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8 More States Added to Amazon's Sales Tax Roll. Will It Tax the Online Giant?

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By , dealnews contributor

Attention Amazon shoppers: According to CNNMoney, your online order might be getting pricer. At least eight states have asked Amazon to change sales tax on its orders. California and Pennsylvania sales tax will go into effect starting in September, while New Jersey and Virginia will begin in July and September 2013, respectively. Beyond 2013, Indiana, Nevada, and Tennessee will collect sales taxes beginning in January 2014, and South Carolina in January 2016.

These states will join the six who already charge sales tax on orders via Amazon: Kansas, Kentucky, New York, North Dakota, Texas, and Washington state. But how much sales tax is charged depends on the state, and could affect customers' bottom lines. CNN Money estimates that in California, the cumulative effect could be as much as $9.75 on a $100 purchase; in Pennsylvania, it'll cost consumers an estimated $8. New Jersey's sales tax is currently 7%, or $7 on a $100 purchase.

Amazon had long fought states' efforts to collect sales tax, and many observers believe it will continue be an uphill battle for the many state governments. But none seem to be relenting. Cash-strapped states have been fighting hard to collect the extra revenue. "Government operates like a business, where they see how they can change things or collect more money," said Maureen Riehl, Vice President of Government Affairs at the Council on State Taxation. "And 30 states have addressed or have projected revenue shortfalls for next year."

Bricks and mortar retailers, too, have also pushed hard for web merchants to collect sales taxes, arguing it would make for fairer competition. Meanwhile, legal pressure has mounted on companies such as Amazon to collect tax before lawyers come after them.

"Some state legislation has allowed people to bring whistleblower suits against companies who do not collect sales tax — and you're not only talking taxes and interest, but triple damages," says Stephen P. Kranz, a partner at Sutherland Asbill & Brennan LLP in Washington D.C. who specializes in tax policy matters. "There are more than 200 suits pending in Illinois alone, and this is an area that we're going to see exploited."

For Amazon and all web retailers, the matter of collecting tax in all 50 states will ultimately be resolved when Congress moves forward on the Marketplace Fairness Act. This law will essentially allow states to collect sales tax on items sold from out-of-state businesses.

Yet Amazon's power as a retailing giant puts it in a good position to keep up strong sales and set benchmarks other retailers would still have to match or beat. What's more, the Financial Times reports that Amazon will actually use the tax kerfuffle as an opportunity to expand its network of U.S. warehouses from the 34 it had at the end of 2011. That way, it plans to offer same-day delivery to more consumers living in or near major markets.

And as many consumers see it, instant gratification via same-day delivery is hardly taxing. But will paying sales tax affect your bottom line purchase at Amazon? Sound off in the comments.

Front page photo credit: Bloomberg
Photo credit: CNN Money



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Lou Carlozo is a dealnews contributing writer. He covers personal finance for Reuters Wealth, and was most recently the managing editor of WalletPop.com, and before that a veteran columnist at the Chicago Tribune.

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Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).
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19 comments
vsarda
there are quite a few things which I bought from amazon instead of local store because of sales tax saving. I cant believe government has been so stupid in not collecting taxes till now. I am in Massachusetts, so it still doesn't affect me, but I am in support of paying taxes as it gives local businesses same playing field which they currently are not getting. I hope government is no more stupid... 
rsg123
http://Amazon.com and B&M stores have similar prices on thousands of products.  The only edge Amazon had was not charging tax.
On a lot of electronics Amazon has only slightly better pricing, but the ~10% tax discount was the biggest factor that would make you forgo the easy local returns and immediate gratification of picking something up right now vs. having to wait 2-5 days.
I hope Amazon will adjust their pricing accordingly.
desolationstorm
The difference is you are paying a sales tax at the state that you made the purchase.  That being said this will of course change some of my habits but not that much.  I do not honestly see the big deal.

