Sales Tax

Amazon has suffered a defeat in their long-running war against collection sales taxes. The governor of VA announced last week that he’d worked out a deal for the retail giant to start collection sales taxes by September 2013.

Amazon has a datacenter and a distribution center in the state, and they are also planning a couple new facilities in VA. In fact, it was their expansion plans that spurred this discussion. Retailer groups based in VA objected to the advantage had over brick-and-mortar stores, and they were incensed that Amazon continued to avoid collecting sales taxes while expanding their presence in the state.

Yes, September 2013 is quite some ways away, but this is still a marked change for Amazon. It was only a couple weeks ago that they were doing their best to duck the duty in VA, and they’ve gone to far as to abandon partners in Arkansas, Connecticut, and other states.

This agreement is likely going to encourage other states to push forward on their efforts to get the taxes their due. Right now amazon only collects taxes for 5 states: Kansas, Kentucky, New York, North Dakota, or Washington. That will likely increase, shortly.

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It looks like the retail giant is running out of refuges in their ongoing effort to avoid sales taxes.

Amazon has long had a presence in Virginia, but they’ve never collected VA sales tax. They have distribution center in Sterling ( suburb of DC) and  data center elsewhere in the state. They also recently announced plans to open new distribution centers in the state, but those plans again did not mention collecting sales tax.

But that might change. The VA state senate is currently considering  bill that would require online retailers like Amazon to collect the 5% state sales tax if they have partners in the state. The Virginian-Pilot has more details: “On Tuesday, the Senate Finance Committee unanimously endorsed a bill, SB597, to require Internet companies with physical locations in Virginia to collect state sales tax. The bill from Sen. Frank Wagner, R-Virginia Beach, now heads to the Senate floor for consideration.”

A similar bill had been considered in 2010, but it died in the state assembly. Given that VA is facing some budget difficulties this year, I would say that the current bill has a better chance of passing.

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image by Tony the Misfit

It looks like South Carolina isn’t the only state who is getting into a tussle with Amazon today. According to Amazon’s recent FTC filings, the state of Arizona wants Amazon to hand over all the state sales taxes that they hadn’t been collection since 2006.

“The State of Arizona is alleging that we should have collected a transaction tax that is similar to a sales tax on applicable transactions during those years,” Amazon said in its annual 10-K regulatory filing. “We believe that the assessment is without merit and intend to vigorously defend ourselves in this matter.”

This collection notice is similar to the one that Texas attempted to collect last year, only in that case Texas caved on the estimated $269 million in unpaid taxes. Arizona sent the bill over in November, and it includes both the unpaid tax as well as interest. They indicted that Amazon could pay by credit card or in small bills.

There’s one detail about this story that, once you know about it, is going to eat away at you. How would the state of Arizona know that the bill should be $4453 million, and not $63 million (or some other figure)? I don’t believe Amazon is required to disclose earnings by state, so that $53 million bill is likely only a guesstimate of the true cost.

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image by dherrera_96

If you’ve been following the online sales tax saga then you probably know that Amazon has done all they  could to avoid collecting taxes. They’ve even gone so far as to cut off affiliates in CO, CT, Ill, and a number of other states just to avoid the expense. In fact, this issue has grown so large that senior managers from Amazon have even testified in front of Congress concerning a national law which would settle the matter.

The latest addition to the tale comes from South Carolina, and it’s  a rather odd twist. As part of their plans to open a new warehouse in SC, Amazon was almost required to collect sales tax from customers in the state. It looks like they ducked the obligation by offering a compromise.

Instead of collecting the SC state sales taxes, Amazon sent out  notice this past week. They told all their customers in the Palmetto State that the customer was obligated to pay the tax on their online purchases. Technically they have to pay a use tax, not a sales tax, but it comes to the same thing.

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Earlier this week eBookNewser brought you news about Amazon’s support for sales tax legislation currently before Congress. It was Amazon’s hope that Congress would pass a law clarifying who had to collect what sales tax in which states. Unfortunately, it looks like Pennsylvania didn’t want to wait for the new law.

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This week Amazon opened the Kindle Store in Spain and Italy, but time will tell if these stores take off. Will Spanish and Italian consumers adopt eReaders? Probably. But the real question is will they go for the higher taxes on eBooks than on print books.

According to The New York Times, printed books in each of these countries are taxed at 4 percent, meanwhile eBooks in Italy are taxed at 20 percent and in Spain at 18 percent.

The New York Times reports: “Across most of Europe, e-books are taxed at full national value-added rates, which reach 25 percent in Sweden, Denmark, Hungary and other countries. Printed books, benefiting from an industry lobby, are taxed at a fraction of the full rates — and not at all in Britain.”

But the situation is not hopeless. According to the piece in The Times, booksellers are pushing their governments for change. And France already has plans to change its eBook tax to 5.5 percent, which is the same tax French consumers pay on print books in the new year.

Earlier today Paul Misener, the Amazon VP for public policy, testified in front of Congress. He wasn’t there to make an offer for Amazon to buy North Dakota (they need the warehouse space); that’s tomorrow. No, Paul was there to speak in favor of passing new laws to close the current loopholes in existing sales tax laws.

Most states require residents to pay a sales tax on all their purchases, but they also require a retailer to collect it. This has led to a rather tricky situation when the retailer is located in another state and thus has no obligation to collect the tax.

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Amaozn has been in a logn-running fight with a number of states over sales tax, and today it looks like the retail giant might have worked out a truce with the Golden State.

Earlier this year the State of California passed a new tax law as part of the state budget. It’s called the “nexus tax”, and it redefines who has to collect sales tax in the state of California to include companies that have business partners in the state. Amazon decided to fight this law by funding an effort to get it repealed. (One quirk of CA state law is that voters can repeal laws passed by the state legislature.) It’s not clear how successful amazon has been, but it looks now like their efforts were moot.

Reports are coming in that Amazon has agreed to back down from its attempts to get the law repealed. In what looks to be a truce, Amazon has agreed to stop fighting in exchange for a 1 year moratorium on the new law. The exact terms of the deal have not been announced, just that the 2 parties have worked out a handshake deal.