Florida business groups inspired by California-Amazon deal

September 19, 2011

According to a Sarasota Herald-Tribune (FL) article, Florida business groups are hopeful that the deal between California legislators and Amazon—which repeals California’s online sales tax collection law in exchange for the reinstatement of Amazon’s 10,000 California affiliates and requires both groups to work together for the passage of the federal Main Street Fairness Act; if the federal bill doesn’t pass by the end of July 2012, the California law will be reinstated—will “help convince [Florida] lawmakers to take similar steps”:

Mark Wilson, president of the Florida Chamber of Commerce and a member of the Florida Alliance for Main Street Fairness, saw the California deal as a positive sign for Florida retailers.

“If Amazon can collect and remit sales taxes in California, it can do it [in] Florida,” Wilson said. “Recently, both Texas and California passed E-fairness legislation to level the playing field for small businesses. Now, Amazon’s agreement to collect sales tax in California — just like Main Street retailers — proves that they don’t need a special tax deal at the expense of Florida-based small businesses either.”

Wilson said Florida lawmakers now have “a unique opportunity to put small business job-creation ahead of Amazon’s tax subsidies.”

While Wilson has a point—I don’t think anyone would argue that it’s too difficult for Amazon to collect Florida sales tax (especially with services like TaxCloud available)—Amazon has good reasons to support federal online sales tax collection legislation (the Main Street Fairness Act) and oppose state-by-state laws. While the Main Street Fairness Act would actually make it easier for businesses to collect sales tax, state-by-state laws have become so numerous and varied that they make it extremely difficult for businesses to collect sales tax in more than one state.

One way that the Main Street Fairness Act makes it easier for businesses to collect sales tax is by authorizing online sales tax collection only in those states that have simplified their sales tax laws by joining the Streamlined Sales and Use Tax Agreement (SSUTA).

Although Florida’s recent bill to join SSUTA stalled, we would urge Florida lawmakers to pass that bill, and soon. Not only will it make it easier for businesses to collect Florida sales tax, but it will also put Florida in the perfect position to require all online retailers to collect sales tax when the Main Street Fairness Act—which now has the full support of California and Amazon behind it—becomes law.

Joining SSUTA will also make it clear to Congress that Florida, like California and Amazon, supports the Main Street Fairness Act.

Many states have been tempted to skip the step of joining SSUTA and go straight to requiring some online retailers (mostly large ones, like Amazon) to collect sales tax. California started out taking that approach. But as California and other states have discovered, that approach ends up hurting businesses, which have to deal with all the complexities of state-by-state sales tax laws, and in-state affiliate marketers, which are usually dropped by retailers so that the retailer can try to avoid collecting state sales tax. The end result is fewer jobs in the state and no increase in collected sales tax.

Joining SSUTA is the better approach. It simplifies sales tax collection for businesses while leveling the playing field between online and Main Street retailers. We hope this is the approach Florida decides to take.

TaxGirl guest post about Amazon and the Main Street Fairness Act

August 30, 2011
Forbes - TaxGirl Guest Post: Why Amazon Is Doing the Right Thing for Online Sales Tax

Forbes - TaxGirl Guest Post: Why Amazon Is Doing the Right Thing for Online Sales Tax

The infamous TaxGirl (Kelly Phillips Erb), a Forbes contributor, has published our CEO’s article!

Guest Post: Why Amazon Is Doing the Right Thing for Online Sales Tax

Our CEO wrote this opinion piece at the invitation of TaxGirl, for her to publish while on her well-deserved summer vacation.

Article looks at details of Main Street Fairness Act

August 11, 2011

An article by Sylvia Dion on SalesTaxSupport.com is unusual for its detailed examination of the Main Street Fairness Act and the Streamlined Sales and Use Tax Agreement (SSUTA). If you’re curious about exactly what the Main Street Fairness Act does and how it affects SSUTA, we recommend you take a look—it’s both thorough and fair—which we can’t say very often when tracking this subject.

States where internet purchases are taxableHowever, it does have one error that we must correct:

The issue of whether sales made over the internet should be subject to sales tax has been widely discussed for at least decade now . . . .

As our regular readers know, sales tax is already due on online purchases—the issue that’s been debated is not “whether sales made over the internet should be subject to sales tax” but whether online retailers should collect sales tax just as bricks-and-mortar retailers do.

The fact that online purchases are already subject to sales tax, and always have been, is one of the most common misconceptions about online sales tax. For others, see our post on the common myths and facts about online sales tax.

Politico: Main Street Fairness Act to be introduced today

July 29, 2011

Politico is now reporting that the Main Street Fairness Act will be introduced today—we will keep you updated as we hear more.

Amazon v. California – Oh, what’s the word . . .

July 15, 2011
'Amazon Taxes' Fail To Deliver As Retailers Cut Ties

'Amazon Taxes' Fail To Deliver As Retailers Cut Ties

Investor’s Business Daily just published a brief article reiterating what we have been saying for a while: affiliate nexus laws are generally ineffective at increasing revenue.

The article covers most of the stakeholders’ views, including comments from Joseph Henchman of the Tax Foundation, Danny Diaz from the Alliance for Main Street Fairness, and Neil Osten from the National Conference of State Legislatures. The article even briefly refers to the Main Street Fairness Act, which will be introduced in Congress soon.

Strangely, the article fails to mention all the fireworks in California right now. As we (and many others) have been writing about for the last few days, last Friday Amazon reportedly filed papers with California’s attorney general for a referendum to repeal California’s recently enacted ABX1 28.

