When it comes to state sales taxation, the rules are mostly pretty simple. You own a store that sells stuff, then you collect and send to the state the sales tax on the things you sell. Done.
But in a sales economy that’s moving beyond bricks-and-mortar stores, and beyond state lines, the rules are getting blurrier. States are worrying about how to tax online sales, and now two states have sued a book retailer whose products are often offered by teachers.
According to the Tax Foundation—a D.C.-based tax research group that advocates for simple, neutral and broad-based tax policies—Connecticut and Tennessee have sued Scholastic Book Club Inc., arguing that the company owes back sales taxes.
And courts in those states have found in favor of the states.
Scholastic’s book club works like this: Teachers offer books to their students for sale, collect money, put in orders with Scholastic and then receive the books. The program also lets parents order books online through a code associated with their child’s teacher.
Connecticut and Tennessee have argued that those teachers are serving as de facto salesmen for the books. In general, a state can tax sales from a company if it has personnel in their state.
Tax Foundation vice president Joe Henchman said more and more states are looking for ways to collect more tax revenue by pushing the definitions of who must pay sales tax.
Henchman said states generally are allowed to collect tax from companies that have property or employees in the state.
But in an Internet world, that exempts an increasing number of companies.
“States generally are not happy with that, they want to go further because they have companies selling into their state who don’t have property or employees in the state,” Henchman said. “The view is that’s kind of unfair.”
Internet giant retailer Amazon is a case in point. A number of states have tried to force Amazon to collect and remit sales tax, but those efforts have mainly been successful only in states where Amazon has a physical presence.
Just this year, Amazon agreed to start collecting sales tax in Virginia—because it’s planning to build distribution centers here.
The Scholastic case, Henchman said, is just part of the trend of states pushing the definition of physical presence, and arguing that if companies have an economic presence, then they owe sales tax.
Some states are “more aggressive than others,” he said, pointing to West Virginia as an example.
The economic recession’s impact on state revenues is part of the reason.
“States are certainly looking under the couch cushions anywhere they can get revenue,” Henchman said.
But it’s also simply the changing dynamics of a world market. You can log into a website from anywhere.
“Certainly the rise of the Internet has pushed it along too,” Henchman said. “There’s a lot more commerce going on that’s not through the brick and mortar store in the state. Retailers say we have to collect the tax, our online competitors don’t, and I think it’s a sympathetic argument. It’s a question, though, of what we can do to resolve that that isn’t giving the states the power to inflict their tax systems on the whole world.”
The Tax Foundation is concerned that without some restraints placed on states by the federal government, the states can stretch the definitions of nexus, physical presence and employees far beyond where the limits are now. Online affiliates—like Amazon uses—or simple online advertising could require a company to pay sales tax in far-flung states.
“The question is how to balance that desire from the states against the dangers the states will exceed their power and basically start exporting their tax burden to the whole world,” Henchman said.
Chelyen Davis: 540/368-5028
cdavis@freelancestar.com

Anew tourism initiative aims to promote the Fredericksburg area’s various alcoholic-beverage producers.
The Grapes and Grains Trail allows people to buy a $12 ticket that gets them a tour of the Hartwood Winery, Potomac Point Winery, Lake Anna Winery, Mattaponi Winery, Blue & Gray Brewing Co. and A. Smith Bowman Distillery.
The ticket also includes a stemless wine glass for tastings with the Grapes and Grains Trail logo on it, and a 20 percent discount at each facility’s gift shop.
All of the facilities are in Stafford and Spotsylvania counties. M.C. Moncure and Debbie Aylor, who manage those counties’ tourism departments, have been planning the trail with the six participants for several months. It’s patterned after other successful programs outside the area.
The local program offers a bit of a twist, however. Most trails feature solely vineyards, while Grapes and Grains has purveyors of wine, whiskey and craft beer. A. Smith Bowman master distiller Truman Cox calls it a “different spin on just the standard wine trail.”
“It has a little bit for everyone,” said Cindi Causey, who owns Potomac Point with her husband, Skip. She said the Blue Ridge Whiskey Wine Loop in the Shenandoah Valley is the only other mixed trail that she is aware of.
Causey said most wine trails involve vineyards that are a much larger distance from each other than the local one. All of the stops on the Grapes and Grains Trail could be hit in one full day.
Causey noted that her vineyard has already partnered with others on the trail, including using A. Smith Bowman’s whiskey barrels to age Potomac Point’s port wine. She said extending the partnership was a natural fit.
The six participating businesses are each holding events June 16–17, Father’s Day weekend, to officially kick off the Grapes and Grains Trail. Many feature music, food and other festivities. Tickets can now be purchased at the vineyards, brewery and distillery.
The partnership is part of an overall effort to increase awareness of the area’s vineyards, distillery and brewery. Many of the individual participants have been taking steps to increasingly open themselves up to the public over the past few years.
For example Blue & Gray opened the Lee’s Retreat brewpub, allowing customers to watch beer get made as they sample a glass over a meal. And the Bowman distillery recently completed the first phase of a renovation that now allows the public to tour the site.
Bill Freehling: 540/374-5405
bfreehling@freelancestar.com

