Sales tax free Amazon to end soon.

[Dave Lehnert]

Amazon is going to have to collect sales tax in Indiana. My guess won't be long before other states do the same .

http://www.onlinenewsheardnow.com/indiana-and-amazon-strike-deal-on-sales-tax-collection-collections-to-begin-in-2014/971/

[Kevin W Johnson]

In my state, we're supposed to claim it and pay it on our state tax returns anyway. I'm sure most no one does. I do have to say that's it's an unfair advantage for online retailers and makes it that much harder for B&M stores (especially small locally owned stores) to compete. All in all, I'd like to see the playing field leveled a bit.

[Larry Edgerton]

I agree with that statement, but do not have a firm enough conviction to not take advantage of it......

Larry, the hypocrite.....

[Kevin W Johnson]

I agree with that statement, but do not have a firm enough conviction to not take advantage of it......

Larry, the hypocrite.....

Agreed, I'm in the same boat. As long as it's an option, however if the option disappears, I can't/won't complain.

[Brian Elfert]

What the heck is Amazon doing? They have been the #1 crusader against being required to collect sales tax and now they volunteer to collect sales tax in Indiana? Amazon has spent millions of dollars on legal fees to avoid having to collect sales tax in many states.

I think states are shooting themselves in the foot here. There are some items I would not purchase period if I had to pay sales tax because it pushes the price too high for me. I know lots of Internet users who won't buy stuff online if tax is collected even if it is just $4 or $5. They won't buy the item offline either. They simply skip the purchase.

[Ron Jones near Indy]

The law in Indiana is to take effect in 2014. B&M stores are saying this isn't soon enough. The Gov seemed to think this was a major accomplishment for his administration. Fact is that a company of Indiana shopping center gurus, had filed a suit to get this done. Other states are doing the tax with a few months lead time. Amazon convinced the Gov that it needed over a year to perfect the system. It's only fair to me. I'll buy from both B&M and online, just as I do now, depending on what I need and convenience. As it is now, I weight the cost of gas to Woodcraft or Rockler and the $$ required for a year of Amazon Prime to get "free" 2 day delivery to my door. It seems that a trip to the B&M stores often end up being more expensive because I usually purchase items that I hadn't planned to get.

Indiana expects to gain more than $20,000,000 annually in sales tax from Amazon.

[Joel Goodman]

California also got Amazon to agree to start collecting sales tax in a year or so (not sure of the date). Seems reasonable to me although like the next guy I'd always rather pay less. Not sure how it will apply to smaller vendors -- does anyone know?

[Kevin W Johnson]

What the heck is Amazon doing? They have been the #1 crusader against being required to collect sales tax and now they volunteer to collect sales tax in Indiana? Amazon has spent millions of dollars on legal fees to avoid having to collect sales tax in many states.

I think states are shooting themselves in the foot here. There are some items I would not purchase period if I had to pay sales tax because it pushes the price too high for me. I know lots of Internet users who won't buy stuff online if tax is collected even if it is just $4 or $5. They won't buy the item offline either. They simply skip the purchase.

The states aren't shooting themselve in the foot at all. If you order something, don't have to pay your state sales tax, they aren't getting anything anyway. If you don't order because you now have to pay sales tax, and choose not to buy it locally either, the outcome for the state is the same.

If $4-5 keeps you from buying an item, you certainly don't want it bad enough, and obviously don't need it either.

[Van Huskey]

We all know the day of internet sales being taxed upfront, instead of waiting for all of us to pay it at the end of the year, was coming.

[ray hampton]

why complain about the sell tax since the shipping cost are high ? will the tax be based on the purchase price before shipping cost or after shipping cost are added on ?

[David Lawhorn]

Yes, California already went through this same thing.
Don't think for 1 minute though that the state cares about fairness between the online sellers and the B&M stores.

[Kevin W Johnson]

Yes, California already went through this same thing.
Don't think for 1 minute though that the state cares about fairness between the online sellers and the B&M stores.

I don't expect the states to care about that, but the benefit to B&M stores, particularly smaller B&M's is obvious.

[Van Huskey]

I don't expect the states to care about that, but the benefit to B&M stores, particularly smaller B&M's is obvious.

