TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Sunday, February 27, 2011

Forbes: Are’s Days of Tax-Free Selling Numbered?

Amazon logo Forbes, Are’s Days of Tax Free Selling Numbered?:

Are’s days as a haven for sales-tax shirking shoppers numbered?

Retail analyst David Strasser, a managing director at Janney Montgomery Scott, suggests that they could be.  “There’s a lot of momentum building,’’ he said Friday.  “(Amazon founder) Jeff Bezos has built a company strategically around avoiding sales tax. But they’re going to have to deal with this,” he added.

Wait a minute. Hasn’t Amazon successfully fended off pesky state tax collectors for 16 glorious years?  Yes, but the battle has entered a new stage as Amazon builds warehouse/fulfillment centers in more locations, states grow hungrier for revenue, and a rising sales tax rate (it now averages 9.64% nationwide) puts retailers who do collect tax at an ever bigger disadvantage.

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Amazon should come to NH no sales or income tax here.

As far I know they don't have any place here, but they should think of it.

Posted by: bty | Feb 28, 2011 5:34:45 PM

I still do not understand how a state can tax a purchase from another state. It seems to be completely what the interstate commerce is about (as opposed to, say, requiring the purchase of health insurance).

Posted by: holmes | Feb 28, 2011 5:37:37 PM

I thought unless a business maintained management, production, or sales presence in a state that that state could not charge sales tax on out of state sales to residents of that state. Am I wrong?

Posted by: Al | Feb 28, 2011 5:37:38 PM

Commerce clause ftw.. Amazon just has to remove any nexus in any state they don't want to collect sales tax in..

Posted by: Dr. Kenneth Noisewater | Feb 28, 2011 5:39:40 PM

as Amazon builds warehouse/fulfillment centers in more locations...

... they increase their ability to leverage one state against another by shifting business from one warehouse/fulfillment center to another.

(Of course, that's an economic argument, not a political or a legal one)

Posted by: ras | Feb 28, 2011 5:43:06 PM

Amazon should propose a flat national sales tax of, say, 4% to be allocated to the purchaser's states. This would be for all mail and internet sales and would give the states substantially more than they will get otherwise, while not driving customers away from having to pay shipping AND sales tax.

Posted by: Kevin M | Feb 28, 2011 5:48:56 PM

Amazon collects sales tax from my purchases, and submits them to the wrong tax commission. Our reservation has a sales tax, but Amazon collects it and sends it to the surrounding state, which expressly claims no taxing jurisdiction over us.

Posted by: Neshobanakni | Feb 28, 2011 6:29:35 PM

Amazon should either move all the fulfillment centers to states with no income tax, or suck it up and just collect the taxes. After all, how hard can be be to track hundreds of various tax rates across the country? It's not like they process their cash using a cigar box and an abacus...

Posted by: Al Patterson | Feb 28, 2011 6:52:54 PM

This is reminiscent of the RIAA attempting to clamp down on file sharing by killing Napster. Clamp down on one end of the balloon, and it will pop up in another area. The economic rewards are just too great.

Posted by: Rix | Feb 28, 2011 7:11:26 PM

There needs to be a national sales tax on the Internet, with the proceeds going to the states.

Posted by: George | Feb 28, 2011 7:13:16 PM

On the off chance that not everyone knows already—New York coerced Amazon into collecting its sales tax a couple of years ago. Anything we order from Amazon for delivery in NY is taxed.

Posted by: hmi | Feb 28, 2011 7:34:37 PM

Well, the obvious thing is to do away with state taxes so that we can all keep Amazon. Amazon does in fact work, remains affordable and keeps a balanced budget unlike many state governments..

Posted by: Forrest | Feb 28, 2011 8:11:20 PM

Here in California, Amazon does not collect sales tax. We customers are required to pay the sales tax on internet purchases on our state income tax return. It's been that way for a while.

Posted by: Spiny Norman | Feb 28, 2011 9:07:09 PM

Spiny, that's the law in several states. No one does it unless it's for something like a car they have to register for other tax purposes.

Posted by: SDN | Feb 28, 2011 9:32:58 PM

It would make more sense if instead of inhering in the buyer's location, sales tax inhered in the seller's location or the FOB point (which is usually the point of shipping). But then outfits like Amazon would shop around for localities where sales taxes are lower, and we can't have that! That would put them out of the reach of greedy legislators who think that if they just squeeze hard enough, that turnip will give up gallons of nice warm O negative.

Posted by: Wacky Hermit | Mar 1, 2011 4:04:04 AM

Suck it greedy taxing states! Please see Quill Corp. v. North Dakota. I am a DEVOTED Amazon customer and gladly do what I can to starve the beast.

Posted by: gogman | Mar 1, 2011 7:27:25 AM

Wouldn't the collection of Sales Tax on an item purchased totally out of state be the equivalent of tariffs on interstate commerce. I mean if I happen to buy something in New Hampshire, and bring it back to New York, why should I pay New York, the sale didn't take place in New York. Is New York claiming that the internet or the US mails are acting as their agent, when I purchase out of state? Or is New York attempting to tax an item simply because I brought it across a state line? I thought the states were specifically forbidden to do that?

Posted by: Mike Giles | Mar 1, 2011 7:31:48 AM

The lack of sales tax on interstate purchases is something of a historical accident, mostly because nobody thought there'd be much of it when the system was set up. We've broken the system with the Internet and reliable cheap shipping; it needs to be fixed somehow. For one, the current sales tax system (counting the completely broken Use Tax system as non-existent) creates perverse incentives to buy from far away. Also, it moves a lot of expected tax base out of availability, and while I'm a fan of lowering taxes, it should be be design and not by accident.

As a consumer I enjoy the tax-free shopping, though I know it's not terribly fair.

As an Internet retailer myself, I'd prefer a more level system so as not to punish local customers (and/or care where everyone comes from). I'd like the Internet sales tax to be 0 (like Amazon) because that gives me a competitive advantage--but I'd accept a general rate. Then again, I don't compete against local stores like Amazon does, so I don't care as much.

I'm sure brick-and-mortar retailers would like the playing field to be leveled as well (in the more-tax-online direction) so I'm surprised there's not more push for that.

I don't know quite what to do about it without Federal law and/or crushing retailers with reporting paperwork; I don't think is it, but maybe is in the right direction.

Posted by: melee | Mar 1, 2011 10:00:53 AM

So, when is every out-of-State advertiser in the New York Times going to be made to collect and send in the multiplicity of taxes for any sale to persons (and businesses) wherever the Times is available?

Posted by: John A | Mar 1, 2011 11:12:26 AM

I worked in state tax compliance for thirty years. This is amusing. Quill, Bellas-Hess, whatever, all those cases are one federal law away from relegation to history. States are begging for bailouts. Guess what they'll get. Even failing that, you put a warehouse (inventory) in a state, even if you hide it in another corporation, or some "unrelated" entity arguably functioning as an agent, you'll be pressed as hard as a money-hungry state legislature chooses to press you. Eventually they will win, and/or you'll move it somewhere else.

Posted by: Doug | Mar 3, 2011 3:05:38 PM