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Arizona Sales Tax Nexus Bill Approved by Senate Panel


On February 8, the Arizona Senate Commerce and Energy Committee unanimously approved SB 1338. The bill amends Arizona's definition of "retailer" to include any company that "maintains a distribution center, warehouse, fulfillment center or similar place of business" that facilitates delivery of merchandise to its customers, or to another company's customers. This means companies like Amazon, and its affiliates, will now have to collect and remit sales tax to the sate. 

Local Arizona business owners have called for legislation that would require Amazon to collect sales tax for some time. Michelle Ahlmer, executive director of the Arizona Retailers Association, argues that by not requiring internet retailers to collect sales tax, local businesses lose, because they cannot compete with online prices. This harms the local economy. She concludes, "When retailers sell more goods, they employ more people. It's as simple as that."

Amazon and its representatives see it differently: "Under this bill, Amazon is the targeted loser," states Don Isaacson, a lobbyist for Amazon. According to the Verde Independent, Isaacson believes the bill violates an Arizona constitutional provision which forbids "special laws" created to affect just a single entity. Likely, from Amazon's perspective, SB 1338 adds insult to injury, since Arizona recently issued an assessment stating that Amazon owed the state and certain cities approximately $53 million in uncollected sales tax for the periods March 1, 2006 through December 31, 2010 (though the grounds for the assessment findings remain unclear).

Amazon has not yet declared how they will respond to SB 1338. A Report commissioned by the Arizona Retailers Association estimates that Arizona would lose approximately $452 million in uncollected sales tax on e-commerce in 2013, if they did not require online retailers to collect sales tax. How much actual additional revenue they will collect remains to be seen.

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Avalara Author
Will Frei
Avalara Author Will Frei
Will Frei covers sales tax news including best practices, legislation and sales tax technology. He is the Social Media Manager at Avalara.