Thursday, June 23, 2011
Collecting state sales tax is, of course, the responsibility of each individual state.
But when business is being done across multiple state lines and through cyberspace, it can be difficult -- if not impossible -- for states to collect the taxes owed them if the business involved refuse to cooperate.
Congress needs to take action.
Take, for example, what's going on with Amazon.com, the Seattle-based Internet retailer that's flexing its muscle in an effort to avoid paying $269 million in sales tax to the state of Texas.
The law, as interpreted by the Supreme Court, mandates businesses with a physical presence in a state to pay collect that state's sales tax. Amazon.com has a huge distribution center in Texas. That is clearly a physical presence, meaning when folks in Texas order from Amazon the company should be collecting tax for the state. That's not happening.
Amazon doesn't want to collect the tax because it gives them a competitive advantage over brick-and-mortar retailers who must collect the tax. It's like being able to offer customers, depending on the state, a 3 percent to 10 percent discount everyday without having to cut into profits. Amazon owes Texas $269 million in taxes it was supposed to collect.
Frankly, we believe that all retailers -- whether located on Main Street or in cyberspace -- should have to collect sales taxes. It would level the playing field.
The public benefits as many state governments would, collectively, be infused with billions of dollars to fund schools, law enforcement and other critical needs.
The problem with this state-by-state approach is that Internet retail giants such as Amazon can threaten to move out of states and take jobs with them or offer to add jobs if the taxes are waived.
In Texas, Amazon first threatened to leave and now it's offering more jobs. The Dallas Morning News reports a proposal floating around the state capital would let Amazon off the hook for collecting sales taxes from its Texas customers over the next 4 ¬? years in exchange for bringing 5,000 jobs to the state.
South Carolina recently accepted a similar offer from Amazon.
All this puts elected officials in difficult, no-win situations that, ultimately, hurts all retailers except 800-pound gorillas such as Amazon.
As we have said before, we believe the issue of online sales tax collections must be handled at the federal level.