I am willing to bet that B&Ms will see almost a zero increase in business from this UNLESS they sell highly price protected items like Festool. Free shipping and no tax are about the only reasons to buy Festool across state lines unless one doesn't have a local supplier. This changes that situation but for most products that aren't price protected the large online sellers will probably still be able to provide a significant discount.

[Kevin W Johnson]

I am willing to bet that B&Ms will see almost a zero increase in business from this UNLESS they sell highly price protected items like Festool. Free shipping and no tax are about the only reasons to buy Festool across state lines unless one doesn't have a local supplier. This changes that situation but for most products that aren't price protected the large online sellers will probably still be able to provide a significant discount.

But it deffinately lessens the difference. Sure it won't make a difference for people that would throw the local store under bus because their still $3 higher, but the local stores will be still be happy to get any little bit of help they can.

[Bruce Darrow]

Here in the People's Republic of VT, they got around folks not reporting out of state purchases by requiring all taxpayers to pay a mandatory percentage of their income. Even if you made no out of state purchases over the course of the year, you pay a tax. Now if internet vendors start charging sales tax, you can bet that we'll all pay double until the good folks in Montpelier figure out how to deal with the fact that some (like Amazon) are collecting, while others may not be.......Double Jeopardy.

[Phil Thien]

The complicating factor for Amazon is affiliated sellers. These are companies that sell on Amazon, but are separate entities. Amazon needs a way to collect sales tax for things an affiliated seller located in Wisconsin sells to an Amazon customer also located in Wisconsin. To a lesser extent, Amazon is opening more distribution facilities around the country, I imagine they have to collect sales taxes in those states already (unless the state specifically provided an exemption in order to attract Amazon to the state--I know there have been some of those deals).

ANYWAY, Amazon's own cost/benefit analysis clearly indicates (to them) that they will (in the future) make more money by retaining their affiliates than they would lose by upsetting customers than don't want to pay sales taxes.

If you extrapolate a bit, you can see that Amazon doesn't foresee being in the fulfillment business forever. Kind of hard to believe when they are building warehouses left and right. But Amazon sees itself as not a seller, but a middleman, ultimately. In the future, Amazon won't own any inventory.

[Kevin W Johnson]

We pay income tax and sales tax in VA. Nothing new there.

[Brian Elfert]

We all know the day of internet sales being taxed upfront, instead of waiting for all of us to pay it at the end of the year, was coming.

The Supreme Court ruled about 20 years ago that companies that do not have a physical presence in a state do not need to collect sales tax on behalf of that state. States cannot require Internet companies to collect sales tax for that state unless the Internet company has a physical presence in the state.

If Congress tried to pass a law to get around the Supreme Court decision you can bet it would be tangled up in the courts for years.

[Brian Elfert]

The states aren't shooting themselve in the foot at all. If you order something, don't have to pay your state sales tax, they aren't getting anything anyway. If you don't order because you now have to pay sales tax, and choose not to buy it locally either, the outcome for the state is the same.

If $4-5 keeps you from buying an item, you certainly don't want it bad enough, and obviously don't need it either.

The whole point of forcing Amazon to charge sales tax is to collect more revenue. If folks just decide they aren't going to purchase items because they don't want to pay the sales tax then the state still gets the same zero tax as they get today. I would almost never skip buying something due to a few bucks sales tax, but I know a lot of people who would not buy over a few dollars in tax. For many I think they simply are against paying sales tax in any amount online.

Let's say I decide tomorrow I want to buy a new HDTV and my budget is $500. I do some research and decide I really want some features the $600 HDTV has. I can stretch my budget by another $100. I go to buy on Amazon and now I find out that Amazon has started collecting sales tax that will cost me another $45. I decide I don't have another $45 for the tax so Amazon misses out on a sale and the state still gets zero tax.


On another note, I think Amazon will kill their business if they get out of the fulfillment business. I will buy from a third party seller on Amazon only as an absolute last resort. Amazon does an amazing job shipping out stuff especially during the holidays. I ordered an electric razor with Prime on a Saturday afternoon in December. Amazon had it shipped within two hours and the razor arrived Monday. I wasn't expecting I would get it until Wednesday. Amazon used Next Day Air Saver for some reason. I don't think I live close enough to any Amazon distribution center to get a regular UPS shipment in one day.

