SALT Report 1676 – The collection of sales and use tax on internet purchases has been a matter of debate for many years. Most states are waiting for federal legislation to mandate the way they require out-of-state businesses to collect and remit sales and use taxes. However, several states have taken matters into their own hands. Texas, Pennsylvania, and California have either started enforcing sales tax collection responsibilities on online retailers and their affiliates, or they will be very soon.
Texas – In 2011, the state passed an internet sales tax collection law that requires retailer’s with a physical presence in the state to collect Texas sales tax. This comes as a result of an agreement between Texas Comptroller Susan Combs and Amazon.com in which the Comptroller agreed not to pursue Amazon for $269 million in unpaid sales taxes from 2005 to 2009 and Amazon agreed to provide $300 million for warehouse expansion and job creation. This law was effective July 1, 2012.
Pennsylvania – Sales and Use Tax Bulletin 2011-01 details the states “click-through” nexus laws that will be implemented on September 1, 2012. On that date, the state will require ecommerce businesses, such as Amazon, that have a warehouse or distribution center in Pennsylvania to collect the 6% sales tax. The businesses will also be required to obtain a state license and remit the sales tax they collect to the Department on a monthly basis. Pennsylvania will impose penalties for non-compliance that range from assessments, audits, and liens, or referrals to a collection agency or the state attorney general’s office.
The Department estimates that an additional $42.8 million in sales tax revenue will be collected between September and the end of the fiscal year in June.
California – Since federal law requiring sellers to collect sales or use taxes was not enacted, California’s AB 155 will go into effect on September 15, 2012. AB 155 will affect online retailers, such as Amazon, and their affiliates as they will now be considered “retailers engaged in business in the state.”
This law is the result of an agreement between the state and Amazon.com. The state granted Amazon a one year delay in tax collection responsibilities and in return Amazon agreed to collect and remit sales taxes on all orders shipped to California customers on September 15, 2012. Amazon also agreed to invest $500 million to build operations facilities in the state which are estimated to create 10,000 full-time jobs and 25,000 seasonal jobs. California estimates that this law will generate up to $500 million in revenue for the state.
Currently, there are three bills before Congress that would require out-of-state retailers to collect and remit sales and use tax. These include the Main Street Fairness Act, introduced on July 29, 2011, the Marketplace Fairness Act introduced on November 9, 2011, and the Marketplace Equity Act of 2011 introduced on October 13, 2011. So far, none of these bills have passed and unless they are the following states will enact their own versions of the “Amazon Tax.”
- New Jersey: July 2013
- Virginia: September 2013
- Indiana: January 2014
- Nevada: January 2014
- Tennessee: January 2014
- South Carolina: January 2016
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