Tax free internet shopping a thing of past?

By Carl Davis, Senior Policy Analyst at ITEP | Permalink |

One of the main arguments used against efforts to crack down on online sales tax evasion just got a little bit weaker.  For years, e-retailers have been claiming that state and local sales tax laws are too complicated for them to bother complying with.  But Amazon.com’s decision to begin collecting sales taxes in Ohio last week belies that claim.

Effective June 1, Amazon is now collecting sales taxes in fully half the states that are collectively home to over 247 million people, or 77 percent of the country’s population.  In other words, more than three out of every four Americans now live in a state where Amazon willingly collects the sales taxes its customers owe.

In the shrinking number of states where Amazon is still refusing to collect the tax, the problem is clearly not that Amazon is incapable of participating in the sales tax system.  Instead, the company thinks it can retain a competitive advantage over mom and pop shops, and other brick-and-mortar stores, by continuing to offer its customers an avenue to evade state and local sales taxes.  And in at least half a dozen states (Arkansas, Colorado, Maine, Missouri, Rhode Island, and Vermont), Amazon has gone out of its way to preserve this advantage by cutting ties with local advertisers in order to dodge state-specific requirements that it collect sales tax.

As we’ve noted before, Congress could address this inequity quite simply if it were able to overcome its current gridlock and pass the Marketplace Fairness Act or similar legislation.  But until that happens, state sales tax enforcement as it applies to purchases made over the Internet will remain an inefficient and unfair patchwork.

Published on 22 May 2014