Friday, February 25, 2011
When folks who live in Washington state buy something from Amazon.com, they pay state and local sales tax because Amazon has a physical presence in the state. In fact, Amazon is headquartered in Seattle.
The law on Internet or catalog sales requires retailers with a physical presence in a state to collect sales tax. It is for that reason Washingtonians pay sales tax but those from some other states don't.
The courts have ruled that if the retailer has no physical presence then it is not required to collect sales tax.
We've long thought this is a loophole in the law that's unfair to traditional brick-and-mortar merchants on Main Streets or in malls across the nation. It gives cyber retailers an unfair advantage.
Nevertheless, it's the law. So until Congress takes action, that's the rule retailers must play by.
But Amazon, the 800-pound gorilla of online retailers, is tossing its weight around trying to avoid its tax obligations in Texas. The company has a distribution center in that state. That is clearly a physical presence. Amazon owes Texas $269 million in taxes it was supposed to collect.
Amazon officials apparently hold the view that physical presence applies only to a storefront, not a distribution center.
The stand is a weak one -- and Amazon officials know it. That's why they are flexing their muscle and threatening to close the distribution center in Texas, move elsewhere and take the 119 jobs with them.
Texas Gov. Rick Perry, not wanting to lose Amazon and its jobs, has said he believes tax officials are wrong for pressing Amazon for the cash. And, of course, there are those in the Statehouse who are looking for ways to make an exception for Amazon because, without question, the company is a plus for the state's economy.
In the end, Amazon might muscle its way to a tax exemption, albeit an unfair one. It's going to create a fuss with other online retailers and those who are selling goods in stores.
It's also going to have a ripple effect as Amazon is going to put the tax squeeze on other states.
Congress needs to take action to put an end to this nonsense.
Nobody likes paying sales tax or any other tax. However, it's not right to allow some to escape the tax simply because they have the muscle to do so. It simply puts a bigger burden on others.
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