Amazon, the digital sales giant, is about to become a big player in Virginia. Last week it announced that 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. The Richmond Times-Dispatch, a loyal McDonnell supporter, bannered the news. But, to its credit, the newspaper also broke some news of its own.
It turns out that Amazon, which is getting $3.5 million from the Governor’s Opportunity Fund and $850,000 from the state’s tobacco fund, will not be required to pay state 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 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, few states charge a sales tax on goods traded over the Internet. Back in the 1990s, the rationale was — in a nutshell — that the Net was just way too cool to tax. The guys who developed it were way-cool types with a strong innovative bent. If you make them play by the usual rules, well, that’s just so Old Economy. Everyone bought into this nonsense, especially George Allen, who lobbied not to tax anything on the Web.
Of course, a lot of these Net heroes are really just conservatives or libertarians who don’t wear neckties. They are not out for the betterment of mankind but the betterment of their bottom lines. And this kind of “The Net is Sacred” thinking is really 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.
But hypocrisy of McDonnell and those who think like him is that while they play free market and tight budget and stick it to the schools, 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 harder bargains than Virginia. Tennessee got a similar-size distribution center from Amazon but also will start 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 in Suffolk and others spots for Wal-Mart, QVC, Target and other big box retailers. Of course, the recession cooled that trend, and Hampton Roads is stuck with the big box centers while competitors such as Baltimore and Savannah eat Virginia’s lunch with other cargo.
Among the groups rightly angry with McDonnell are members of Richmond’s Retail Merchants Association, who still have to pay that pesky 5 percent tax. “The bottom line is that we just want a level playing field,” says Nancy C. Thomas, the group’s CEO and president.
Apparently, they won’t get it when it comes to the Internet and Robert McDonnell.