Holiday shoppers paying state sales tax on internet purchases thanks to new law

Online Shopping Sales Tax

CHARLOTTESVILLE, V.A. (WVIR) - If you’re shopping online this holiday season, you may notice your final total is more than you expected. A new law in Virginia is requiring shoppers to pay state sales tax online for the first time.

The law was passed after a Supreme Court ruling in June of 2018. The decision in “South Dakota v. Wayfair, Inc.," struck a major blow to online retailers. It overturned a previous ruling and allowed states to collect sales tax from online purchases even if the seller doesn’t have a physical location in the state. This year, Virginia’s General Assembly passed a law doing just that.

"When you're talking about, you know, maybe 100 or more dollars difference if you're not paying tax, they're going to go ahead and take the risk and make that purchase,” President of Charlottesville’s Chamber of Commerce Elizabeth Cromwell said. “Now, maybe, we'll get a little bit more of those kinds of purchases here locally."

For Virginia, this is a revenue stream that could bring in more than $100 million more in tax revenue a year. A portion of that money will be returned for use where customers live and shop.

"1% of that sales tax goes back to the locality where it was collected,” Neil Williamson of the Free Enterprise Forum said. “That helps fund your school's your police officers, the things that you need for your local government."

One business with a large online presence tells NBC 29 that they've seen a sharp decline in online sales to states with higher sales taxes. However, analysts say that could be a game changer for the majority of small businesses, as it levels the playing field between local businesses and large online retailers.

“I think it's kind of an inevitable process,” Cromwell said. “You know, are those retailers locally who sell across state lines negatively impacted? Yes, but I think the overall importance is better overall for the business community here."

Since the law went into effect, more than 1200 businesses around the Commonwealth have already signed on. Companies like Amazon had already been collecting and remitting state sales tax.

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