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The e-tailer will also have to create 2,500 jobs in the state and make at least $200 million in capital investment in Texas over a four-year period

Amazon spent much of 2011 fighting tax-related battles in select U.S. states, claiming that it could not be forced to collect taxes on online sales without some sort of set standards. But Amazon is changing its tune in Texas, as it has agreed to start collecting taxes on online sales in the state starting this summer.

After more than a year of fighting with the state of Texas, Amazon has reached a settlement with Texas State Comptroller Susan Combs regarding $269 million in uncollected sales taxes on online items. The deal states that Amazon will begin collecting taxes on online sale items starting July 1, 2012 and that the e-tailer will create a minimum of 2,500 jobs. Amazon will also have to make at least $200 million in capital investment in Texas over a four-year period.

“While we continue to believe the assessment was without merit, in April 2012, we entered into a settlement with the State of Texas that included an agreement to collect sales taxes on applicable sales transactions for our US-focused internet retailers beginning July 1, 2012, resolution of Texas sales taxes up to that date, certain commitments related to capital investment and job creation in the state, and an immaterial payment to the state," said Amazon.

Amazon has been going to head-to-head with Texas over tax issues since February 2011. At that time, Combs told the online retailer that it was responsible for $269 million in sales taxes that were not collected on online sales in the state.

Amazon said that it does not have to collect sales taxes on items sold online because of a 1992 Supreme Court decision that excuses Amazon and other remote sellers from having to collect taxes in U.S. states that do not have the company's employees or warehouses operating within those states. While Amazon had a suburban Dallas distribution center in the state of Texas, it said that this was not enough of a physical presence to justify the collection of taxes.

After Combs pinned the $269 million in unpaid taxes on Amazon, the e-tailer announced that it was closing its suburban Dallas distribution center and canceling operation expansions in Texas.

"We regret losing any business in Texas, but our position hasn't changed; if you have a presence in the state of Texas, you are required to pay sales tax just like any other business that has a presence in Texas," said Allen Spelce, a spokesman for Combs.

But now, Amazon and Combs have struck a deal and are working toward federal legislation for set standards on the collection of online sales taxes.

“Amazon looks forward to creating thousands of new jobs in Texas and we appreciate Comptroller Combs working with us to advance federal legislation,” said Paul Misener, Amazon Vice President of Global Public Policy.  “We strongly support the creation of a simplified and equitable federal framework, because Congressional action will protect states’ rights, level the playing field for all sellers, and give states like Texas the ability to obtain all the sales tax revenue that is already due.”

Texas isn't the only state that went after Amazon for online tax collection. Last year, Senator Dick Durbin (D-Ill.) introduced a bill called the Main Street Fairness Act, which would require all businesses, including those online, to collect sales taxes in the state where the consumer resides.

Amazon also ran into trouble with New York, where Amazon filed a lawsuit and lost in 2009 over a dispute concerning the collection of taxes from out-of-state transactions through the online retailer.

California was another U.S. state that pushed Amazon away last year when it introduced an online sales tax bill that would require the e-tailer to collect. Amazon threatened to terminate contracts with all California residents in the Amazon Associates Program because it believed the new bill was unconstitutional. Later, Amazon asked California voters to repeal the new sales tax law and even offered the state 7,000 jobs to put the tax law on hold.

Currently, Amazon only collects sales tax in Kansas, Kentucky, New York, North Dakota and Washington. Starting July 1, Texas will be added to that list. Amazon also agreed to start collecting sales tax on online items in California starting next year, and in Arizona in 2014.

Source: GeekWire

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By Tequilasunriser on 4/30/2012 10:41:58 AM , Rating: 5
The beginning of the end.

RE: :(
By AMDftw on 4/30/2012 10:42:12 AM , Rating: 2
Well I guess I won't buying anymore items off Amazon. I live in Tx. :( They should have chosen CA, MA. :P

RE: :(
By Flunk on 4/30/2012 11:05:54 AM , Rating: 2
You're not going to have a choice. There will soon be no way to evade the sales tax.

