Amazon avoids charging sales tax for another year

By on September 9, 2011, 3:00 PM

Amazon and the state of California have prepared legislation that would give the online retailer one more year to try and change federal tax policy. This means that Californians could buy online goods without being charged sales tax for another 12 months.

One of the lures of online shopping is not having to pay sales tax. A 1992 Supreme Court decision mandates that consumers don’t have to pay sales tax from online purchases so long as they don’t reside in a state where the online retailer has a physical presence.

Governor Jerry Brown approved an $86 billion budget that would require Amazon and other out-of-state online retailers to collect sales tax from California residents if they had offices, workers, affiliates or any other ties to the state, reports CNN.

The new law that took effect July 1 in the cash-strapped state should have forced Amazon to collect taxes from California residents, a measure that would generate nearly $200 million. According to Reuters, Amazon doesn’t have a “physical presence” here, but they do have a large enough presence that they would be required to collect sales tax.

Amazon announced that they were cutting all ties with their California associates and wrote a referendum to challenge the new law. Furthermore, they offered to build distribution centers in the state in exchange for a tax-free ride.

If the proposed legislation is passed, Amazon would have one more year to try and petition Congress for a national solution. The company has not announced if they plan to reinstate their California affiliate program.

User Comments: 7

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Sales tax... I get enough of that in stores.

Guest said:

Most people don't seem to realize that the era of tax-free Internet shopping ended years ago. Even though you don't pay sales tax at the vendor, you have to show all such purchases in your annual tax return where it will be subject to California State tax AND, what they call, use tax which is collected by the Board of Equalization.

gwailo247, TechSpot Chancellor, said:

Something like this is exactly what the federal government actually should do to set a unified standard for interstate commerce on the internet.

I personally believe that states have a right to set tax rates for themselves as a means of attracting business, but when it comes to the internet, they should set some kind of flat tax on all e-commerce, nothing crazy like 10%, but perhaps 4% for the state in which the buyer resides, 1% for the state in which the company resides, and 1% for the federal gov't.

A 6% tax rate would not be egregious for the average consumer, and it would allow companies total freedom as to where to base their physical locations, as this particular tax issue would offer no competitive advantage to any particular state, although the states would be free to offer additional incentives as far as property taxes, etc, to attract a company.

One of the great strengths of this country has always been the small business owner, and the internet allowed anyone to become just that. From your home or apartment you can become rich, or just supplement your income, so I think that if this issue is dealt with on a state level, you're going to get what Amazon is doing across the country, and that's cutting affiliate programs, which are probably in a lot of cases businesses that make the difference in someone keeping their home, or paying for health insurance or education. A federal law would really open the playing field to everyone and avoid disrupting people's lives, forcing them to choose between their business or where they live.

Guest said:

Been paying Connecticut "Use" tax for over a decade - PIA - would be glad to have Amazon collect and pay for me - like DRM, it is the guy who does it straight and legal who bears burden.

Guest said:

I buy a lot from Amazon..The day the sales tax comes to Amazon and Online....I will be buying less...I hate freakin sales tax!!! U tax my wages then you tax the stuff I buy....Come on!!

Guest said:

It isn't fair that physical stores have to charge sales tax whilst online retailers don't. I mean, I'm against the entire idea of sales tax in principle, frankly; but some businesses having to charge it whilst others don't based on antiquated pre-Internet regulations isn't satisfactory either.

Be thankful you don't live in the UK, where VAT (sales tax equivilent) is 20%

Guest said:

If it were up to me, I'd suspend ALL sales taxes indefinitely UNTIL governments ( at least the ones that are OF the people, BY the people and FOR the people ) would live up to their damn RESPONSIBILITIES and spend what they ALREADY GET wisely.

Taxes that make sense, AREN'T used to fill holes in overspending ( read: oops, we thought the people wanted this, we just didn't CHECK with them first ).

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