The nation's largest online retailer, Amazon, has announced that beginning Feb. 1, it will begin to collect the state sales tax from its Vermont consumers.
Under current law, an online retailer doesn't have to collect a state sales tax from its customers unless the company has a physical presence in the state, like a store or warehouse. So Amazon's announcement has came as a pleasant surprise — for lawmakers.
It's estimated that this could bring in more than $5 million in new revenue for the state in a full fiscal year.
Calais Rep. Janet Ancel is the chairwoman of the House Ways and Means committee. For several years, she has been a strong advocate of efforts to require online retailers to collect the Vermont sales tax.
"The challenge that we've had the last five to 10 years really is that more and more people are buying online, and those online retailers aren't necessarily going to collect the sales tax that's due on behalf of the state,” said Ancel. “So Amazon is a big online retailer."
Ancel thinks many other online retailers will follow Amazon's lead. That's because of a new state law that will go into effect this summer. It will require all online companies that don't collect the 6 percent state sales tax to send each of their Vermont customers an annual invoice of all of their purchases.
Ancel believes that many companies will choose to collect the sales tax rather than comply with this administrative requirement. It's been projected that Vermont would receive at least $17 million in new tax revenue on a yearly basis if all online retailers collected the state sales tax.
“The tide is turning in terms of states' ability to get online retailers to collect the tax,” said Ancel. “The other thing is because of these notice requirements, which do go into effect July 1, we think it's likely that other retailers will fall in line."
Claire Benedict is a co-owner of Bear Pond Books in downtown Montpelier. She says this issue is one of simple tax fairness.
“It's great news, it's about time," she says. "A lot of retailers, particularly bookstores, have been following this and advocating for this for a long time, so we're very happy to see the news. It's just a matter of fairness — and we pay our taxes and they should pay theirs."
Congressman Peter Welch is a co-sponsor of the federal "Main Street Tax Fairness" bill. It would require all online retailers to collect all applicable state, regional and local sales taxes. He says this issue is crying out for a national approach.
"There are a lot of Vermont businesses that have a brick-and-mortar component and also have an online component where that really supplements their bottom line,” said Welch. “So the advantage of having a national solution is that you can get simplification and make it easy for the retailers."
Welch thinks the outlook for his legislation is reasonably good.
"A lot of my Republican colleagues are in support of this, and they see it not as a new tax but a due tax,” said Welch. “And a lot of them have downtowns just like we have in Vermont, where it's tough, where the retailers are a backbone of the community and they want to have a level playing field for their retailers."
State officials say it's important to remember that any items that are exempt from the Vermont sales tax will also be exempt from online retailers. These include food, clothing and a number of health products.