|Sun Dec 27 2009 22:46:07|
Should Amazon Be Required to Collect Sales Tax?
By: Ina Steiner
Randall Stross published a rant about Amazon.com in the New York Times on Christmas Day, "Sorry, Shoppers, but Why Can't Amazon Collect More Tax?" Randall says Amazon.com collects sales tax in only five states, and writes, "If Mr. Bezos wanted to do his part to avert layoffs of schoolteachers and firefighters and, yes, professors at state universities, he should start collecting the sales tax."
The issue of whether online retailers should be required to collect sales tax is gaining steam. In April, AuctionBytes columnist Greg Holden wrote about a proposed law called the Main Street Fairness Act that would require all sellers (except small businesses that qualify for an exemption) to collect sales tax on purchases made by residents of the 23 states that have complied with the Streamlined Sales and Use Tax Agreement.
Why doesn't Amazon.com collect sales tax? It relies on the 1992 Supreme Court ruling in Quill Corp. v. North Dakota where the Court cited its concerns about the national economy. (Basically, there are over 8,000 tax jurisdictions that make the collection of sales tax complicated for online retailers.) Citing the Complete Auto case in which it had developed a four part test, the Court wrote, "The second and third parts of that analysis, which require fair apportionment and non discrimination, prohibit taxes that pass an unfair share of the tax burden onto interstate commerce." Currently, only businesses with a physical presence in a state are required to collect sales tax for that state.
But states are hungry for revenue, and small local businesses believe it's unfair for them to have to collect tax on sales while sites like Amazon.com do not. They say the Streamlined Sales and Use Tax Agreement (SSUTA) has simplified tax-collection so that there would be no burden on online retailers.
Taking matters into its own hands, the state of New York passed a law last year requiring Internet retailers with affiliates residing in the state - such as Amazon and Overstock.com - to collect New York sales tax, stating that affiliates count as a physical presence. Here's what the Performance Marketing Association says about such bills, which are catching on in other states:
These bills, whether proposed or passed, are flawed at their core. The crux of the bills is predicated on the idea that affiliates are extension of a merchant’s sales force and thus constitute nexus for that merchant. Not only is that premise absolute wrong, it discriminates against independent small businesses and entrepreneurs using advertising model not a sales model to generate their income.
So is it fair to blame Amazon.com CEO Jeff Bezos for states having to lay off schoolteachers and firefighters?
Is it fair to brick-and-mortar retailers who collect sales tax to have to compete with online retailers who don't collect tax?
Is the Streamlined Sales and Use Tax Agreement really a solution?