Amazon makes a deal with Indiana. Who’s next?

January 24, 2012

Indiana has been a member of the Streamlined Sales and Use Tax Agreement (SSUTA) since 2005, so we here at FedTax were surprised when we heard that affiliate nexus legislation (sometimes called “Amazon tax”) was being proposed there (H.B. 1119). Regular readers of this blog know that affiliate nexus laws expand the definition of nexus to include affiliate marketers— locally based websites that provide marketing for out-of-state merchants. Affiliate nexus laws are generally ineffective because, time, and time, and time,  and time again the impacted e-commerce retailers have demonstrated their willingness to sever ties with their in-state affiliates so they can avoid being singled-out as the only remote retailers being required to collect.

We were very pleased when we learned this was not going to happen in Indiana.  Governor Mitch Daniels announced that Amazon has agreed to begin collecting sales tax in Indiana in 2014—or even sooner if Congress enacts guiding legislation, like the Marketplace Fairness Act  (S.1832). In exchange, the Indiana legislature will not advance the proposed affiliate nexus legislation. As an additional benefit, the Indiana-based Simon Property Group (the largest shopping mall owner in the U.S.)  has agreed to suspend its lawsuit against the Indiana Department of Revenue over its failure to require Amazon to collect sales tax despite its three distribution warehouses in the state. Governor Daniels said that Indiana is the 4th state with such a tax collection agreement with Amazon, joining California, Tennessee, and South Carolina.

Now even more states are considering similar legislation. We do not intend to hatch a conspiracy theory, but some could draw the conclusion that these bills are being used as an indirect method of “requesting” that Amazon open distribution centers in their state. We hope Congress will act soon to end all this craziness.

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House Judiciary Committee to hold hearing on online sales tax collection

November 30, 2011
House Judiciary Committee

House Judiciary Committee hearing

Tomorrow, November 30, the House Judiciary Committee will hold a hearing on “constitutional limitations on states’ authority to collect sales tax in e-commerce”—in other words, on whether states can or should be able to require online retailers to collect sales tax.

With three online sales tax collection bills before Congress and the holiday retail season heating up, it’s no surprise that Congress is moving to act on the issue.

The witness list includes one small business owner; senior executives from eBay, Overstock.com, and Amazon; Texas State Representative John Otto; and Indiana State Senator Luke Kenley, who is also president of the Streamlined Sales Tax Governing Board.

We’re pleased to see Congress moving ahead on the issue!

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UT small business owners urge Congress to pass online sales tax legislation

October 26, 2011
Utah

Utah's small business owners want online sales tax collection

According to an article in the Wall Street Journal, small business owners from Utah traveled to Washington, DC, to “meet with members of Utah’s congressional delegation and Congressman Steve Womack, R-Ark., who introduced states’ rights ‘e-fairness’ legislation last week.” Although the article doesn’t specifically say so, it certainly sounds like the reason for the visit was to persuade Utah’s congressional delegation to support online sales tax legislation.

The article quotes small business owners making some good points about online sales tax collection:

“Small businesses across the state of Utah are struggling,” said Jared Hurst, owner of Rebel Sports, “and the unfair advantage given to online retailers hurts Utah businesses and local communities.” . . .

Betsy Burton, owner of the King’s English Bookshop in Salt Lake City, also supports Womack’s legislation. Her bookstore now draws cutthroat competition from online retailers such as Amazon.com.

“This is a huge economic issue,” said Burton. “Internet sales are getting bigger and bigger and if we can’t compete on this unlevel playing field, it will drive bricks-and-mortar businesses out of business. And we are the backbone of the economy.”

She’s not kidding. For every $1 million in new sales, Amazon creates 0.88 jobs. For the same $1 million in new sales, Best Buy creates 3.47 jobs.

The chair of the Utah Tax Commission, Bruce Johnson, also made a good point, one that we’ve heard many times from local retailers:

“People will go in and shop at a bricks-and-mortar retailer in Utah to get specifics,” Johnson said, “and then go buy the product on the Web to save sales tax.”

An executive at O.co (formerly Overstock.com), which is also based in Utah, repeated his company’s concern that it’s too difficult to collect sales tax for all states.

We know that’s not the case. We know that because we designed TaxCloud specifically to eliminate all the complexity and confusion of online sales tax collection.

We recommend that O.co executives take a look at TaxCloud. It’s comprehensive, easy to use, and FREE.

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Press round-up on Marketplace Equity Act

October 15, 2011
Press round-up

Press round-up: News on the Marketplace Equity Act

Here’s a round-up of the press coverage on the Marketplace Equity Act, introduced yesterday:

- from Politico, “Online sales tax bill splits community”

- from the National Journal, “House online sales tax bill draws bipartisan support”

- from Internet Retailer, “A new take on web sales tax collection”

- from the Tax Foundation’s Tax Policy blog, “New state online sales tax bill introduced in Congress”

- from Bookselling This Week, “New federal sales tax fairness legislation introduced”

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Marketplace Equity Act (HR 3179) introduced in House of Representatives

October 14, 2011
HR 3179 introduced in House of Representatives

HR 3179 introduced in House of Representatives

Today Rep. Steve Womack (R-AR) and Rep. Jackie Speier (D-CA) introduced before Congress the Marketplace Equity Act (HR 3179), a bill that, like the Main Street Fairness Act, authorizes state to require all online retailers, regardless of location, to collect state sales tax.

The introduction of the Marketplace Equity Act is a sign that more and more legislators are becoming aware of the problems inherent in the fact that while bricks-and-mortar retailers have to collect sales tax, online retailers do not. We’re happy to see that Washington DC legislators are listening to state and local legislators—not to mention their constituents—and are working hard to offer possible solutions.

Although the Marketplace Equity Act differs in some details from the Main Street Fairness Act, the two bills have the same goal: to ensure that states can enforce existing sales tax laws in cyberspace by requiring online retailers to collect sales tax. The very fact that two bills with this goal exist emphatically demonstrates how much they are needed.

Communities need sales tax revenue to pay for schools, police, and libraries, and local businesses are at a disadvantage when they try to compete with online retailers that don’t have to collect sales tax. By allowing states to require online retailers to collect sales tax, the Marketplace Equity Act and the Main Street Fairness Act stand to return to states over $23 billion in uncollected sales tax. They will also create a level playing field for local retailers, which create three times as many jobs as online retailers.

We welcome Reps. Womack and Speier and their cosponsors to the fight to ensure that all retailers play by the same rules, and we look forward to working with them.

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Posted by FedTax

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