Small states expect tax windfall from Amazon
Many online shoppers in the United States have for years had to pay state sales taxes whenever they buy goods from Amazon. But the Seattle e-commerce giant has dragged its feet on collecting sales taxes in small and sparsely populated states where it doesn’t have any distribution centers or corporate offices.
That’s quickly changing this year. And governors and state legislators looking to balance their beleaguered budgets are rejoicing as they brace for a boost of revenue from Amazon sales.
Amazon customers in at least 10 states will begin paying sales taxes on their website purchases for the first time this winter. Tax collection begins Wednesday in Mississippi, Missouri, Rhode Island, South Dakota and Vermont. It already started this month in Louisiana, Iowa, Nebraska and Utah, and begins in Wyoming on March 1.
The company didn’t return request for comment and hasn’t explained its rapid shift, but the move follows last month’s U.S. Supreme Court ruling that rejected a challenge to a Colorado law requiring online sellers to notify customers about how much they owe in taxes. Colorado officials had estimated they were missing out on as much as $172.7 million a year.
To avoid collecting taxes, Amazon has historically relied on another high court ruling that predates the era of online shopping. That 1992 decision bans states from forcing out-ofstate retailers to collect taxes if they don’t have a physical presence in the state.
Rhode Island, which has long fought for Amazon to remit sales taxes, is now counting on nearly $35 million in tax revenue next year from the company and other online retailers that follow its lead.
“Amazon’s doing the right thing,” said Robert Hull, the director of the state’s revenue department. “They’re an $85 billion revenue animal that’s making sales, historically, into Rhode Island and not paying the 7-percent sales tax.”
Customers might not be as pleased as state budget-writers. Those in Rhode Island and other states were technically supposed to declare the taxes owed on items bought online at the end of the year, but almost no one did. A proposed Rhode Island law would mimic Colorado’s in ordering companies that don’t collect sales taxes to post a “conspicuous” online pop-up notice informing customers about what they owe and following that up with an email and an annual tax obligation mailing. The measure is a way to effectively coerce companies to collect the tax if they don’t want to burden their customers with unpleasant notices.