If you bought something on Amazon this past weekend, you may have noticed something else beyond fast shipping: DC sales tax was added to your charge. Before you go to that “I’m mad about a new tax” place, we hope to explain why a small addition to your Amazon bill is a good thing. The sales tax on an Amazon purchase is the same as when you buy something from a store in DC, which means small businesses now don’t have to worry about losing business to Amazon because of an unfair tax difference. And as we buy more online, paying sales tax makes sure the District has enough to pay for things like the new library on Rhode Island Avenue, NE, or affordable housing.
Amazon now collects sales tax for 28 states and DC, including Maryland and Virginia. In DC, the rate is 5.75 percent, which works out to less than the $1 convenience fee when you go online to buy a movie ticket. Online retailers don’t have to collect sales tax unless they have a physical presence in that state, but Amazon’s presence has been expanding through distribution centers and brick-and-mortar stores. The fact that Amazon is collecting DC sales tax suggests they may be planning to open a store here.
Whatever the reason, this change has several benefits. First, it levels the playing field between Amazon (and other online retailers) and businesses located in DC. It is an unfair advantage if you pay sales tax when you shop at a local shoe store but not if you buy shoes from a solely online retailer.
Beyond that, the sales tax is an important source of revenue for schools, public safety, health care and more. DC’s sales tax brings in $1.3 billion each year, enough to pay for the police and fire departments, libraries and parks, and homeless services. Sales tax collections will not keep up if we buy more and more from online sources that don’t collect sales tax. Without a broad base for our sales tax, the rate may need to increase to help maintain tax collections.
Finally, people who buy online tend to have higher incomes than average, in part because lower-income households often do not have credit cards and cannot shop online. That means collecting the sales tax for online purchases makes the sales tax more fair than it otherwise would be.
To print a copy of today’s blog, click here.