To be fair to the states that are looking at this issue, the fact that Amazon doesn’t collect sales tax while smaller outfits do is the very reason they’re concerned. It’s pretty obvious that Amazon doesn’t do it because most people do think of it as a “tax free” exchange. That built-in “discount” is a big part of why people shop there. They just don’t realize that they’re technically supposed to be paying it later.
As an online retailer, we collect taxes and we get questioned about it all the time. “Why are your charging me tax? [Blank] doesn’t charge me tax!” It’s pretty frustrating to be honest.
Retailers have to charge taxes in states where they have a physical presence. Basically, Michigan can’t charge a California retailer taxes because they have no jurisdiction over them until the retailer sets up shop in Michigan.
This was even in the news recently, as Amazon terminated its affiliate program for Colorado-based/hosted websites, as Colorado was going to treat affiliates as constituting Amazon’s presence in that state.
Which is the long way around of saying that Newegg doesn’t charge taxes to most people, only those in CA, NJ, or TN.
Also, I think it’s New York State that has the best implementation of use tax: They charge you some default amount like $400, and that fulfills your obligation. If you believe you actually spent less than that on out of state purposes, you can override it with the correct numbers, but then there’s a very real expectation that you can stand up to an audit on that.
In practice, this is basically like the system in other states, except that people default to paying that amount instead of $0, and you don’t end up being a tax cheat by failing to keep track of every single paperback book you purchased in the last year.
I’m not sure I like the idea of a tax on assumed purchases. Seems like you’re assumed to be guilty and you’re trying to prove your innocence. How does one prove that you made no purchases out of state, should you be audited or is the state then shelling out money to track down any sales info about you from retailers around the world? What happens if you pay cash, they can’t possibly track that?
This just seems unworkable and seems more like a scam to make people who aren’t paying attention pay more in tax then they really should.
I think Amazon is going to eventually lose this fight. California is hopping mad about it. Moonbeam is actively trying to figure out a way to sue them to force them to collect taxes for the state. Their excuse of “it’s too costly to implement” is honestly ridiculous as it’s a simple multiplier. JeffB says (or did say when he started Amazon) is that the reason he didn’t start the company in his native NY is that he wanted to be able to sell tax free to most of the country.
I suspect that if Amazon continues to refuse to collect taxes, eventually Californian’s will be charged the $400 too because the state is pretty desperate.
This completely sounds to me like an attempt to strong-arm Amazon into collecting sales tax per state. It will be interesting to see how it plays out. I would expect NC to lose, frankly. Amazon is bigger than they are…
New York State’s tax is actually kind of annoying. Most of the people I know just pay the $400 because it’s not worth an audit. However, I’m buying almost everything through Amazon now, so technically I’m paying double tax on Amazon purchases (since they line item the 8.75%) Annoying.
Flat rate or having merchant collect it is the best way, God knows the average adult doesn’t need more paperwork.
Whether you think Amazon will “win” depends on where you set your goalposts. Will states successfully force Amazon to turn over records of customers’ purchases? I really doubt that; it seems ridiculous.
Will retailers eventually be forced to collect taxes even from residents of states in which they don’t operate? Seems likely to me.
I have no problems with paying taxes on online purchases. But I certainly don’t want to keep track of all my purchases, and then figure out how much I owe come tax time. If it was automatic like brick and mortar stores, then it wouldn’t be much of a problem.
In Michigan, they make estimating this easy. They provide an estimate of the use tax based on your taxable income, & I just have used that. Turbo Tax imports the correct information if you use it for state taxes as well. The estimate is likely underestimating the amount of tax I actually owe. Many folks I talk to just declare 0, even though they have internet purchases, figuring they can wiggle out of it or just pay what’s owed on the slim chance they get audited.