What Amazon's Sales Tax Deal in Massachusetts Means for Shoppers, Retailer

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Amazon.comIt's going to cost the 6.6 million residents of Massachusetts a little more to shop on Amazon.com (AMZN) next holiday season.

The leading online retailer and the Massachusetts Office for Administration and Finance have reached an accord for Amazon to begin collecting the 6.25 state sales tax on any purchases by Massachusetts residents starting next November -- and forwarding those funds to the state Department of Revenue, of course.

Massachusetts will be the ninth state in the country to ink a state sales tax collection deal with Amazon -- an agreement that makes each purchase on the site that much more expensive, and makes Amazon that much less superior on price.

A Taxing Dilemma

Recession-starved states are hungry for tax revenue, and going after online retailers is a relatively new approach. Residents may not like the idea of paying more for their online purchases, but local merchants will naturally appreciate moves that help level the playing field a bit.

Consumers who skirt state sales taxes on e-commerce purchases are still supposed to offer them up later as "use" tax, but few taxpayers know about that or go through with the calculations. It's a lot easier to go after e-retailers, but states typically have to wait until the company has a physical presence in their state.

Massachusetts got that break when Amazon acquired North Reading-based Kiva Systems last year. In the past, some states have stretched their authority by suggesting that Amazon Associates -- a program under which individual webmasters and bloggers can earn commissions by promoting Amazon.com merchandise -- requires Amazon to collect state taxes.

Sometimes Amazon has caved, the way it did in New York. Other times it has fought back by revoking Amazon Associates eligibility for residents of that state.

A Nation Divided

Amazon is now either collecting state sales tax or expected to start tacking it on soon for orders originating in New York, California, New Jersey, Virgina, Nevada, South Carolina, Tennessee, Indiana, and Massachusetts.

Amazon has established a presence in those states by opening fulfillment warehouses, making acquisitions, or agreeing to keep Amazon Associates.

The clock may be ticking on the rest of the country. States are likely to get even more strapped for cash if federal austerity measures kick in next year, and going after Amazon's sales taxes may seem like low-lying fruit. The move would set the stage for potentially going after smaller Web-based retailers.For now, though, Amazon's pricing advantage is narrowing.

So don't be surprised to see Massachusetts residents starting their holiday shopping in October next year, choosing buzzer beaters over door busters to ensure that they save some money when they click "proceed to checkout."


Motley Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com.



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20 Comments

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TnJranch

Just another way to get money from the citizens. It will NOTjhelp out any local businesss, the governement has to pay for that stupid obummercare...

December 18 2012 at 8:22 PM Report abuse -2 rate up rate down Reply
norrie12

What do you expect from Mass with a democratic governor, who can "taste" anything that can raise taxes.. Imagine him ever try to reduce taxes, no way.. BTW, he is a Mini-me of Obama.....

December 18 2012 at 6:38 PM Report abuse -2 rate up rate down Reply
rdd2897

Amazon do not come to alabama

December 18 2012 at 5:40 PM Report abuse -1 rate up rate down Reply
rtmorse

Collecting the sales tax and paying it to the various states will be a bit of a headache for Amazon. However, it is only fair. I doubt many really know how much we have spent online versus locally, nor do we volunteer to inlcude the sales tax from online purchases on our returns. This will make honest citizens of us. I honestly doubt it will affect Amazon purchases, simply because of the "free shipping on purchases of $25 or more" and the ultimate convenience of having items delivered to one's door. I really don't mind paying sales tax if I don't have to brave the elements, the crowds, the traffic, the parking, the gasoline fill-ups, the check-out lines or the time spent going from store to store only to find they do not have what I want at a price I can afford to pay.

December 18 2012 at 1:15 PM Report abuse -3 rate up rate down Reply
King Timothy

Here in Cook County Illinois the rate has dropped from 10% to 9.5% still an outraegous amount. Just across the state line in Wisconsin there is 0% tax on food, now I know why the folks up there are so large ..... ;-)

December 18 2012 at 12:19 PM Report abuse rate up rate down Reply
newbasicse

I AM SURE THE MA GOV KNOW'S HOW TO SPEND $6.25 OUT OF $100.00 MORE RESPONSIBLY THAN THOSE WHO EARNED IT. OH WAIT, YOU WORKED FOR THE MONEY AH BUT UH, YOU DIDN'T EARN IT.
IN ADDITION TO HIGH INCOME, GAS AND PROPERTY TAXES. ADD THE $63.00 OBAMACARE FEE (FIRST OF MANY) TO COME DOWN, INCREASED PAYROLL TAXES AND THE FUTURE PASSED ON EXPENSES UNFORSEEN. SOON THE $100.00 WILL BE REDUCED TO $25.00 LEFT FOR YOUR OWN GREEDY CONSUMPTION.

December 18 2012 at 12:11 PM Report abuse -2 rate up rate down Reply
1 reply to newbasicse's comment
joyceand

You sound like a Taxachusetts resident, so am I. I agree with you wholeheartedly.

December 18 2012 at 4:20 PM Report abuse rate up rate down Reply
newbasicse

THIS HELPS OUT THE MIDDLE CLASS. WHERE WILL THE MONEY GO ?????

December 18 2012 at 12:04 PM Report abuse rate up rate down Reply
newbasicse

I LEFT TAXACHUSETTS MANY MOONS AGO, MY WEALT IS 6.25 % BETTER OFF.

December 18 2012 at 12:02 PM Report abuse +1 rate up rate down Reply
1 reply to newbasicse's comment
uptownxxpress

Where did you go that made it worthwhile to leave the wonderful State of Massachusetts to save 6.25%? Isn't there any state tax at all where you moved or are you only saving some percentage? You get what you pay for. Where is your free paradise?

December 18 2012 at 6:22 PM Report abuse -1 rate up rate down Reply
Bean

Im sure as more online retailers start collecting state tax, less consumers will be shopping online, it will be cheaper to shop in stores, where all you pay is sales tax, not sales tax and shipping which will be charged by online retailers.

December 18 2012 at 12:01 PM Report abuse -5 rate up rate down Reply
Richard

How about a novel idea which would involve those greedy tax and spend states LOWERING their needs for revenue. Just like Washington, if you put your ear to the ground in most states you hear a strong ******* SOUND which is various Departments of Revenue confiscating your and my wealth by force.

December 18 2012 at 11:10 AM Report abuse +3 rate up rate down Reply