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This is the start in what will be a long battle with online taxes. Currently, taxes are only imposed when the company is located in the same state as the consumer. However, some are trying to change the taxing methodology to include an online tax, both on the state and national level.

“Brick and Mortar” business are in favor of online sales tax as it will “level the playing field”. To the contrary, all this will do is limit healthy competition in the free market. There is nothing stopping “Brick and Mortar” businesses from selling their products online. Existing online business should not be punished for non-online business unwillingness to adapt.

Virginia has a $4.2 billion dollar deficit and it is predicted that this new tax is predicted to generate $17 million dollars a year. However, throwing money at an inefficient system is not going to solve anything.

As mentioned in “Down and Dirty on Marginal Tax Rate”, all taxes create a deadweight loss. In other words, it inhibits mutually beneficial transactions from occurring. This deadweight loss decreases economic efficiency, especially when pertaining to sales tax, due to its elasticity of supply and demand.

With said consequences of an additional tax, it’s possible that national retailers will pull out of Virginia to avoid this unnecessary tax which will further hurt Virginia’s economy. Consumers will avoid buying an item online from Virginia when they can easily by the same product from another retailer in a different state.

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