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New Jersey, Amazon Deal – Retailers Balk, Decisions Must Be Made

  • Feb 14, 2012 | Susan McLain

New Jersey is one of the latest states in discussion with Amazon offering concessions to encourage the Internet giant to move into their state. New Jersey’s unemployment rate “…has hovered around 9 percent,” according to NorthJersey.com. Amazon is considering bringing “…two warehouses to New Jersey in a deal that could bring 1,500 or more full-time jobs.”

In a statement to the Associated Press, State Assembly Democratic Leader Lou Greenwald said that Amazon is bargaining for a 22-month sales tax holiday. Currently, the Internet retailer has arranged deals for building “…job-creating distribution centers in Indiana, California, Tennessee and South Carolina in exchange for sales tax exemptions.”

Even though NJ.com reports that local retailers aren’t opposed to Amazon moving into the state, they do not want it to be under these terms. "John Holub, president of the New Jersey Retail Merchants Association, said he can't overstate how adamantly he opposes the idea of lawmakers giving Amazon permission to continue unfairly competing with the state's businesses."

The amount of money being talked about is a $65 million investment by Amazon for two 1.2 million square foot warehouses and up to 1,500 new jobs (paying an average of $40-50,000 per year with health benefits). On the other hand, sales tax revenues collected from Amazon sales to New Jersey residents could add up to $200 million per year.

According to the New Jersey Retail Merchants Association and Rutgers University researchers, “…the state would miss out on $317 million in revenue annually by 2015 if online retailers without a physical presence [nexus] in New Jersey, like Amazon, don’t collect and remit sales taxes.” The legislature is already working on passing a bill with a new definition of nexus that includes affiliates and subsidiaries, creating presence for a number of internet retailers. This presence translates into a requirement to begin collecting and remitting sales tax on sales to New Jersey residents. If the bill passes, the requirement would apply to Amazon even without the two new warehouses "...due to its affiliates here: audiobook seller Audible.com in Newark and competitor-turned-subsidiary Quidsi in Jersey City."

NJ.com says, “More than 20 states, including many along the eastern sea board, have set dates when online sellers will have to collect sales taxes or have legislation pending.”

Will New Jersey become the latest in a line of states cutting deals with Amazon, conceding a few months in exchange for eventual compliance with sales tax collection duties? Is the exchange of ensuring jobs are brought the state worth the loss of revenue that would be coming in if new legislation is passed?

Stay tuned for the continuing saga of states, rates, internet sales and managing budgets!

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”