RE: :(
By cigar3tte on 4/30/2012 11:22:46 AM , Rating: 2
Until then, I will keep buying from retailers who have the cheapest prices, which likely won't be Amazon when taxes are added (for high-value items of course).

RE: :(
By ChuckDriver on 4/30/2012 4:11:14 PM , Rating: 2
Other than move to Delaware or New Hampshire.

RE: :(
By kmmatney on 4/30/2012 10:51:59 AM , Rating: 4
I think this was inevitable. The states are losing out on too much tax money. They've lost out on several hundred dollars from me alone over the past year. I hope that they eventually have a flat tax, rather than have the taxes change with every state.

RE: :(
By bah12 on 4/30/2012 11:49:28 AM , Rating: 3
I won't beat a dead horse, but the problem is not online sales, it is tax evaders such as yourself (and me). The law is really quite clear, the buyer owes the tax regardless of whether the seller pays it on their behalf. But very few of us actually account for and pay sales tax on out of state purchases.

It is just far more politically safe to go after big bad Amazon, than sue a few million of your voters for tax evasion.

As for me I'll still buy off of Amazon if the price is right.

RE: :(
By acer905 on 4/30/2012 12:36:33 PM , Rating: 5
Its actually a much more complex problem than just that. First off, one state has no constitutional right to tax any goods from other states. It actually violates laws on the federal level set in place to regulate interstate commerce.

Now, this neatly applies to physically going to a different state, buying something, and returning. In that case, the goods have either been taxed, or not, based on the laws of that state. The state you return to has no ground to stand on demanding tax on those goods, so you have nothing to worry about.

Now for the monkey wrench. Nexus laws set up to encourage mail order sales. Because there are simply too many different sales tax laws and zones, it was deemed by the US Supreme court that if the seller has no physical presence in a tax zone, it does not need to collect and report sales tax from people in that zone. The problem is that this extended to internet sales, and the internet sellers became quite large. So, what was the solution?

Use Tax: "use tax n. a state tax on goods purchased in another state for use in the taxing state, to make up for (in lieu) local sales tax. Example: Bill Buyer who lives in California (which has a sales tax) orders a freezer from a company in a state with no sales tax. California will attempt to charge a "use" tax equivalent to its sales tax."

Now, the problem is that a use tax is all encompassing. If you physically drive somewhere, buy an item, and come back you still need to report it due to the way that many states word their laws. So, you could be paying the same taxes twice. This in turn makes the law unconstitutional.

Amazon caving in will cause a snowball effect. Now, it sets the precedent that online retailers are exempt from the Nexus laws, so even individual sellers and small buisnesses will have to start collecting as well. This may have a seriously negative impact on the internet economy as a whole.

((And they will never sue millions of people because they know that if challenged, the laws will not stand. Better to hope some gullible fools follow the system than do something which would cause it to crumble))

RE: :(
By bah12 on 4/30/2012 4:38:17 PM , Rating: 4
Agreed, 100%. But my point still stands current use law has not been ruled unconstitutional (for mail order/internet that is), thus we still owe it until then. Unfortunate but true.

It is not a popular view for sure, thus my quick down rate, but from a legal perspective I certainly owe my state tax for goods I've purchased over the internet. Don't get me wrong, I don't pay it either, and I hope the refine it, but the law is pretty clear with regard to items not physically bought in another state. Ill-advised and utterly unenforceable, but still there nonetheless.

RE: :(
By foolsgambit11 on 4/30/2012 6:50:14 PM , Rating: 2
Maybe I'm refusing to pay it, hoping to be slapped with a fine so I will have standing to bring a case challenging the law's Constitutionality. But I'm not, since I live in WA, and have paid sales tax on Amazon for a long time.

RE: :(
By Solandri on 4/30/2012 8:59:48 PM , Rating: 2
Broadly speaking, a tax which costs more money to enforce than the revenue it brings in is a bad idea. That's the problem with a use tax. Unless you require everyone to report every sale, every trade, every transaction over (say) $20 to the government, enforcement is going to be non-uniform and prohibitively expensive. It has the effect of turning everyone into tax cheats, opening up the doors to government having the power to arrest and charge you whenever they feel like it, whenever you tick them off.