We’d like to hear from you both in online comments on this column on Fredericksburg.com and my Tech Toys blog and in email to mikez@freelance star.com. Let me know about:

The quality of the experience, which revs up mobile downloads and uploads by a factor of up to 10.
Where you are—or are not—getting it.
How much data is being consumed by streaming video and music. Keep in mind that 4G can pop your data plan cap in a hurry if you stream much video and that it’s important to switch to Wi-Fi when possible.
And whether you believe the Verizon Wireless new HomeFusion high-speed broadband service that’s paired with the network rollout may be helpful to you.
According to Verizon Wireless spokeswoman Melanie Ortel, some more rural parts of the Fredericksburg area are included in the rollout as well as the more densely populated areas. Individual, anecdotal responses from you may help us complete the picture.
Ortel said:
“Included in Verizon Wireless’ new 4G coverage area are the city of Fredericksburg, the majority of Stafford County, portions of Spotsylvania County, and portions of King George and Westmoreland counties, extending the company’s existing footprint west of Stafford County and south of Prince George’s County, Md., and Fairfax County to include the communities of La Plata, Md., and Dahlgren, Colonial Beach and Fairview Beach. This expansion will provide service along Route 5 as well as a host of other rural roads including Route 225, Route 6, and Route 231, to name a few.”
Check network4g.verizonwireless.com/#!/coverage to see if Verizon Wireless shows your home or business as covered.
“We know from U.S. Census Bureau statistics that Fredericksburg is one of the fastest-growing localities in the country, so it makes sense that residents and businesses in this thriving area will benefit from access to our 4G LTE network and all that it provides to support their wireless needs,” Ortel added.

This could be a boon for counties such as King George and Westmoreland—and even parts of Stafford and Spotsylvania—where home high-speed broadband access options have been limited. And it’s an indication that help is on the way for businesses in those areas.
Culpeper, Orange and Caroline counties seem to be out of luck for now. If you’re getting a 4G signal there, please let me know.
“HomeFusion from Verizon Wireless is a great option for people who are in the market for residential broadband service,” Ortel said. “With minimal equipment and setup, you can have the power of our 4G LTE network delivered into your home.”
HomeFusion requires users to pay for a $200 outdoor antenna that’s installed free by Verizon. The service is pricey—starting at $60 a month for the 60 GB package—but it may be worth it to those frustrated by Internet limitations at home.

“Increased access to high-speed broadband service is a priority for Virginia,” Ortel correctly noted. It’s vital to business growth in the area and the state.
“Broadband connectivity,” she said, “not only keeps us entertained and connected, but it also helps to improve the flow of information useful to communities, families and businesses in Fredericksburg and to those traveling to any of the 258 markets nationwide.”
No word yet on when AT&T will roll out 4G service in the area.

