SALT Report 3868 – Amazon, the country’s largest e-commerce retailer, is set to collect state sales tax in Alabama beginning Nov. 1.
Amazon announced it will begin charging customers the 8 percent sales tax through Alabama’s Simplified Use Tax Remittance Program Act of 2015. The tax applies to all sales regardless of where they are shipped in the state.
Alabama projects netting $40-$50 million in additional revenue by 2017. Half of the sales tax collected from online transactions goes to the state while cities and counties split the other half, based on population.
Amazon joins 51 other online sellers in charging the sales tax, with nearly $3 million generated since the program began in November 2015, Alabama Department of Revenue Commissioner Juliee Magee said.
In addition to Amazon, two other participating companies are within the top 15 largest remote retailers in the country. The state will not release the companies’ names, citing confidential tax information agreements.
Under the law, online retailers can agree to collect a fixed transaction tax rate, rather than paying state and local sales taxes Alabama consumers would normally pay. Participating merchants are also allowed to deduct a 2 percent discount of the simplified sellers use tax collected.
State officials say the initiative helps Alabama tap into a revenue source that has grown exponentially in the past decade to shore up its budget while also leveling the competitive marketplace for traditional businesses.
Alabama is the 29th state to collect sales tax from Amazon. Founded by Jeff Bezos, the company also produces consumer electronics—notably, Amazon Kindle e-readers, Fire tablets, and Fire TV —and is the world’s largest provider of cloud infrastructure services.
In 2015, Amazon raked in more than $107 billion in net sales, with more than 304 million active customer accounts worldwide.
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