You can accomplish the same thing as a sales tax by simply raising the income tax, and giving tax credits for uses of money which currently don't have sales tax (food, clothing in some states, putting into a savings account, paying utility bills, etc).

RE: :(
By Theoz on 4/30/2012 1:13:01 PM , Rating: 2
Any other honest saps here that pay the use taxes for all tax-free online goods on your state tax returns?

You are still responsible for state sales tax (in the form of a use tax) regardless of whether Amazon charges it or not. Use taxes on tax-free online goods are still cheaper than sales tax in my area (6.5% vs. 10%), so I still come out significantly ahead when buying online vs. brick and mortar.

RE: :(
By Solandri on 4/30/2012 2:41:24 PM , Rating: 2
That's really tangential to the issue here. The real issue is that if States want to work around the Constitutional ban on taxing interstate commerce, they need to get together and pass a Constitutional Amendment doing it.

Yes that's hard, but it's the proper way to do it. Singling out private businesses and individuals for tax judgments based on laws of indeterminate constitutionality is just bad for everyone. You're not getting money from them with the threat of law, you're getting it from them with the threat of causing them to burn money in court, where often even the legal winner is a financial loser.

RE: :(
By Samus on 4/30/2012 2:01:21 PM , Rating: 1
Of the categories of tax states' collect, sales tax is almost always one of the smallest portions. Some states like Oregon have no sales tax.

Property tax, income tax, and "excise" tax (utility taxes, gas taxes) are always the primary revenue generators. Here in Illinois, sales taxes account for <10% of collected taxes. In Chicago, which adds an additional 3.5% to the state tax (6.5%) making the sales tax in Chicago 10% on general goods, sales taxes account for 3% of city revenue.

Basically my point is, with all the inconvenience, systems and agencies involved with sales tax with such little return, why bother? Just tax us somewhere else more convenient so I don't have to carry around a ton of collected change throughout the day.

RE: :(
By cknobman on 4/30/2012 3:15:10 PM , Rating: 2
Amazon will have 1 less customer.

Unless Amazon's price (including tax & shipping) is still less than a competitor who does not collect tax price (including shipping).

I will always buy from the place offering the cheapest TOTAL cost.

RE: :(
By jimbojimbo on 4/30/2012 3:50:37 PM , Rating: 2
The thing is with this precedent Texas will go after EVERY online retailer that they feels owes them tax money so you won't be able to buy anything without paying sales tax.

Eventually you'll be back to Amazon.

RE: :(
By bah12 on 4/30/2012 4:46:00 PM , Rating: 2
You missed the point, the only reason TX had any leverage was that Amazon indeed did have a physical presence. I always found it's assertion that it wasn't enough, laughable.

So your assumption is wrong, if for example has literally no physical property in TX, then TX does not have a leg to stand on. That was not the case with Amazon. They had a warehouse for Pete's sake! When your entire business model relies on a vast network of warehouses, and you claim the one in TX "doesn't count", guess what chances are that isn't going to fly. Amazon knows this or they wouldn't be settling, they threw the dice and came up snake eyes, pay your bet and move on.

RE: :(
By retrospooty on 4/30/2012 5:37:23 PM , Rating: 2
Yup...same story here in AZ. There is a huge Amazon depot here, and the state is trying to get several hundred million dollars from Amazon and will likely take it to court. My hope? Amazon just leaves the state. You want to charge us? OK, buy bye. How do you like 10,000 less jobs to help your gross budget deficit now?

Shop local
By djcameron on 4/30/2012 1:58:08 PM , Rating: 1
I've quit most of my online shopping and now shop local as often as possible. The price isn't that different and my sales tax dollars stay local. Why would you send your money to other states where they get the jobs and the tax revenue?

