Will E-Commerce Businesses Be Hurt By Amazon State Sales Tax Battle
Because of the increased strain on states' budgets in recent years, every state is looking for additional sources of tax revenue to balance it's budget while minimizing the budget cuts they must make
Last years in a post titled Are You an On-Line retailer? If So, You have a Big Time Ally in Amazon, we highlighted the battle brewing between some of the states and Amazon. Over the past year additional states have jumped into the fray and have attempted to pass legislation requiring Amazon to collect sales tax.
Amazon, is fighting back aggressively, discontinuing relationships with its affiliates and pulling jobs in states requiring sales tax be collected. Jeannine Pogi posted a great article "Amazon Sales Tax: The Battle State by State" and map that details the state by state battles between the states and Amazon.
Source: Jeannine Poggi, Amazon Sales Tax: The Battle, State by State from theStreet.com
In addition to the state by state battle being fought, Senator Dick Durbin (D-Ill.) plans on introducing a bill later this month called the Main Street Fairness Act. If passed, it would require all businesses to collect sales tax in the state where the consumer resides.
Currently there are approximately 30,000 state and local sales-tax jurisdictions. Imagine, as a business owner keeping up with all of the requirements and changes for some 30,000 locales where the sales tax requirements are constantly changing. What may be taxable in one jurisdiction may not be subject to sales tax in all other locales.
This was part of the basis for a 1992 US Supreme Court ruling (Quill vs. North Dakota). It ruled states could not force retailers to collect sales tax, unless the retailer had a presence in that state. The court reasoned that because the rates in every state, city and county and the products or services taxed were all different, it would be impossible for a retailer to keep track and conform to all the various sales tax laws and rates across the country.
Despite this Supreme Court ruling, a number of states are pressing forward to force Amazon and all other e-commerce retailers to collect and report the sales tax collected.
If you are expanding into another state it is important to understand the laws, licensing and tax reporting requirements of each state. To assist you we put together a list of links to connect you to each state's business web site. Go here to get your list of links.