Amazon will collect sales tax across US starting next month
Beginning April 1, Amazon will collect sales taxes from all states that have implemented such levies, according to CNBC and other outlets.
Amazon already adds sales tax on goods shipping to 41 states and Washington, D.C., and will add Hawaii, Idaho, Maine and New Mexico to that list next month. Alaska, Delaware, Oregon, Montana and New Hampshire don't collect sales taxes.
Retailers with a physical presence in a state have long been required to add state sales taxes to their online orders, and as Amazon has expanded its fulfillment and distribution network (not to mention its nascent physical store strategy), the number of states that fall into that category has risen significantly.
Several states (and even Congress, which has failed to get beyond anti-tax sentiments among many of its members) worked over the years to find ways to even the playing field for retailers with physical stores within their borders. Although Amazon has steadily been collecting sales tax for most states that have it, the e-commerce tax advantage has long been dubbed the “Amazon tax.”
Considering that Amazon has been collecting sales tax now for years in most states in the union, the e-commerce giant has likely already absorbed the worst shock of state tax collection. There was a time when it would have mattered: Shoppers did spend 8.3% less on products on Amazon once a sales tax was charged, with lower income households more likely to hold off on purchases and higher-income households less affected by it, according to research last year from Ohio State University. Bigger-ticket items costing $250 or more were more affected by the inclusion of a tax, while non-tax collecting competitors often won some of Amazon’s business once Amazon had to collect tax, the study found.
With no action in Congress, the effort has shifted to the courts, including the U.S. Supreme Court. The Court’s Quill v. North Dakota decision in the early 1990s — the early days of the internet — has made it difficult if not impossible for states to collect taxes from e-commerce retailers. As state budgets have become ever leaner, as state sales taxes have edged higher and as e-commerce has grown, officials have pushed for change. In 2012, states lost some $23.3 billion from being prohibited from collecting sales tax from online and catalog purchases, according to the National Conference of State Legislatures.
The original Quill decision helped foster e-commerce over the past decades in a major way, considering that the likes of eBay and Amazon were able to thrive with a significant advantage by liberating consumers from paying sales tax. Quill still puts brick-and-mortar retailers working to boost their omnichannel and digital sales at a decided disadvantage. Notably, Amazon is no longer a major fighter against such laws; its proliferation of fulfillment centers nationwide has given it a "sales tax nexus" in many states.
In December the high court declined, without comment, to take up appeals with Colorado’s e-commerce tax law, passed in 2010 but left in legal limbo, which would require retailers without a physical location in Colorado to report customers’ names and purchases to the government so it could collect use tax. The year before, the Supreme Court undid a federal appeals court ruling that state laws regarding taxes had to be filed in state court, on the grounds that the challenge is not regarding tax collection per se, but “notice and reporting requirements” about people in other states. A South Dakota law from last year that aims to collect sales tax from internet purchases has also faced legal challenges.
While the U.S. Supreme Court has not made any move to topple the Quill decision, it did make it fairly easy for Colorado to tweak its law to pass muster in the lower courts and has made it clear that Congress could pass legislation that would undo Quill altogether — although the general anti-tax bent of many elected officials, especially in the U.S. House of Representatives, has stymied all attempts to do that so far.
The discussion isn’t over by any means, but, with its new policy next month, Amazon will no longer be a factor in it. That’s good news for retailers in Maine, according to a statement from the commissioner of the Pine Tree State’s Department of Economic and Community Development, George Gervais.
“Maine businesses can go toe-to-toe with the very best out-of-state companies, provided they are competing on an equal playing field,” Gervais said. “Amazon’s decision to collect and remit sales tax to the State of Maine is an important first step in leveling the playing field. The increased revenue will help the [governor] and lawmakers in making further reductions to Maine’s income tax.”
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