RE: Shop local
By Spuke on 4/30/2012 2:53:54 PM , Rating: 2
I don't know where you live but the price difference is significant between online and local, not to mention diversity of products goes to online. I won't even talk about the cost of fuel and my time to go to a store. Sorry but online stomps local for most anything. Do I shop local for some things? Yep. Groceries, home improvement stuff among other things and these are done all at once typically. If I need a light bulb, I'm sure as hell NOT going to drive 20 mins one way to Home Depot, I'm going to order it online.

RE: Shop local
By jimbojimbo on 4/30/2012 3:58:48 PM , Rating: 2
In fact I know some staples I can buy locally are more expensive online but I still order them. Why? It's just so damn convenient to have it delivered than to take an hour out of my day to go actually buy it in person.

The other thing is some stores have online only sales so their prices online are better than in the stores. Also, paying just state sales tax and shipping is still significantly cheaper than paying for state, county, and city taxes. Anybody living in Chicago, with the highest total sales tax in the country, would understand.

RE: Shop local
By djcameron on 4/30/2012 8:41:00 PM , Rating: 2
I'll just stop by Safeway on my way home from work to pick up my light bulbs. It's convenient, I don't pay for shipping, I get them right away, and my sales tax stays in town, where we desperately need it.

RE: Shop local
By djcameron on 4/30/2012 8:46:39 PM , Rating: 2
...and you'll pay for it in the long run. When the local stores are vacant, some of the out-of-work employees may turn to crime. Your city, running low on income to perform public services such as road repair, schools, etc, will just raise local parcel taxes to make up for the shortfall.

RE: Shop local
By DiscoWade on 4/30/2012 9:49:03 PM , Rating: 2
If the price isn't significantly higher, I will buy locally if, and only if, the store has good customer service. That is where the big box stores, such as Sears and Best Buy, fail. If you can't beat on price, at least make shopping informative and enjoyable. That means the store should treat the employees well so they want to help us and stop shoving high-profit extras down our throat. This also means that when I ask about the difference between two products, the employee should know the answer.

Customer service is more important than many businesses give it credit for.

So Dumb.
By Jahooba on 4/30/2012 12:51:32 PM , Rating: 2
When you impose more taxes on companies they simply pass on the price hikes to the paying customers.

Tax hikes in a recession are BAD - they make the cost of goods go up at the same time people are running low on money. Life becomes that much more expensive. In a recession you want to encourage corporate growth (or at least leave it alone), not attack it.

RE: So Dumb.
By chromal on 4/30/2012 1:04:49 PM , Rating: 1
Taxes are never popular, but you seem to misunderstand what sales tax is and how it works. A sales tax is not a tax "imposed" "on companies," it's imposed on consumers. A sales tax is paid by the consumer directly. No raising prices, it's added as a line item at the bottom of the bill of sale.

Additionally, this isn't a tax hike, this is simply enforcing taxes already on the books.

I'm not a fan of taxes, but I'm even less a fan of crumbling roads and bridges, failing government services like schools, police, and fire departments. I'm also no fan of unregulated corporations, who got us into this whole recession mess...

RE: So Dumb.
By schmizz on 5/1/2012 7:00:28 AM , Rating: 2
These are not laws that are on the books. Amazon has no retail storefront in the state of Texas, so according to Federal Law they don't have to collect state sales tax on the items sold. This is Texas circumnavigating Federal Law to fill their greedy coffers. If Amazon would have fought this to the federal level they would have won, but it would have cost them millions of dollars in legal fees. This is nothing more than bully tactics by the state of Texas to extort money out of companies trying to succeed in business, in a country whose laws favor foreign based corporations over domestic.

If you're not a fan of failing government services, why don't you do some investigating and see where the billions they collect now are going? When will enough be enough? Answer: Never! There's only so much blood, before it runs dry.

RE: So Dumb.
By ClownPuncher on 4/30/2012 2:19:09 PM , Rating: 2
Er, the sales tax is paid by the consumer. It is already being "passed on", since it isn't Amazons burden to bear. This isn't a tax hike.

RE: So Dumb.
By retrospooty on 4/30/2012 5:40:11 PM , Rating: 1
it still bears weight... Impost a sales tax and Amazon will lose out on alot of potential sales. It benefits etailers to avoid it like the plague.