Michael Zitz: 540/846-5163
mikez@freelancestar.com

It’s hard to imagine a construction project facing more setbacks than DLR Contracting went through on a 140,000-square-foot office building last year in North Stafford.
On Aug. 3, three months after DLR started the third building of that size at the Quantico Corporate Center, a 200-foot-tall construction crane operated by a subcontractor toppled over and came to rest atop an unfinished four-story wall. Nobody was hurt, but it did extensive damage.
Twenty days later, just as construction crews were again hitting their stride after the project shutdown, investigation and cleanup in the aftermath of the crane incident, an exceedingly rare magnitude-5.8 earthquake hit.
Mother Nature also challenged DLR’s crews with a tornado, a hurricane and about 75 days of rain during the eight-month project.
Yet next weekend the building’s anchor tenant—QinetiQ North America—will move into its new finished space right on schedule. Other defense contractors are also moving into the building, which is already close to fully leased.
Those firms are able to move in on time because DLR finished its part right on schedule, delivering it to QCC developer the Silver Cos. on Jan. 1 as planned.
“It shows the type of company that they are,” said David Newman, a Silver vice president who is overseeing the fast-growing Quantico development. “It reminds us of why we’ve had such a long-term relationship.”
DLR President Robert L. Dodd Jr. (the company’s name is his and his late father’s initials listed backwards) has been a big part of that relationship for almost 30 years.
Rob Dodd and his father started working on Silver projects in the mid-1980s almost by accident. They were mostly in the restaurant business and built out commercial kitchens for customers. That expanded into full-service commercial construction.
Since then DLR’s relationship with Silver has led the firm to build many of the area’s most prominent commercial projects—including new construction and tenant buildouts in Central Park, Cosner’s Corner, Carter’s Crossing, Celebrate Virginia, Harrison Crossing and most recently the QCC.
Each project has faced its own challenges, and the Quantico one was no different. Dodd said his company has built its reputation on sticking to a tight construction schedule and delivering projects on time.
In the case of the Quantico project, DLR was able to meet its deadline due in part to its own ambition. The company had already built one 140,000-square-foot office building at the QCC before starting last year’s very similar project. The company internally set a goal of having the building done in seven months instead of the eight-month buildout it promised Silver.
Led by Superintendent Ralph Ruggerio and Project Manager Randy McNulty, DLR was clicking along on its seven-month schedule before the crane incident. They’re disappointed they weren’t able to hit the seven-month goal but say the extra month and a lot of hard work by their subcontractors saved them from any delays.
DLR is headquartered in an office building near Silver in Central Park, but the company doesn’t work exclusively for the Fredericksburg developer. Lately it has done projects for the Rappaport Cos., Kimco Realty Corp., Safford Auto Group and the A. Smith Bowman Distillery. The firm is making plans to build out office space for the Fredericksburg law firm Parrish, Houck & Snead PLC at the partners’ Princess Anne Street building.
Dodd said DLR, which employs eight people, is starting to see more inquiries come in after a rough three years, though bidding remains very competitive as many firms vie for available jobs.
Bill Freehling: 540/374-5405
bfreehling@freelancestar.com

