Amazon and Web Taxes

As most of the retail industry is aware, online retailers such as Amazon have been flying under the radar in regards to the collection of state sales tax, relying on the upstanding honesty of online shoppers to declare taxable purchases. For nearly a decade, local brick and mortar stores have been fighting to level the playing field, but local companies affiliated with online retailers fear rebuttal such as removal of service. In a united effort, however, California became the seventh state to adopt sale tax fairness legislation in July. And while there are many online retailers fighting to keep their tax-free transactions, Amazon continues to be the big name in the headlines.

State Legislatures Taking a Stand

According to Institute for Local Self-Reliance advocate, Stacy Mitchell, “Amazon’s physical presence has spread to more than a dozen states, where it has built warehouses and other facilities that would normally trigger an obligation to collect sales tax.” Going to great lengths to maintain a tax-free advantage by structuring its facilities as separate companies or lobbying state legislatures, Amazon isn’t going to go down without a fight. California’s new law led to the firing of 10,000 or so companies and individuals who earn commissions for using their blogs and websites to funnel sales to Amazon. “The move seemed motivated purely by spite, since it will not alter Amazon’s obligation to collect California’s 7.25 percent sales tax,” notes Mitchell.

As the online giant has done in all the other combating states, it is expected that Amazon will file suit to block the law. Taxable online purchases are no longer an issue in New York, the first state to pass a sales tax fairness law. It is a positive indication that Amazon may find little chance in court for an appeal. Mitchell says, “Most legal observers believe Amazon is likely to lose any lawsuit it files in California. The only real question is how long Amazon’s lawsuits might keep other states waiting in the wings, and how many independent small businesses will be forced to close their doors in the meantime.”

This article has been adapted from an original piece by the Hometown Advantage Bulletin.