Memo for fiscal year 2021, updated 2020-02-20

[Archived] Question # 17: Please provide the impact of the WayFair sales tax dollars.


Please provide the impact of the WayFair sales tax dollars. (Mayor Wilson)


Based on the methodologies discussed below, staff estimates that the revenue gain to the City in FY 2020 from the Wayfair Supreme Court decision ranges from $0.4 million to $1.2 million through February 2020. Pursuant to state legislation adopted during the 2019 session of the General Assembly, “remote marketplace sellers” like Wayfair are now subject to state and local sales tax.  This legislation resulted from a 2018 US Supreme Court decision in South Dakota v. Wayfair, Inc. that held that states may charge sales tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the state.

The Virginia Department of Taxation reported that it is currently unable to quantify how much of the local sales tax revenue is attributable to this state code change.  Similarly, specific company receipts provided on reports to the locality also do not identify the nature of sale (i.e., whether or not it was an Internet sale absent physical presence in the locality).  The state reports also do not provide separate business names location in state sales tax reports.  While some conjecture can be made based on the name of the business, many others use corporate names not typically associated with the more familiar business trade name.  Absent this specific identifying information and given the volume of data, staff can only make an educated rough estimate as to the range of impact of Wayfair on local revenue based on the two methodologies noted below: 

1.  Staff matched the monthly sales tax reports against the local BPOL tax roll based on FEIN or Social Security numbers.  By identifying those businesses that did not have a corresponding local license (i.e., no physical presence in the locality), staff identified a $411,000 increase in sales tax revenue year-to-date, or $41.1 million in new taxable sales.  

2.  Alternatively, noting that state sales tax revenue has increased, the state reported that “this is directly related to the anticipated increase in Wayfair related revenues”1 and that “new use tax dealers submitted $26.4 million for the month of September.”1  Inasmuch as Alexandria’s local sales tax revenue represents 0.786% of total state General Fund sales tax, this would equate to almost $208,000 in City revenue for the month of September.  Multiplying that by 6 months, beginning in September 2019, yields approximately $1.2 million to date through February (the law went into effect July 1, which means the gain would not start showing up until September 2019 receipts, due to the lag in state collections and remitting).  This would equate to $120 million in new taxable sales.

 1 Layne Jr., A.L. (2019). Economic and Revenue Update: A Briefing for the Money Committees. Commonwealth of Virginia.

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