[Kevin W Johnson]

I decide I don't have another $45 for the tax so Amazon misses out on a sale and the state still gets zero tax.




They were goona get zero to begin with anyway, thus the states aren't "shooting themselves in the foot" as you stated. They might be shooting Amazon in the foot, but on this one, the states have nothing to loose, and revenue to regain.

Those that won't buy because they refuse to pay sales taxes for online purchases, well, that's their choice.

[Jim O'Dell]

I seem to remember there was a thing a few years back with Amazon here in Texas and collecting tax. Even if it shipped from the local warehouse, tax wasn't being collected, but Texas was trying to change that. Amazon said they would close down the warehouse/shipping facility if Texas made that happen. Not sure what the outcome was, but I know none of my shipments in the past year or so have come from the Texas Amazon facility. So maybe Texas called their bluff and lost. Jobs and property taxes would also be in the loss column on something like this. Jim.

[Kevin W Johnson]

I seem to remember there was a thing a few years back with Amazon here in Texas and collecting tax. Even if it shipped from the local warehouse, tax wasn't being collected, but Texas was trying to change that. Amazon said they would close down the warehouse/shipping facility if Texas made that happen. Not sure what the outcome was, but I know none of my shipments in the past year or so have come from the Texas Amazon facility. So maybe Texas called their bluff and lost. Jobs and property taxes would also be in the loss column on something like this. Jim.

If Amazon had a physical presence in Texas, then yeah, they should have been collecting that tax to any shipments destined to Texas. Amazon would have been liable for those taxes whether Amazon collected them from customers or not...

[David Weaver]

There's been a "use" tax in PA for years that applies to goods purchased out of state. If the originating seller doesn't pay taxes, you have to declare the purchase as subject to the use tax on your tax return and pay it.

They say they are going to start looking closer at individuals this past year, and you were supposed to keep records of all of your receipts from internet purchases.

At any rate, with income taxes down, sales taxes down, transfer taxes down, gains taxes down, etc, the states are all going to start doing what they can to collect more sales tax. It's only a matter of time.

I see the issue from Amazon's side as two fold:
1) If people have to pay 4-10% tax (whatever it is where you are), the value proposition isn't there. It'll literally add up to lower sales, and probably a significant amount and quickly.
2) Complying with charging and collecting taxes through gobs of different state laws is going to be a huge compliance cost, one that does not benefit amazon at all.

It makes sense why they're fighting it, but they're on the losing side of the situation in the long term, states are not going to be able to go without the revenue. All of their current revenue from income and business sources is down, and everything they have trust-based (benefits, etc) has asset values that are down and don't appear to be quick to go back up - the drain is there from all directions.

[Van Huskey]

"The Supreme Court ruled about 20 years ago that companies that do not have a physical presence in a state do not need to collect sales tax on behalf of that state. States cannot require Internet companies to collect sales tax for that state unless the Internet company has a physical presence in the state.

If Congress tried to pass a law to get around the Supreme Court decision you can bet it would be tangled up in the courts for years."



Don't know why but it wouldn't let me do the standard reply with quote.

Anyway, that would be Quill Vs North Dakota in the early 90s. It established the "nexus" test. I don't know how well a challenge will go since the court explicitly said that Congress can legislate this away if they liked. I think it was Durbin et al that has introduced just such legislation, as introduced it would require states to simplify and streamline their process for collecting sales taxes. In the end it WILL happen and any challenge will probably fly through the courts, well as quickly as it can happen. My guess is within the next 3-4 years it will be a done deal. The biggest opponent seems to be eBay which makes sense due to the fact eBay has so many sellers that fall into a gray area between once in a blue moon garage sale type sellers and huge retail sellers.

[Jim O'Dell]

If Amazon had a physical presence in Texas, then yeah, they should have been collecting that tax to any shipments destined to Texas. Amazon would have been liable for those taxes whether Amazon collected them from customers or not...
IIRC, the loophole is that they didn't have the brick and motor store front and were just a shipping point. But I have no knowledge of the legalities of whether they should or shouldn't have had to pay. Jim.

