LITTLE ROCK — Online retail giant Amazon.com Inc., which long has resisted efforts to collect state and local taxes in most states, this month began collecting those taxes on purchases made by Texas residents.
The move was part of a deal the company negotiated with the state, which was seeking $269 million in unpaid sales taxes on online purchases. Previously, the company collected sales taxes in Kansas, Kentucky, New York, North Dakota and Washington, all states in which Amazon has significant operations.
At the core of the sales tax controversy is a twodecades-old decision by the U.S. Supreme Court involving catalog sales to North Dakota customers. The court decided in that case, which preceded the launch of the Internet, that Quill Corp. was not subject to the state’s sales tax because it had no “nexus,” or physical presence, in the state and the tax would be an unconstitutional burden on interstate commerce.
Now, the Internet is home to extensive commerce, most of which takes place untaxed. Technically, buyers are legally obligated to pay the tax if the seller does not collect it, but in reality that rarely happens.
Last year, when Arkansas enacted its online sales tax, Amazon and another retailer, Overstock.com, cut their ties with Arkansas-based marketing affiliates to avoid having to collect and submit the taxes.
Scott Stanzel, an Amazon spokesman, said in a statement that the company believes the online-sales-tax issue should be resolved at the federal level and that the company is working with states, Congress and other retailers toward that goal.
“We collect sales tax or its equivalent in more than half of the areas where we do business and we are pleased to say we are thriving in those geographies because Amazon offers low prices, vast selection and fast delivery,” he said.
U.S. Rep. Steve Womack, a Republican who represents Arkansas’ 3rd Congressional District, is among those seeking to change the rules. His proposed Marketplace Equity Act would give states the authority and a framework to compel online retailers with no nexus to collect and remit taxes on sales to residents of the states.
“It would level the playing field for the brick-and-mortar retail establishments,” he said. A hearing on the bill is scheduled for July 24.
Womack’s bill drew the support of the National Retail Federation, which said the bill “is a step forward in NRF’s long-standing efforts to level the sales tax playing field between physical and online retailers and helps move toward a federal legislative solution to this issue.”
Two other bills addressing the issue also are pending in Congress: the Main Street Fairness Act and the Marketplace Fairness Act.
Womack, formerly mayor of Rogers, said cities, counties and states increasingly have resorted to raising taxes to offset lost sales taxes on online purchases.
“As a former mayor, I totally understand the impact that’s having,” he said. “It needs to be fixed and it’s long overdue.”
Michael Mazerov, senior fellow with the Center on Budget and Policy Priorities, said Amazon’s move likely will have an impact. The center focuses on fiscal policy and public programs that impact low- and moderate-income families.
“It is a significant milestone that a company that has resisted sales-tax collection has now agreed to collect the tax in one of the largest states,” he said.
A multiyear effort known as the Streamlined Sales and Use Tax Agreement, which 44 states have joined, has made good progress in developing ways to collect taxes from online sales, Mazerov said.
“It has given a very significant show of good faith to Congress that the states are willing to simplify their process if given this taxing authority,” he said.
Daniel Morales, a spokesman for Bentonville-based Wal-Mart Stores Inc., said the company has always followed the rules for collecting and submitting sales tax for its online sales.
“We think that’s the right thing to do, and we’re going to continue that,” he said.
Steve DelBianco, executive director of NetChoice, which advocates against threats to online commerce, said Amazon’s growth has created a physical presence for the company in so many states it will soon collect taxes from areas that encompass more than half the U.S. population. Amazon has built a number of “fulfillment centers” around the country to process orders.
“That takes the winds out of the sails for Congress to overturn the physical presence standard,” he said.
He said he opposes new tax burdens on Internet commerce.
Business, Pages 23 on 07/07/2012