- Days left
states demand amazon collect sales taxThe tentacles of Amazon are long, and many states that are suffering tax income shortfalls are itching to squeeze some money out of their state residents' online purchases from the behemoth. The problem isn't with the law, most of the time, but with the collection, and Amazon is caught between the desire to maintain its present structure and the desire to keep this price advantage. A bill under consideration in Connecticut that would require Amazon to collect sales tax on purchases by that state's residents has the company threatening to drop Connecticut partners from its site.

What's the issue here? The most common Amazon transaction, where you buy an item from its inventory, is pretty straight-forward. Amazon collects sales tax from buyers in those states where it has a physical presence: Kentucky, North Dakota, and Washington, as well as New York.
However, there less straight-forward transactions: What about:
  • The Amazon Associates program? How it works: anyone owning a web page can add links to Amazon products. Say, on my personal Web site, I write a nice review of Tobias Buckell's book "Tides From the New Worlds". You click on the link next to my post, which sends you to Amazon, where you buy a copy of the book. Amazon spiffs me 15% of the sale price. Around 200,000 people currently take part in this program. However, if I live in Iowa, and you live in Iowa, shouldn't I be collecting sales tax for that purchase?
  • The Amazon Marketplace? I have a gizmo to sell, so I put it up for sale on Amazon, much like I would on eBay but without the auction option. Amazon acts as the middleman; when you buy my gizmo through Amazon, the company sends me the money (minus its cut) and has me ship the gizmo directly to you. But if you live in Idaho and I live in Idaho, I should be collecting sales tax and sending it in to the state, right?
You can see already that this issue is way complicated.

The problem is not the federal law. The Internet Tax Freedom Act keeps states and local governments from discriminatory taxation, but does not stop those governments from imposing the same sales tax it would on brick and mortar stores. The problem is collection. States have not found a way to get residents to voluntarily pay sales tax on Internet sales, or for sellers to voluntarily collect it, so they want to put that burden on Amazon.

Amazon, understandably, doesn't want to get into a situation where it has to know the state and city sales tax rates for Natchez, Miss., and every other taxing entity in the country, nor do the bookwork necessary to cut checks monthly checks for each.

However, governments love taxes like bears love honey, so more and more legislatures are debating the issue, egged on by local merchants.

The issue isn't going to go away, much as Amazon might wish it would. Looking at the shape our town and state budgets are in, I can only expect unrelenting pressure to impose tax collection on sites like Amazon.

Increase your money and finance knowledge from home

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

Building Credit from Scratch

Start building credit...now.

View Course »

TurboTax Articles

What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

Add a Comment

*0 / 3000 Character Maximum