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
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
"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.
prices remaining lower than brick-and-mortar retailers and items being
delivered quicker than ever with cheaper shipping prices, how could Amazon
quote: mandating that all businesses collect the sales tax in the state where the consumer resides.