Amazon's Sales Tax Battle: Swimming Against the Current?

Will Amazon soon be collecting sales tax everywhere? Retail analyst David Strasser thinks so. He told Forbes: "There's a lot of momentum building. Jeff Bezos has built a company strategically around avoiding sales tax. But they're going to have to deal with this." Forbes noted that "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."

"I think Amazon is starting to overplay their hand with what they're doing in Texas and Tennessee. I'm not an advocate for bricks and mortar retailers. But Amazon is gaming the system," said Strasser, who believes the backlash regarding fulfillment centers is significant "because both the competitive market place and Amazon's ambitions require it to continue building. As Best Buy and Wal-Mart get more efficient at distributing items purchased on the web, Amazon has to have warehouses nearer its customers, he says. He also points to a Wall Street Journal report last month that Amazon is considering selling fresh groceries, which would require even more of a local presence wherever that service is offered," Forbes wrote.


South Carolina has joined Texas and Tennessee in questioning Amazon's tax breaks. The Associated Press (via the Washington Examiner) reported a planned distribution center "that became one of former Governor Mark Sanford's last big economic development deals has become a headache for Governor Nikki Haley, legislators and possibly South Carolina's economic development image."

"It's a tough situation," Haley said. "I've had to take on all these issues where I've had to check: What's the background on this? How did we get here? What happened?... I don't want us to be known as the state that doesn't keep our promises. But the second side of it is when I go and I push for economic development, I want to make sure that we're being fair to the companies that are coming in and to the companies that we already have in this state."

A law passed in 2005 that "made it clear big distribution centers didn't open out-of-state businesses to sales tax collections just because they shipped goods from South Carolina" expired last June. The state commerce department "promised Amazon that they would work to get the law back on the books--but with a new exception for Amazon. The company operates Createspace, a book publishing operation in North Charleston. Amazon wanted to make sure Createspace also did not have to collect sales taxes," the AP wrote.

Jill Hendrix, owner of Fiction Addiction, Greenville, and a SIBA board member, said, "We would like for that to be off the table completely."


Amazon has thrown down the tax gauntlet in California, threatening to sever ties with affiliates if the state government passes legislation requiring the company to collect sales tax on items sold to residents. In a letter to California's Board of Equalization, Amazon said four bills introduced to the state legislature "are unconstitutional because they would ultimately require sellers with no physical presence in California to collect sales tax merely on the basis of contracts with California advertisers," the Wall Street Journal reported.

In a letter to State Board of Equalization member Senator George Runner, Paul Misener, Amazon's v-p for global public policy, wrote: "If any of these new tax collection schemes were adopted, Amazon would be compelled to end its advertising relationships with well over 10,000 California-based participants in the Amazon Associates Program." Misener also warned that "similar legislation in other states has, counterproductively, led to job and income losses and little, if any, new tax revenue."

Runner observed: "In no uncertain terms, Amazon has made it clear to me that the checks they send Californians will be cut off overnight if pending legislation aimed at regulating their operations becomes law."


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