[Brian Elfert]

Amazon has reached agreements with at least one state that if they placed a distribution center in that state they wouldn't have collect sales tax for sales in that state. Some states are desperate enough for jobs to agree to this.

The state of Minnesota does not require individuals to pay use tax unless purchases subject to use tax exceed $770 in any calendar year. I can legally avoid sales or use tax on online purchases as long as I keep it under $700 a year. I thought they had a line for use tax right on the income tax form, but it isn't on this year's form.

[Kevin W Johnson]

IIRC, the loophole is that they didn't have the brick and motor store front and were just a shipping point. But I have no knowledge of the legalities of whether they should or shouldn't have had to pay. Jim.

Its still considered a physical presence. While state laws can vary, I know Newegg has to charge sales taxes in Tennessee and New Jersey in addition to California because they have distribution centers in those states. They don't have B&M stores at all.

[Greg Cuetara]

the thing I find most interesting is that it would put a burden on anyone who owns a business but does not have a presence in that state. Now as a small business you have to apply for and get a tax id in every state, more regulation and $$ to the states in the form of getting a tax id an and keeping it up. Probably you will also have to have a business license in every state also which is more $$ to the state for no reason. How is someone in a small business supposed to keep up with all the tax laws and changes in every state every year? guess a new business for the lawyers to make more money for no real reason.

[Dave Anderson NH]

If, or rather when, a law is passed allowing states to collect sales tax on internet businesses in all states it will be the deathknell for the small boutique hand toolmaker. I live in NH where there is no sales tax and indeed the state doesn't issue sales tax exemption certificates for businesses. The only reason I started Chester Toolworks was that I knew I wouldn't have to deal with the hassles of collecting and forwarding sales taxes to other states. In fact, after incidents in 2010 current NH law expressly prohibits NH businesses from collecting sales taxes and paying them to other states. If Federal law changes or the other 49 states try to force me to collect sales tax I will just shut my doors or sell only wholesale. Currently over half of my business is wholesale and as a part time business I can't afford in either time or money to deal with all of the paperwork and record keeping that would be involved. I can't imagine having 49 sets of papers to file quarterly and all of the aggravation required to send a check to South Dakota for $1.36 for a single sale and then sending in the form showing no sales or collections to SD for the other 3 quarters. Most of the hand tool makers are like me, either part time or retired, and I strongly suspect that most would just fold or go underground. This would not be helpful for those of us who are primarily hand tool users and the choices available to the generlal community would drop to almost nil.

[Brian Elfert]

I'm sure there will be software or web services that will help with figuring out the sales tax based on customer shipping address. If one chose to set up shop on Amazon they would handle the sales tax calculation and probably tell the merchant how much they owe to each state.

I do recall that one major retailer early on in the Internet age set up their web site as a separate company specifically so they would not have to collect sales tax on online sales. They knew they would get more sales if customers didn't have to pay sales tax at the time of purchase.

[Harry Hagan]

I’ve been paying a 6% sales tax on Amazon purchases for years to subsidize Amazon’s distribution center in Lexington, KY. When I realized this, and that customers in other states were not paying a sales tax—I started taking my business elsewhere when it’s to my advantage.

[Brian Elfert]

I’ve been paying a 6% sales tax on Amazon purchases for years to subsidize Amazon’s distribution center in Lexington, KY. When I realized this, and that customers in other states were not paying a sales tax—I started taking my business elsewhere when it’s to my advantage.

Huh, how is that you're subsidizing Amazon's distribution center? Amazon is required to collect sales tax and forward the sales tax to the state of Kentucky. I would bet that legally you're supposed to pay use tax if sales tax is not charged although hardly anyone pays their use tax.

Amazon is simply following the law that they are required to collect sales tax if they have a physical nexus in that state. They don't have physical nexus in other states so they don't collect sales tax in those states.

[ray hampton]

what is a use tax ?

[Brian Elfert]

Most states that have a sales tax actually have both sales and use tax. Use tax is usually charged at the same rate as sales tax. Use tax is due when a seller sells you something and you don't pay sales tax on the transaction. This applies when you buy something online and sales tax was not charged. Most consumers never voluntarily pay the use tax they owe which is why states want Internet sellers to collect sales tax at the time of the sale.

