States in battle with Amazon over sales tax

March 22, 2011
132 Views

Tax-free online shopping may be in jeopardy.

With many states facing enormous budget deficits, collection of all appropriate sales taxes are certainly a priority for state governments.  Now, online retailers are facing new pressure to collect sales tax from shoppers.  In 1992, the U.S. Supreme Court ruled in Quill Corp v North Dakota that states cannot collect sales tax from businesses unless that business had a physical presence within the state.  A physical presence is considered a store.  States are trying to broaden the definition of physical presence.  Walmart.com collects sales tax from its online shoppers because it has stores in every state.  Amazon.com however, which is based in Seattle, Washington, does not collect any sales taxes from online shoppers in other states because it claims it does not have any stores there.  However, new laws claim that companies like Amazon use local affiliates, which are small companies that feed customers to Amazon in exchange for commission.  Those local affiliates have a physical presence within their state, and therefore, sales taxes must be collected.  Illinois, Vermont, and Arkansas recently passed such laws.  Arizona, California, and Massachusetts are considering their own versions.  Amazon is fighting back.  They have threatened to stop doing business with any local affiliates within states that have passed this legislation.

 

What do you think?  Should Amazon have to collect sales tax?

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