In an interesting shift in attitude, Amazon.com seems to be softening its hard-line stance against state demands for it to collect sales tax. Along with lobbying for a single nationwide sales tax, Amazon is starting to settle lawsuits with states and, in many cases, has agreed to begin collecting sales tax at future dates.
Up until now, Amazon has maintained that online retailers with no physical presence in a state did not have nexus and did not have to collect sales taxes. Amazon limited business dealings and placed travel restrictions on employees to states that it viewed as “bad”, meaning these states wanted Amazon to collect sales taxes on purchases made by residents of those states.
Amazon even went so far as to pull the plug on its marketing affiliates in “bad” states. It followed through with one such threat in Colorado in 2010 after the state enacted a law that would have required Amazon to report all online sales made by Colorado residents. Colorado’s law was thrown out after it was determined to be unconstitutional because it would have “discriminated against online retailers.”
Amazon has put up a costly legal battle against Texas, threatening to remove its warehouses, and against California, threatening the removal of both the warehouses and affiliate programs. Both lawsuits have now been settled, with Amazon promising to start collecting sales taxes in Texas on July 1, and California in September of this year. Amazon has even promised to sweeten the pot with the promise of new jobs in both states.
Amazon has admitted nexus and collected taxes in Kansas, Kentucky, North Dakota, New York and Washington for the past 5 years, mainly due to the presence of warehouses in those states. Along with Texas and California, Amazon will begin collecting tax in Pennsylvania this year. Promises have been made to start collecting tax for New Jersey and Virginia in 2013, and Indiana, Nevada, and Tennessee the year after that, and looking out to 2016, South Carolina.
Arkansas, Connecticut, Illinois, Vermont, North Carolina, and Rhode Island have all passed legislation calling for what is often called an “Amazon tax” even though it would impact most, if not all, online retailers. Recently, brick and mortar retailers have begun to band together and put up an organized front in the form of a well funded campaign supporting “Main Street Fairness”. It seems inevitable that Amazon would bear the brunt of the financial burden it would take to fight future lawsuits.
While it may seem unlikely for a mega-company such as Amazon to back down, it is probable that they simply balked at the potential legal costs. There is also the possibility that if Amazon could be seen as cooperating with the states their plea for a single nation-wide tax legislation could gain some traction in congress.
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