Some states only require individuals to pay use tax if their total non-taxed purchases exceed a certain amount per year. There are states that have a line right on the income tax form to report and pay use tax.

To be clear, you are not legally avoiding taxes when you buy online. In most cases you will technically owe use tax to your state government.

[ray hampton]

If the internet companies that you buy from do not report or pay sale tax , can the different states ask to look at the companies books ?

[Harry Hagan]

Huh, how is that you're subsidizing Amazon's distribution center? Amazon is required to collect sales tax and forward the sales tax to the state of Kentucky. I would bet that legally you're supposed to pay use tax if sales tax is not charged although hardly anyone pays their use tax.

Amazon is simply following the law that they are required to collect sales tax if they have a physical nexus in that state. They don't have physical nexus in other states so they don't collect sales tax in those states.


Exactly!! For that reason I'm subsidizing the tax break that Kentucky gives Amazon by paying 6% extra for goods shipped from any Amazon facility whether or not it's located in Kentucky. If Amazon takes an order for another company and that company ships from its out-of-state location, Amazon doesn't charge me 6% extra because Kentucky doesn't have an agreement to subsidize that company.

[Van Huskey]

If the internet companies that you buy from do not report or pay sale tax , can the different states ask to look at the companies books ?


Unless they have a business nexus in the state a "foreign" state would have no standing to force open corporate books. They are under no obligation to deal with taxes from foreign states. The buyer on the other hand has the obligation in most states to pay this tax at the end of the year as a use tax.

[ray hampton]

unless the states see the books , how will they know who forgot to pay the sales tax ?

[Jason Roehl]

unless the states see the books , how will they know who forgot to pay the sales tax ?

For the same reason, employers withhold income tax.

[Van Huskey]

unless the states see the books , how will they know who forgot to pay the sales tax ?

I thought you were talking about currently, if the law changes and allows this "affront" to the commerce clause then they would have standing to attempt to open the books. If you are talking about currently they don't really have an easy way to know if consumers don't pay their end of the year use tax. I would expect an average state collects maybe .001% or so of the use tax that is due. Currently, it is exteremely hard to enforce.

[ray hampton]

I thought you were talking about currently, if the law changes and allows this "affront" to the commerce clause then they would have standing to attempt to open the books. If you are talking about currently they don't really have an easy way to know if consumers don't pay their end of the year use tax. I would expect an average state collects maybe .001% or so of the use tax that is due. Currently, it is exteremely hard to enforce.

1 mill is 10% of 1 cent, what is .001% except 1 % of 1 % of 1 mill, Kentucky have been talking about this tax for a very long time, when will they shut -up and act on the tax ?

[Van Huskey]

1 mill is 10% of 1 cent, what is .001% except 1 % of 1 % of 1 mill, Kentucky have been talking about this tax for a very long time, when will they shut -up and act on the tax ?

.001% is one thousandth of 1%. Meaning that I am guessing that the states get only about 1 penny for every $1,000 of use tax their citizens "owe" at the end of the year from out of state purchases. People just don't know or choose not to fill out the forms and mail them in with a check on April 15th.

There is nothing Kentucky or any other state can do, other than make a deal with certain merchants like the OP was talking about or "lobby" Congress to change the law. The interstate commerce clause prevents them (according to the Quill case I cited) from being able to force out of state companies to collect their tax, they have to depend on the good intentions of their citizens to pay it.


As a Kentucky resident you owe use tax for most of your internet out of state purchases at a rate of 6%. If you are physically out of state and buy something and the state charges no sales tax (like DE) then you technically owe 6% on it payable with your state income tax, if you pay 5% in another state you owe 1% in use tax to Kentucky.

[ray hampton]

I forgot most of the details but Kentucky will not permit the sale of wine over the internet because of the tax, this is a number of years back so it may be different now

[Kent A Bathurst]

............. they would have standing to attempt to open the books. If you are talking about currently they don't really have an easy way to know if consumers don't pay their end of the year use tax. I would expect an average state collects maybe .001% or so of the use tax that is due. Currently, it is exteremely hard to enforce.

