York's 'Amazon' Laws: Unconstitutional but Unwise," by Edward A. Zelinsky (2010), p. 721), the revenue that Virginia officials expect from this tax may never arrive.

Amazon taxes help saturate our nation with conflicting and complicated tax codes. They also undermine transparency—SB 660 is not the product of prudent analysis. Although the state Department of Taxation places the expected revenue from the law at $17 million, that figure ignores the likelihood that such a law will deter business from operating within the state.

Don't Mess with Taxes blog author Kay Bell points out that the bill is unlikely to pass into law, given that Gov. Bob McDonnell (R) pledged on the campaign trail his staunch opposition to new taxes Nonetheless, Amazon taxes are being contemplated in an increasing number of states. While some legislators view them as a "get rich quick" scheme, SB 660 and its sister laws across the nation harm simplicity, transparency, and stability in the tax system.


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