Cathy Powell Cavender has given her parents a gift that was four generations and more than 100 years in the making.
It’s a certificate and aluminum sign from the state Department of Agriculture and Consumer Services certifying that Monrovia, their Westmoreland County farm, is a Virginia Century Farm. As the name implies, it honors families who have owned and operated farms for 100 years or more.
“I think it’s a great sense of pride for the family,” said Cavender. “We see so many subdivisions sprouting up on farms. We, as a family, are doing estate planning and looking toward the next 100 years. It’s just a cool thing to have.”
Monrovia Farm is one of two Westmoreland County farms to qualify as Virginia Century Farms recently. The other is Cedar Hill Farm, which is owned by Mr. and Mrs. Richard E. Wilkins. Both farms are in the Colonial Beach area and specialize in cattle.
The Virginia Century Farm program was established by the General Assembly in 1997. Today there are 1,201 Century Farms in 95 counties, including seven in Caroline, 10 in Culpeper, four in King George, eight in Orange, three in Spotsylvania, four in Stafford and 26 in Westmoreland. A complete list is available at vdacs.virginia.gov/century.
“The Century Farm program recognizes and pays tribute to those farmers whose continuing efforts have formed the backbone of the Commonwealth for more than 400 years,” said VDACS Commissioner Matthew J. Lohr in a prepared statement.
“These are the people who have made agriculture Virginia’s leading industry with an annual economic impact of $55 billion,” he said. “I am a fifth-generation farmer, and my family’s farm is a Century Farm. We take great pride in that heritage.”
Monrovia Farm dates to 1907, when Thomas H. Powell paid $300 for 25¼ acres of land that had once belonged to President James Monroe’s father. Thomas Powell’s was basically a subsistence farm, and he raised a few cows, pigs and horses, Cavender said.
The family has bought additional land over the years, and now owns 138 acres and rents 600 more. She and her husband, J. Andrew Cavender, are helping her parents, H. Shirley and Joan S. Powell, raise Black Angus and Angus cross feeder calves that they purchase locally and sell at the Fredericksburg Livestock Exchange.
“My grandfather, Thomas’ son Harry, raised hogs,” Cathy Cavender said. “My dad focused on cattle. I like the cows, so we’re keeping the cows and have added free-range chickens.”
Monrovia’s calves are grass fed and finished with corn, alfalfa hay silage and a custom, homegrown ground feed mixture. Most are purchased by butcher shops, restaurants and kosher markets, although whole, half or split halves can be purchased through the farm’s website, monrovia farm.com.
“We sell freezer quarters to friends and family and anyone who is interested,” Cavender said.
Nearby Cedar Hill Farm is just a few years younger than Monrovia Farm. It dates to Feb. 13, 1911, when Richard Wilkins’ grandfather, Bush Wilkins, bought the property from his first wife’s family. He raised dairy cattle, chickens, hogs and some produce.
Luther E. Wilkins, his adopted son and Richard Wilkins’ father, tired of raising animals and switched over to such crops as barley, corn, wheat, soybeans and lespedeza, a legume commonly known as bush clover.
“After graduation from Ferrum in 1974, we expanded into herds and forage for our cows. We were too small an operation to compete [with large farms] so we decided to go to cattle 100 percent,” Richard Wilkins said.
Today he has a registered Black Angus bull and 32 Angus and Simmental mix brood cows that produce 30 to 32 calves a year on the 100 open acres of the 316-acre farm. The rest is wetlands and woodlands.
Wilkins vaccinates his calves but doesn’t use growth hormones or antibiotics. Once they reach 700 to 800 pounds, they’re sold through the Fredericksburg Area Feeder Calf Association to operations such as Monrovia Farm or Rosetta Farm in Baltimore.
Running Cedar Hill is a part-time job for Wilkins. He also worked for what is now Verizon for 33½ years and now has a part-time job with Communication Services Inc.
“It’s relaxing to me,” he said. “I can have a bad day at work and come home and get on the tractor and feel a whole lot better.”
Wilkins has two daughters and a son, and is considering putting his farm into a conservation easement so it won’t be developed.
“My father’s ashes are scattered on the property and I plan to have mine scattered here. I’d hate to see houses go up where my ashes have been scattered,” he said. “Eventually, 150 years from now, there won’t be anything but houses on the East Coast. It will be nice to see some open space.”
Cathy Jett: 540/374-5407
cjett@freelancestar.com

Virginia saw a 7.6 percent increase in revenue for March, driven largely by improved sales and corporate income tax receipts.
That puts total revenue collections for the year at a 5.3 percent increase, better than the 4.6 percent increase that was forecast.
In a letter to Gov. Bob McDonnell explaining the monthly revenue report, state Secretary of Finance Ric Brown said March isn’t typically a big revenue month; April and May are typically the more important months for revenue collection.
In a press release about the numbers, McDonnell said the increase in sales tax receipts “hopefully reflects some improvement in overall consumer confidence.”
He also said the rise in corporate tax receipts “correlates with the improving jobs climate in the state.”
McDonnell said the April and May collections “will give us a much more thorough and accurate reading of state revenues. It is evident that our economy is beginning to turn around.”
McDonnell also said the state’s fiscal policies “will continue to play an important role in this recovery,” and his statement included a warning to state lawmakers, who are due back in Richmond Tuesday to vote on a two-year, $85 billion state budget.
“It is imperative that we pass a budget tomorrow in order to ensure that this recovery is not hindered, and our state economy can continue to grow, creating good jobs for citizens in all areas of the commonwealth,” McDonnell said.
Also on Monday the governor’s office released a report from Moody’s—one of three national bond rating agencies that determine Virginia’s credit rating—that said legislation to change the Virginia Retirement System is “credit positive.”
Those changes essentially reduce the amount the government will put into the retirement system over the next two decades, by shifting more of the costs to employees and creating a “hybrid” retirement plan that is partly the existing pension plan and partly a 401(k)-like plan.
State lawmakers predict that over time, the changes will help reduce the plan’s unfunded liability.
The changes, according to the Moody’s analysis, “put [Virginia] on a more sustainable path to fully funding its pension commitments, which is credit positive. Virginia’s legislation also reflects an ongoing trend among states to find flexibilities in their retirement systems to rein in their long-term liabilities.”
Chelyen Davis: 504/368-5028
cdavis@freelancestar.com