For one example, talk to over-the-road trucking companies.

It is very easy for a Freightliner to fill up with a few hundreds of gallons of fuel in a state with low taxes, and then cross the state lines and use the roads maintained by a high-fuel-tax state. So - the owner of that truck owes a use tax. It is calculated by the average fuel consumption by the truck, and the number of miles driven in that state, to determine the number of gallons that were consumed in that state, which is applied to the tax rate in that state - and you owe those taxes. As if you had purchased in-state the number of gallons you consumed in that state. The truck owner can then get a rebate, if appropriate, from the state in which they did buy the fuel and pay the tax.

And - you're doggone tootin' - the states audit those books. When I was involved, it was a private company that operated around 30 trucks, and state auditors from all over the country would be there every 3 - 4 years.

[David Weaver]

A state doesn't need to collect the information from amazon or retailers. All they have to do is decide they think that you've been skirting the use tax and then require you to submit credit card and paypal history.

I think in PA, they work pretty hard to collect use tax from businesses (they're obviously going to be more worthwhile for collecting). As they get more hard up for revenue, I'm sure they'll go on to individuals.

The nuisance of the whole situation is that you are supposed to keep all web receipts for items that you didn't pay tax on. People file their state income taxes as an afterthought more or less, and gathering all of that stuff up at tax time probably has a lot to do with it being underreported, even by people who would otherwise pay the tax.

I've been trying to keep my records as well as possible, but quite often, sellers do not include any receipt with stuff they ship to you (individuals). It just makes it even more of a nuisance.

[Van Huskey]

For one example, talk to over-the-road trucking companies.

It is very easy for a Freightliner to fill up with a few hundreds of gallons of fuel in a state with low taxes, and then cross the state lines and use the roads maintained by a high-fuel-tax state. So - the owner of that truck owes a use tax. It is calculated by the average fuel consumption by the truck, and the number of miles driven in that state, to determine the number of gallons that were consumed in that state, which is applied to the tax rate in that state - and you owe those taxes. As if you had purchased in-state the number of gallons you consumed in that state. The truck owner can then get a rebate, if appropriate, from the state in which they did buy the fuel and pay the tax.

And - you're doggone tootin' - the states audit those books. When I was involved, it was a private company that operated around 30 trucks, and state auditors from all over the country would be there every 3 - 4 years.

That is an interesting one, never heard of it but it makes sense. I suppose the difference is the trucks physically operate within the state. On a similar note we have friends who's family operate trucks in the UK, it is quite common for them and other trucking companies to send their trucks to Belgium to buy fuel, apparently due to the difference in taxes the trip is worth it.

[Brian Elfert]

I can't imagine states are going to spend all that much time auditing individuals for use tax. The cost of an audit would exceed the tax for most taxpayers I would suspect. They are better off trying to require all businesses to collect sales tax for all states.

I owned a small business and I got audited for use tax by the state. I didn't even know about use tax before the state showed up. The state was targeting businesses in my industry as they had lots of compliance issues. I ended owing $7,000 over the four years I had been in business. The state audited one year of my records and I self audited the other three years. Doing the self audit avoided any penalties.

The auditor was a stereotypical government bureaucrat. She was kinda mean and nasty. I swear she went to the KGB school for bureaucrats.

[Brian Elfert]

It is very easy for a Freightliner to fill up with a few hundreds of gallons of fuel in a state with low taxes, and then cross the state lines and use the roads maintained by a high-fuel-tax state. So - the owner of that truck owes a use tax. It is calculated by the average fuel consumption by the truck, and the number of miles driven in that state, to determine the number of gallons that were consumed in that state, which is applied to the tax rate in that state - and you owe those taxes. As if you had purchased in-state the number of gallons you consumed in that state. The truck owner can then get a rebate, if appropriate, from the state in which they did buy the fuel and pay the tax.


A friend operated his own truck over a five state area. He was very good about filling up on fuel in each state to match the number of miles driven in each state. Some quarters he would owe less than a dollar in fuel taxes to some states. I guess he just didn't want to end up with refunds from one or more states and then owe money to the other states.