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Amazon taxes here, on the way

By Kay Bell · Bankrate.com
Tuesday, July 17, 2012
Posted: 4 pm ET

Amazon began collecting sales tax from Texas purchases July 1.

It was a big victory for the Lone Star State's treasury and Comptroller Susan Combs, who had filed a lawsuit seeking to collect years of unpaid sales taxes from the giant online retailer.

But it was a setback for Texas shoppers who had taken advantage of the Amazon no-tax position to avoid paying more on their e-purchases.

It also didn't do much for Gov. Rick Perry. The erstwhile Republican presidential hopeful had cast himself as a friend of business, and he had vetoed an earlier legislative effort to collect the state's 6.25 percent sales tax from Amazon and other online sellers.

The times, however, are changing. After fighting state attempts to collect sales taxes, often threatening to close or not build facilities in tax-seeking states, Amazon has relented on the issue.

The Seattle-based company has been collecting sales tax from customers in Kansas, Kentucky, New York, North Dakota, Washington and now Texas.

On the horizon are online taxes from shoppers in California beginning this September; New Jersey in July 2013; Virginia in September 2013; Indiana, Nevada and Tennessee in January 2014; and South Carolina in January 2016.

So why did Amazon relent? In the Texas case, there was the hassle of a lawsuit. But it's also a business decision.

The shift isn't just on Amazon's side. The Wall Street Journal says there's been a dramatic shift in support for online taxation from the country's governors, many of whom are conservatives who, like Perry, philosophically oppose raising or adding new taxes.

Money changes minds

Why the change of mind? Money, pure and simple.

On Amazon's part, the company needs more facilities in more places in order to speed up shipping to customers. These physical distribution centers are the nexus, or in-state presence, that states say is necessary for them to demand sales tax collection by the company.

Dollars also are the deciding factor for previously no-tax lawmakers. The distribution centers will boost local and state economies through more employment. The sales tax money is just icing on that fiscal cake.

Use taxes ignored

So Amazon and state officials are relatively happy, but buyers are upset. Too bad, shoppers. You've been breaking the law all these years, and it's now time to start being tax-law-abiding citizens.

Every state that has a sales tax also has a use tax. It's the same rate as the state sales tax and, as its name indicates, the state levy on products that you bought elsewhere but use in your home state.

The problem here is threefold.

First, a lot of state residents don't know about the use tax.

Second, even when they do, they ignore it.

And third, shoppers get away with not paying because states know it's not worth the time and trouble to try to get use-tax money from thousands of residents.

Now that free tax ride is over or about to be in many states. Look for every state that collects sales tax to eventually jump on board this accelerating tax train.

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2 Comments
Something for Nothing
July 17, 2012 at 5:13 pm

"Free Ride"?

I'm curious as to what services the state is providing in these transactions?

A great deal of tax revenue for not much in return would be the answer obvious answer. "We pave the roads for the UPS trucks?"

Another blow to consumers. Enjoy your pretax hike summer.