Effective November 1, 2013, Amazon will collect sales tax from 6.6 million Massachusetts residents.
Unfortunately for residents of Massachusetts, Amazon and state officials have struck an agreement for the online retailer to collect sales tax in the state, and no amount of tossing tea into the Boston Harbor is going to change that. If it would, Amazon would probably join in, because terms of the deal could potentially place the company at a competitive disadvantage with other online sellers.
Enemies yesterday, friends today. That about sums up the relationship between online eCommerce giant Amazon and the state of California, two sides that have been bickering over sales tax. According to a report in the Los Angeles Times, Amazon and California legislatures took off the boxing gloves long enough to shake hands and sign a deal where Amazon would be off the hook for sales tax for one more year.
It’s getting to be a highly predictable pattern. A state starts working on a bill that would force Amazon to pay sales tax up front on its sales in said state. Amazon then starts playing hardball by cancelling business deals and ending associate programs, and that’s what’s happening in California today.
The United States has a long history of fighting against unfair taxes (Boston Tea Party, anyone?), and while Amazon's battle is of a different sort than when the country was founded, the e-tailer feels as though it's the victim of greed by state officials who have the audacity to seek sales tax. Rather than comply with new laws that keep popping up around the country, Amazon has chosen to take its ball and run to different playgrounds, most recently turning its back on Connecticut.
It seems that wherever Amazon goes, sales tax issues will follow. After pulling out of planned distribution centers in both South Carolina and Texas, the online retailer may now be leaving a planned facility behind in Tennessee. The company is usually unlikely to issue press statements on such issues, but this time Amazon is coming out swinging.
According to Cnet, one US Senator is preparing to introduce legislation that would radically alter online commerce. The bill would end the ability of Americans to buy goods from online retailers free from state sales tax. Democrat Dick Durbin of Illinois is expected to present the bill shortly after the Easter recess.
Amazon is at odds with the state of Texas over what the state claims is $269 million in unpaid taxes, which ultimately prompted the online mega e-tailer to close a distribution center in Dallas and cancel plans to build additional facilities in the state, according to a report in the Associated Press. The AP got its paws on an email sent to Amazon employees by Dave Clark, the e-tailer's VP of operations. In it, Clark announced the closing due to the state's "unfavorable regulatory climate."
Amazon is throwing a minor temper tantrum in response to a new tax bill recently passed by Illinois Governor Pat Quinn, and it could leave affiliate members in the state high and dry if it gets signed into law. A sharply worded e-mail sent out to Illinois based affiliates late last week makes Amazon’s position on the matter quite clear. "We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates”.
Illinois law currently only requires a 6.25 percent sales tax be collected by organizations with a presence in the state, but the new law seeks to redefine this “presence” to include affiliates who help Amazon link to product pages. Realistically this move shouldn’t have affected tax revenues in the state because residences are required to pay a “use tax” already, but they have no way to prove you wrong should you choose to bend the truth come tax time. The new law would require Amazon to collect the tax in this case rather than relying on individual honesty, and as you could imagine, this would probably be bad for business.
Hopefully this move will make Illinois lawmakers think twice since Amazon has proven in the past that they are more than willing to follow up on their threats. The online retailer has already closed its affiliate program in Colorado, Rhode Island, and North Carolina for similar reasons.
A New York appeals court today backpedaled an earlier decision and has reinstated Amazon.com's (and Overstock's) lawsuit claiming that a law forcing them to collect sales tax in New York is "invalid, illegal, and unconstitutional," CNet reports.
Here's the deal. Neither of the above mentioned e-tailers have any kind of physical presence in New York, be it their headquarters or a shipping warehouse. As such, Amazon and Overstock argue that a 1992 Supreme Court ruling that says retailers can't be forced to collect sales tax on out-of-state shipments if they don't have offices in those states applies. New York decided to collect sales tax anyway and the original suit against the state was dismissed.
But now a New York appeals court unanimously agrees that "the dismissal of the entire complaint was premature" and wants to see the lawsuit continue. Victory for Amazon and Overstock?
Not so fast. The judges also ruled that, at least in some cases, the state law can be constitutional, so Amazon and Overstock have their work cut for them. What makes this whole situation so important is that whichever side prevails in the end could ultimately shape how business online is conducted, not just in New York, but all over the country.
Amazon's third quarter financial results came with an unexpected twist. According to the retailer's SEC filings, the state of Texas handed Amazon a bill for $269 million for uncollected state sales tax. Amazon has said that the assessment of taxes is "without merit" and they plan to pursue the matter legally.
This isn't the first time Amazon has been at odds with state regulators. Businesses have traditionally only had to pay taxes in states where they have facilities or employees. Some states have tried to use Amazon's affiliate program as an excuse to levy taxes. Both North Carolina and Rhode Island went that route, so Amazon ended the affiliate programs there.
As state budgets continue to tighten, more legislatures may look to the wildly successful online retailer as a source of cash. Do you think Amazon and other sites should have to pay (and presumably charge you) state sales tax in all states?