Fresno Bee: Opponents say Amazon's proposed referendum is unconstitutional

Opponents say Amazon's proposed referendum is unconstitutional

Under ABX1 28, the California Board of Equalization estimates, Amazon could collect and remit approximately $83M in sales tax this year; together, it projects, all remote retailers could collect about $200M. Of course, those BOE estimates apply only if Amazon and other online retailers actually comply with the new law—a reasonable expectation given that noncompliance is . . . oh, what’s the word . . . illegal (for the rest of us internet retailers, anyway). Now the internet has lit up with blog posts and tweets as well as print and broadcast media articles and editorials either praising or demonizing Amazon for refusing to collect sales tax and comply with California’s new law (don’t miss the exciting article in the Fresno Bee today).

As we said before:

While we appreciate and respect California’s need to fix the current imbalance related to sales tax collection obligations, which costs the state over $1.1 billion annually, we sincerely hope those entrusted to do the people’s work in Sacramento recognize that this matter must ultimately be resolved in Washington DC.

Under the Supreme Court’s 1967 National Bellas Hess vs. Illinois Department of Revenue ruling, the ability of states to compel remote or out-of-state businesses to collect local sales tax hinges on minimizing (or eliminating) burdens implied by such an obligation. In its majority opinion (now forty-four years ago), the Court ruled that

the many variations in rates of tax, in allowable exemptions, and in administrative and record-keeping requirements could entangle National’s interstate business in a virtual welter of complicated obligations to local jurisdictions.

So, unless and until California directly addresses these three points of undue burden, attempts to compel remote retailers to collect will not likely survive litigation and judicial review.

Fortunately, California has been working with 43 other states on the Streamlined Sales and Use Tax Agreement since 2000 —a system that alleviates all of these burdens (and is FREE for retailers to implement). Governor Brown and the California legislature should urge California’s delegation in Congress to sponsor and work to pass the federal Main Street Fairness Act, which would eliminate the need for California to venture into such controversial interpretations and extensions of the concepts of nexus and would finally enable California to require out-of-state retailers to collect sales tax, just as any local retailer is required to do.

Ironically, Amazon yesterday announced it would be releasing a tablet device (like an iPad) by October. The California BOE is likely wondering if this new tablet was developed by Amazon’s Lab126 in Cupertino (the birthplace of the Kindle).

WV delegate John Doyle says online sales tax could mean tax cuts elsewhere

June 8, 2011

In an Associated Press article about West Virginia’s budget, state delegate John Doyle noted that if online retailers collected existing sales tax, instead of shifting that burden to their customers, the revenue generated could allow for tax cuts elsewhere:

Doyle, a past president of the agreement’s governing board, said increased revenue is one of several reasons to pursue Internet sales tax revenues — but not the most important.

 “Even if we didn’t need the revenue, we should still do this and then reduce the tax burden elsewhere,” Doyle said Friday.

He gave the example of the state tax on groceries, which generates about as much revenue as online sales tax would if retailers collected it:

States can expect to lose $11.4 billion in 2012 from Internet sales that will go untaxed, state Deputy Revenue Secretary Mark Muchow said Friday, citing a recent Tennessee study. West Virginia will miss $50.6 million in such potential revenues, the study estimated. . . .

Muchow estimated that the 2 percent tax [on groceries] will yield between $52 million and $55 million annually.

“It’s almost a fair trade,” Doyle said.

It’s an argument for online sales tax that hasn’t gotten much attention, but we have heard that legislators in other states are considering cutting taxes elsewhere if they are able to require online retailers to collect sales tax. The West Virginia tax on groceries is a good example: Most states do not tax groceries at all, but even though many West Virginia lawmakers advocate eliminating the tax entirely, the $52-56 million it brings in is necessary for vital state services. If an existing tax that mostly goes uncollected were to be collected and provide enough revenue, the groceries tax could be eliminated.

The entire article is well worth reading for both background on the issue and Doyle’s take on it.

Update: There seems to be some confusion over a quote from Doyle at the end:

“I believe that the Internet should be a tax-free zone,” Doyle said. “We’re better off not taxing it, but it’s still wrong for the federal government to tell us that particularly because they’re allowing states like Texas and New Hampshire to tax it.”

This seems to be a contradiction at first—up to this point in the article, Doyle has supported online sales tax. However, the paragraph preceding the quote supplies the necessary context to understand Doyle’s true meaning:

He added that while states should also be allowed to decide whether to tax Internet access, he favors an across-the-board federal ban. The problem there is an existing federal moratorium allows a handful of states to maintain their access taxes, he said.

In other words, Doyle believes that internet access should not be taxed—and that existing sales taxes on online sales should be collected by retailers. Far from being contradictory, these positions seem quite sensible to us.

Bezos to shareholders: Simplified sales tax will happen

June 8, 2011
Seattle Times

Seattle Times: Amazon tells shareholders it will stand firm on sales taxes

According to an article in the Seattle Times, at a shareholder meeting on Tuesday Amazon CEO Jeff Bezos expressed support for the Main Street Fairness Act (without mentioning it by name):

Bezos reiterated his support of federal efforts to minimize the many differences among states on sales-tax collection from Internet retailers. Asked by one shareholder to look ahead 10 years, Bezos said, “I believe we’ll have the simplified sales-tax initiative passed.”

“I hope it might happen much sooner than that,” he added. “It’s the right thing to do, and I think it would be great for Amazon.”

However, he reiterated that Amazon is opposed to state-by-state legislation attempting to require online retailers to collect sales tax.

One clarification: It may be difficult to understand from the article that sales tax is already due on online sales. Currently the consumer is required to send the tax due directly to the state if the retailer doesn’t collect it.

The Main Street Fairness Act would allow states that have adopted sales tax simplification measures (thus making it easy for retailers to collect sales tax for multiple states) to require online retailers to collect sales tax.