If you’ve been enjoying sales tax-free purchases online, get ready for a major change. Amazon will begin collecting sales taxes from all states with a sales tax as of April 1, 2017. That’s no April Fool’s Day joke: it’s for real.
YEARS IMPOSITION STATE BY STATE
After years of fighting the imposition of sales tax on a state by state basis – from court battles to corporate exemptions – Amazon has been following a different tack of late. The online retail giant has been adding – not fighting – states to its list of jurisdictions subject to sales tax. You can see the list as it appears today here.
SALES TAX 45 STATES
The list is about to get a little longer. Next month, Amazon will begin collecting sales tax in Hawaii, Idaho, Maine, and New Mexico. Those four states are the last to be added to the list, rounding out a complete list of 45 states where Amazon will now collect sales tax. That means that as of next month, Amazon will be collecting sales tax nationwide.
5 STATES DON’T HAVE SALES TAX
And no, I didn’t skip the geography class: I know there are 50 states. Amazon won’t collect sales tax in Alaska, Delaware, Montana, New Hampshire, and Oregon. Those states do not have a state sales tax.
Collecting sales tax on online purchases has been a provocative subject for years. Companies which make sales over the internet are still subject to the same sales tax collection requirements as so-called “brick and mortar” stores. Normally, the test is whether the company has a physical presence in that state: if a company has a physical presence in a state, they are required to collect and remit sales taxes. The test is the result of 25-year-old Supreme Court ruling in Quill Corp. v. North Dakota. In that case, the Court ruled that only those companies with a physical presence inside a state can be required to collect sales tax, “continuing value of a bright-line rule in this area.” The key, of course, is that the definition of ‘physical presence’ can vary as technology changes.
(You can read more about the history of sales tax and mail order catalogs here.)
Retailers don’t love the rule because it’s more work for them. Figuring sales tax in multiple states and localities can be complicated and expensive. So, for years, online retailers like Amazon have largely railed against an expansion of sales tax to the internet while brick and mortar stores have argued for expanding the tax, claiming it would level the retail playing field.
That said, even if a company doesn’t charge you sales tax, consumers don’t get a pass on taxes. States that impose a sales tax typically also impose a use tax. If your state has a use tax and you are not charged a sales tax, you are supposed to self-report and pay the tax. About half of all states offer a line on their income tax returns now for this purpose; otherwise, there are separate tax forms for your completion.
As you can imagine, between the complexity and the insanity of this rule, most consumers ignore the use tax. In fact, a 2015 poll conducted by the International Council of Shopping Centers (ICSC) found that 62% of registered voters were not aware that use taxes were payable (downloads as a pdf). Most of those polled felt that the best way to collect sales tax was at the point the sale is made – and not by asking consumers to self-report and pay.
So what’s changed? The laws haven’t changed drastically (though, some states, like Colorado, are passing new rules to require retailers to report more information about sales). That said online retailers who are either seeing the writing on the wall or are weary of fighting against the inevitable, have been quietly shifting operations to collect sales tax in most states. Amazon is one of the largest retailers to do so.
A request for comment from Amazon about the change was not immediately returned.
Founded in 1994 by Jeff Bezos, Amazon is headquartered in Seattle, Washington. The retail giant reported revenues of $107.01 billion in 2016. The company was ranked at #237 in Forbes’ Global 2000 and #12 on Forbes’ list of the Most Valuable Brands.
- Amazon to collect state sales tax in Missouri on Feb. 1 …
- Tax-Free No More: Amazon To Begin Collecting Sales Tax …
- Amazon To Voluntarily Collect Sales Tax Nationwide …