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Sen. Dick Durbin (D-Ill.)  (Source:
Senator Dick Durbin (D-Ill.) plans to introduce a bill called the Main Street Fairness Act

Amazon's war on taxes is becoming a tale as old as time. A U.S. state pushes the online retailer to collect taxes, and Amazon simply packs its bags and leaves for the next state that will leave it alone. But this time, that may not be the case.

Amazon is the largest online retailer with over 90 million registered buyers and $34 billion in annual sales. It launched in 1995, and sells everything from food, furniture and apparel to computers, electronics and toys. 

Recently, U.S. states have started pressuring Amazon to collect sales taxes on its items due to the retailer's affiliates operating within those states, and because of large state budget deficits. For example, Texas State Comptroller Susan Combs gave Amazon a $269 million bill in unpaid sales taxes, which led to Amazon's decision to close a local distribution center and cancel all plans to expand in the state of Texas. 

In another instance, Amazon won an exemption on a new sales tax law in South Carolina after saying it would pull a distribution center from the state if forced to collect. Amazon has also cancelled tens of thousands of affiliate accounts in Illinois and Colorado due to tax problems, and has brick-and-mortar chains like Best Buy and Wal-Mart breathing down its neck because of Amazon's "unfair advantage."

The unfair advantage refers to the online sales tax reprieve that was put in place awhile ago to support the then-upcoming industry of online shopping. But now that Amazon is large and in-charge, states and brick-and-mortar retail chains believe this reprieve is no longer necessary.

Now, Amazon may be in an inescapable position as Senator Dick Durbin (D-Ill.) plans to introduce a bill that will require all businesses to collect sales tax "in the state where the consumer resides." The bill is called the Main Street Fairness Act.

"This idea is overdue," said Durbin. "Online retail sales are now very fulsome and are growing at the expense of local units of government." 

Amazon argues that a Supreme Court ruling from 1992 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 its borders. In addition, Amazon notes that it currently collects taxes in Kansas, Kentucky, New York, North Dakota and Washington, and that buyers in other states where taxes are not collected are to report it themselves, though they rarely do. 

According to a University of Tennessee study, U.S. states will collectively lose $10.1 billion in uncollected sales tax revenue this year. Next year, that number is expected to jump to $11.3 billion. With many state budgets in the red, the collection of online sales tax looks to be a quick fix that they all will continuously push for.

Jeff Bezos, Amazon CEO, has said that he would prefer that the tax situation be "fixed properly" through federal legislation, and this month, he may get his wish. Durbin is gathering support from former mayors and governors who are now in Washington "weighing the budget problems back home," and the issue will go to Capitol Hill by the end of the month.

"Doing it state by state gives the Internet companies an opportunity to go shopping, to find the state that is going to treat them the best," said Durbin. "It certainly argues for a federal approach."

Jason Brewer, vice president for communications and advocacy for the Retail Industry Leaders Association, is unsurprisingly for Durbin's new bill, saying that it's only a matter of time before Amazon will be forced to collect taxes

"Ultimately, this is a battle they are going to lose, and this is about how long they can push off that day of reckoning," said Brewer. "They always claimed to support a federal solution, but they've never lifted a finger to get there."

Even if Amazon loses this battle, it really wouldn't be that bad for the online retail giant. According to analysts at Wells Fargo Securities, Amazon's products would still be cheaper than Wal-Mart or Target even if it had to collect sales tax. In fact, if Amazon had to collect sales tax, it would be 5 to 6 percent cheaper than Wal-Mart and 12 to 13 percent cheaper than Target. In addition, with a sales tax policy in place, Amazon could add new shipping centers anywhere they pleased, and could accelerate shipping time.

With prices remaining lower than brick-and-mortar retailers and items being delivered quicker than ever with cheaper shipping prices, how could Amazon lose?

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RE: B&M Changes?
By ddh on 6/3/2011 2:45:00 PM , Rating: 5
As a Business owner having to collect and document sales tax rates at the point of delivery is a nightmare. People do not realize that sales tax rates differ by address. There is a base state tax rate, plus a county rate, plus a city rate, plus any special sales tax rate. Also in some cases different products have different sales tax rates.

States do not adequately provide support for business with proper databases that actively help track and collect these sales taxes. In many states there are hundreds of different composite sales tax rates, having to collect document and report on all these is a huge nightmare.
Doing it in one state is bad, in fifty it is even worse. The accounting staff and constant database maintenance is horrible, not only that if the rate you doesn't match the updated rate in the hopefully accurate state database you are required to remit at the correct rate to the state regardless of whether or not you collected.

Bottom line, amazon and every other online retailer will have to add 3% to 5% to the product cost to cover the admin costs plus the sales tax. Not only that this will be a precursor to every state wanting you to remit B&O and other taxes even though you don't operate there.

Look into the details of sales tax systems state by state and you will soon understand why they are running for there lives.

Americans are woefully ignorant of what taxes they really pay. Open your eyes and start looking around.

RE: B&M Changes?
By Ananke on 6/3/2011 4:08:06 PM , Rating: 2
Do you understand that you have a competitive advantage over Amazon of having a physical presence at your market? At the very moment when Amazon will not need to avoid a warehouse next to you, they will open one, and everybody of your clients will buy from them, because the prices will be lower AND likely the shipping charges will vanish.

I am a consumer, and I buy from local stores either because I want easy return if necessary, or to avoid shipping, or to get a "feel" of the product. I pat the sales tax premium for that luxuries. In a leveled filed, I will not buy anything from a small businesses, since Amazon will become local.

RE: B&M Changes?
By Nutzo on 6/3/2011 5:40:38 PM , Rating: 2
You also haven't considered how dificult it would be to deal with 50 different state tax offices, all with different rules and regulations.

Most require that you have a state taxpayer ID, some also require a deposit based on your estimated sales (you do have a sale estimate by state in your business plan I assume).
You can't just write a check at the end of the month either(or maybe by the quarter) since some require direct electronic transfers.

Just wait until you get hit with a sales tax audit for 20 different states the same month.

RE: B&M Changes?
By JediJeb on 6/3/2011 6:23:44 PM , Rating: 2
Maybe that is why the already collect sales taxes in Kentucky because we have one rate of 6% everywhere. There is no local sales tax here so it is much simpler to deal with.

The crazy thing they did do here a few years back was if say you were living in a state like Alabama that didn't charge sales tax on cars, if you moved to Kentucky before you could register your car you had to pay the difference between the sales tax you paid on it when you bought it and what the Kentucky sales tax was. My friend has to pay a 6% sales tax on his car he bought 4 years earlier in Alabama when he moved to Kentucky. I don't think they do it anymore because I think someone took them to court over it. I was always curious if you had bought one when you lived in Tennessee and moved to Kentucky if they would refund the difference lol.

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