Amazon Severs Ties in Connecticut and Arkansas after Tax Debacle - The Blytheco Blog
Amazon Severs Ties in Connecticut and Arkansas after Tax Debacle

Amazon Severs Ties in Connecticut and Arkansas after Tax Debacle

The Wall Street Journal reports that has now “severed its affiliations with websites in Connecticut and Arkansas because of new state taxes on online purchases, retaliating against a measure that it opposed as unconstitutional and counterproductive.” These two states add to Amazon’s current enemy list that includes Illinois, New York, North Carolina and Rhode Island. California’s version of the law is making its way through the Assembly and Texas has been volleying its version back and forth from the Texas Legislature to the Governor and back again.

What is now becoming a flip flop argument and tug of war between online retailers and states isn’t a new argument. And not all large online retailers are against online sales tax.

In 2007, Federal legislation called the “Sales Tax Fairness and Simplification Act” [HR 3396] declared, “state and local tax systems should treat transactions involving goods and services, including telecommunications and electronic commerce, in a competitively neutral manner.” The resolution further stipulated, “that a simplified sales and use tax system that treats all transactions in a competitively neutral manner will strengthen and preserve the sales and use tax as vital state and local revenue sources and preserve state fiscal sovereignty.”

In testimony for this legislation, JCPenney representatives stated: “We remit over $1.2 billion dollars in sales tax annually on our sales whether made through stores, catalog or online. Many of our online competitors do not collect, which gives them a competitive advantage. This is not because they are innovative or provide incremental value to the consumer, but because the states do not have the ability to require collection of a tax that is due from the consumer.” They went on to state that complexity of the system has caused the court to refuse to lay the burden on online retailers without a physical presence in the state.

HR 3396 identified the burden of cost to the seller can range from 2.17 percent to 13.47 percent of sales tax collected. This burden was cited as the justification for two Supreme Court decisions that “…prohibited a state from requiring an out-of-state seller from collecting sales tax on a purchase made by a resident of the state.”

The burden on sellers is also why states will generally provide discounts for timely remittance in order to provide some balance to the seller for being the state’s tax collector for sales tax. But managing the complexities of each state’s rules and regulations doesn’t have to be a nightmare.

Join our webinar, “Become Best-In-Class by Automating Sales and Use Tax Compliance” on Thursday, July 7, 2011 10:00 am PDT and learn how your business can benefit from affordable automation of your sales tax process.

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