Just a few months ago, the giant retailer was filing lawsuits and dropping affiliates to combat states trying to charge online sales tax. Now, Amazon is on board.
As states have struggled to find new tax revenues over the past couple of deficit years, many have sought to levy sales tax on online transactions. In most cases, the sales tax is not charged when you buy online; while most state laws require online shoppers to declare purchases and pay a "use tax" on goods at the end of the year, almost no one does. And when states tried to force retailers like Amazon to make the tax collections, they were met with determined resistance.
Amazon dropped local affiliates in Connecticut, Illinois and elsewhere this year, to protest attempts to impose the sales tax, which were justified legally because the company had a physical connection to the those states. In California, the company threatened to overturn a similar provision in a voter referendum, and also went to court. (The Street has a handy map of the states in which Amazon was fighting sales tax battles.)
But now, the Los Angeles Times reports, the company is signing on to a bipartisan federal bill that will clear the way for states to more easily charge sales tax for online commerce, erasing an advantage online businesses had over brick-and-mortar competitors, and speeding a new revenue stream to cash-strapped governments without having to get a cent of new spending through a clogged Congress.
What gives? Why did Amazon change its tune (in a way that EBay and Overstock.com have not)? The answer may be, simply, that it's easier to follow one universal rule than 50 separate, arcane ones.
Retailers have argued for years that it would be too complicated to collect state and local sales taxes because of differing definitions and the difficulty of submitting payments to thousands of jurisdictions.
The Senate bill would require states that want to require the collection of those sales taxes to join an existing 24-state group called the Streamlined Sales and Use Tax Agreement that has standardized definitions and provided a single location in each state to send all payments.
States such as California, whose tax systems might be too complicated to join the group, still could be allowed to require retailers to collect taxes if they adopted similar tax simplification measures.
Retailers that take in less than $500,000 in total remote sales each year would be exempt.
TIME's Moneyland explains the fairness issue: allowing online retailers to skip sales tax built an advantage into their pricing over that of other retailers.
If a shopper lives in a state with 7% sales tax, that shopper instantaneously gets a 7% discount by shopping online, assuming this individual is one of the many that doesn’t later pay sales taxes on these purchases come April 15. Because of the proliferation of free shipping offers by online sellers, consumers often find it cheaper, and often more convenient, to buy online rather than at the store.
Work remains to be done to square the Senate bill with a less expansive House counterpart, and, if passed, it would still be up to individual states to decide whether to collect the tax. But Sen. Lamar Alexander, R-Tenn., a co-sponsor and, the Times notes, a former governor, said the path forward is clear.
"If I were president of an online retailer," he told the paper, "... I would look at this week in Washington, D.C., and I'd make my plans to start collecting sales taxes wherever I sold things in the United States."
This article is from the archive of our partner The Wire.
We want to hear what you think about this article. Submit a letter to the editor or write to firstname.lastname@example.org.