RE: So Dumb.
By ClownPuncher on 4/30/2012 7:15:50 PM , Rating: 2
That sounds punitive, and not very relevant to sales tax being collected. More like state protectionism.

Either way, Amazon is usually cheaper than most even here in WA including sales tax.

If I were Amazon....
By Egglick on 4/30/2012 1:32:46 PM , Rating: 2
If I were Amazon, I would just pay the $269 million and then refuse to do business in the state of Texas. Many people in Texas would be outraged. I would then provide links to write their congressmen whenever someone from Texas attempted to make a purchase.

RE: If I were Amazon....
By Solandri on 4/30/2012 3:00:37 PM , Rating: 3
This is one of the issues where I actually admire and support Bezos. He's not trying to punish sales tax states and reward non-sales tax states as you propose. He realizes this is a catch-22 for the states and he's trying to get it fixed the right way - by passing some sort of Federal law regulating interstate sales taxes.

The deals he cut with Texas and California were a 1-2 year stay on Amazon collecting taxes in their states, while he tried to get the issue addressed in Washington D.C. Sadly, I haven't heard of any progress on that front. It's ridiculous that a business has had to take the initiative in getting the government to abide by and modify the government's own rules.

RE: If I were Amazon....
By foolsgambit11 on 4/30/2012 6:52:52 PM , Rating: 2
Businesses work to get laws changed all the time. Bezos is a lobbyist....

RE: If I were Amazon....
By Solandri on 4/30/2012 8:49:40 PM , Rating: 2
That's my point. He's lobbying against Amazon's best interest, for a more sensible overall sales tax structure.

The states are just want more tax revenue.
The brick and mortar stores want online stores to collect sales tax.
The other online stores want to continue not collecting sales tax.
All three of these are acting in their own self-serving best interests.

Amazon/Bezos are lobbying for some sort of uniform federal tax structure, not because it'll help them in terms of sales (it'll hurt them since their final price will go up in most states), but because it makes better sense for the country and business environment overall.

big deal..
By kattanna on 4/30/2012 11:09:27 AM , Rating: 3
I dont turn to amazon because I dont have to pay sales tax, I use them because they have an awesome selection and I have almost never come across a product they dont have.

A Smart State Govt would...
By TacticalTrading on 4/30/2012 11:02:49 AM , Rating: 2
What is more important, Sales Tax, or Payroll Employment?

If a state favors Payroll Employment,
The State should offer Amazon, and any other online retailer, Build distribution and warehousing here, create jobs, and you don't have to collect State Sales Taxes.

I know, someone would object. But at a time when states are struggling to attract jobs, this could be a powerful incentive.

Tax deductable expenses.
By drycrust3 on 4/30/2012 12:14:35 PM , Rating: 2
and that the e-tailer will create a minimum of 2,500 jobs.

Isn't the expense of this all tax deductible? If so, I can see it would need at least 2500 employees to find "recycled green sustainable environmentally friendly" paper to feed into the printer, watch it print the itemised data with "green sustainable recycled ink", collect the printout, load it into a shipping container, put it onto a truck fueled with "bio-diesel", and wave good bye as it drives off to Texas.
Meanwhile, Texas will need to decide what to do with all the shipping containers filled with printouts.

I'm curious how they collect
By VoodooChicken on 4/30/2012 4:22:42 PM , Rating: 1
I am in Texas, and while the state sales tax rate is 6.25%, municipalities can add up to 2% for various entities (city tax, transit, etc). So I live in Dallas, I go to the 7-11, and my $1 soda costs me $1.09, 6.25 cents to the state, 1 cent to the county (5 possible), and 1 cent to Metro Transit. I go to a different county, my soda is $1.07, with .5 cents going to county.
Now if my billing address is in the 2nd county, but my physical address is in the 1st, which dictates my sale or use tax? It doesn't matter, in practice, Texas has always gotten its 8.25%, and I have no idea where it sends 2% (I assume Rick Perry puts it under his mattress). This may seem like a victory for Combs, but she has a DIRTY house she needs to clean up and get in order.

"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)

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