Amazon Sales Tax Loopholes Likely To End Next Year

Amazon Sales Tax Loopholes Likely To End Next Year

True story: It was about 1978, I was reaching over the counter of a busy newsstand in Staten Island with some coins in my young hand to buy a pack of trading cards. The man at the register took my money. “Wait,” I said, having a few extra coins ready, “what about the tax?” He waved me off. “Don’t tell Uncle Sam,” he said.

It’s unlikely that newsstand was taking advantage of a legal loophole in collecting sales taxes, like the one currently enjoyed by online retailers. But Amazon.com’s no-tax loophole is almost certain to close next year, according to Corporate Counsel, and it could mean a vastly different landscape for online retailers.

In fact, Amazon intends to urge lawmakers to support federal legislation aimed at letting states collect sales taxes from Internet retailers, as Paul Misener, Amazon’s vice president for global public policy said in prepared remarks for Wednesday’s House Judiciary Committee hearing, according to WSJ.

Earlier this year, Amazon worked out a deal with California delay a start to collecting sales taxes until September 2012, after the state passed a law to require it.  More states – possibly all of them – are expected to follow its example.

Currently, Amazon and other online sellers take advantage of a loophole in national sales-tax policy that requires a “physical presence” in the state for tax collection. Amazon had claimed its operations didn’t constitute a physical presence in California, and therefore, the “use tax” applied, which means customers are supposed to keep track of their purchases where sales tax isn’t collected and pay tax each year to their state.

States like Florida, Connecticut and Indiana are following California’s lead in closing the online loopholes for collecting sales taxes. Amazon has turned its attention to federal legislation, as the testimony this morning illustrates. “Amazon strongly supports enactment of a federal bill with appropriate provisions,” Misner said in his testimony.

The Marketplace Fairness Act has been proposed in the Senate by a bipartisan group, and would close loopholes everywhere.

However, critics point out that Amazon could benefit from the legislation, as it will offer to handle sales-tax chores for merchants selling through its site for a fee, according to MultiChannel Merchant, a marketing industry site.

Law Blog has reached out to Amazon for comment, but a spokesperson wasn’t immediately available.

Amazon Sales Tax Loopholes Likely To End Next Year
Sam Favate
Wed, 30 Nov 2011 16:31:28 GMT