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State Governments Looking to Capitalize on Amazon Sales Tax

  • Ecommerce
  • February 28, 2017 | Ryan O'Donnell

The following post is a contribution from Rob Segall and Alex Maglione of Amazon Sellers' Lawyer.

What do Arkansas, Oklahoma, and Wyoming all have in common? They will all begin paying sales tax on Amazon sales as of March 1st, and legislators are anxiously awaiting the new funds. Currently, Amazon is collecting sales tax in 38 states, as well as the District of Columbia.

Governors and state legislators who have been desperate to find ways to balance their budgets are gearing up for a boost of revenue from Amazon sales. In January, Amazon began collecting sales tax in Iowa, Louisiana, Nebraska, and Utah. In February, they began collecting sales tax in Mississippi, Missouri, Rhode Island, South Dakota, and Vermont. Wyoming, Arkansas, and Oklahoma will be all be added to that list starting in March.

Amazon has been “dragging its feet” for a while to collect sales taxes in states in which it does not hold a large corporate or physical presence. However, local governments and small business owners find it unfair that ecommerce websites like Amazon can capture business from customers looking to save money on sales tax.

To avoid collecting these taxes, Amazon has relied on a 1992 Supreme Court decision, Quill Crop. V. North Dakota, which forbids states from ordering retailers to collect sales tax if there is no substantial physical presence in that state.

What is interesting is that Amazon made the decision on their own to begin collecting taxes, leaving many wondering why. It may seem like Amazon should be applauded here, but critics say that Amazon took too long to make this decision.

Some local retailers claim Amazon has been able to discount goods by avoiding sales tax for years, and are angered that something has not been done sooner. Some feel as if this decision will “even out the playing field” for small businesses, since many consumers opt to shop online in order to avoid sales tax. This also means more tax revenue for the state, which may lead to income taxes being cut.

Dr. Michael Pakko, Chief Economist for UA-Little Rock, believes local businesses will still face challenges when it comes to online purchasing. The online shopping trend will continue to rise, especially with future plans for delivery with drones and other items which will make online shopping even more convenient.

According to the National Conference of State Legislatures, it is estimated that states have missed out on $23.3 billion in sales tax revenue for the year of 2012. Only time will tell if legislation is passed to make Amazon accountable for the “back taxes” some people feel they owe, but for now, the new tax will go into effect next week.


Avalara Author
Ryan O'Donnell
Avalara Author Ryan O'Donnell