Would I prefer that they do not collect it of course.
28roader
dealguy,

..People, people...not the four-legged variety. There are many 2 legged souls that are worth far more than 15 million British pounds...
snaimpally
Internet retailers, certainly the big ones, should collect taxes.  First, it puts the internet retailers on a more even footing with local retailers.  Second, the states need the tax revenue.  Sure it hurts consumers to have to pay tax, but sales tax provides for many state services that are provided to those same consumers.  Amazon's response is to build more warehouses in those states for which it collects tax, providing consumers with next day delivery.  So even if you have to pay tax, you get your stuff quicker!  Not a bad tradeoff.
rwdavis0530
That's funny, I never saw the option to claim / pay taxes on all my online purchases for the year. I also use to have my taxes prepared by a CPA and they never inquired or asked me to disclose all my online purchases eather. Just sayin' :-)
Stubenville
Amazon does not charge sales tax; the state charges sales tax, Amazon merely collects it. And everyone is liable for their state tax whether Amazon collects it or not.
dealguy
The richest fat cat in history was Blackie, a cat that inherited 15 million British Pounds. tp://en.wikipedia.org/wiki/List_of_cats url]
johnnylately
We will definitely review the costs of shopping at Amazon after they start collecting TN sales tax.  I am against collecting a sales tax if the merchant doesn't have a B&M store in that state.  If I vacation in another state I don't keep detailed records of all purchases or even just the purchases of items that I bring back home.  That is unreasonable.  This is just the same as me ordering something from Amazon.

If the quote in the article is factual (30 states running deficits) then that means that 20 have balanced budgets or are running surpluses.  The 20 states are being run correctly.  The 30 states are NOT being run correctly so instead of the governments being corrected (voted out, laws changed) they get REWARDED by taxing more of their citizens.  The citizens are the ones picking up the slack for bad politicians and/or policies!  For all the ones wanting/loving taxes how about you giving the Govt all of your money so that others don't have to suffer that burden.  That seems fair to me (and I bet a few others).
zramix
When this goes into effect I will cancel my Amazon prime subscription and go back to Brick and Mortar where I can see things before buying and return with relative ease. 
Scroogus Maximus
Amazon has derived huge profits from the loophole allowing them to dodge state sales tax.  The Govt is finally catching up and realizing what a huge amount of money is flowing Amazon's way as a result of this lovely little tax haven...and like everywhere else, the states want their budget boosted. This was just waiting to happen, and the only surprise here is the lack of speed with which the Govt taxed them. Something similar to the IRS: If they owe you money, they can write "IOUs", but the second you owe THEM, the interest and penalties start stacking up.
jones036
Tennessean paying 9.75%.  Yes it will affect what I buy.  Paying almost 10% of every dollar takes a big bite out your budget.  In 2014 I will only purchase from Amazon what I can't find anywhere else.
valle07
affects my bottom line. I'll probably shop elsewhere once taxes hit my state. Amazon, I loved you for your prices and for being patriotic by not charging me sales tax. 
smmatrix
Not paying tax is like getting an instant 9% return on my money, otherwise, it takes over three years to get that type of return in my money markets account.  
smmatrix
I'm currently an Amazon Prime member, but will re-think my membership once Nevada joins the tax pool.  The 9% extra I will be paying with taxes will lead me to other online retailers, but soon they will probably all tax and I will be back to Amazon.  
drshuey
Anyone who buys anything from Amazon is supposed to pay tax on what they buy.  The difference between Amazon and a brick and mortar store is that the store collects the sales tax for you while Amazon doesn't.  When you buy from Amazon you are supposed to claim it on your yearly taxes and pay all sales tax on those items at that time.  The only difference now is that people who don't do what they are supposed to will now be forced to do what they have to.
28roader
The states should make the big corporations, that are sending their profits overseas, and the rich fat cats pay their fair share of taxes. Because these entities do not have their fair share of taxes, government treasuries have lost billions of dollars. If we would collect taxes from these unpatriotic entities, the states would not have to go after Amazon. Somehow...the "little guy" always seem to lose.
tahu300
This new law will definitely be affecting my bottom line. I go to Amazon instead of local stores for large purchases. For example, my new tv that I purchased in May from Amazon saved me just over $50 in taxes! Why would I go anywhere else. Now, I'll be paying Santa Clara County California's 8.375% tax rate. Also, since Fry's matches Amazon's prices anyways, I will be using Fry's as my go-to retailer rather than Amazon. Amazon and the consumers are the big losers in this whole disaster of a law. I do not like the new law as it affects the bottom line for the consumers.
PoppaG
Leave Amazon alone. Love that place!
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