Amazon’s Multi-State Sales Tax Battles are a Sideshow to the Real National Solution, and the Politicians Know It

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little sales tax districts around the country just for the privilege of being in business was too difficult. Unconstitutionally difficult, in fact, because it would amount to a restriction of interstate commerce—an arena reserved for the feds.

So Amazon has historically collected sales taxes in only a handful of states, including Washington, where its headquarters are based.

Cue the economic meltdown, which has left state budgets in tatters just as more people are trying to get their hands on unemployment benefits, subsidized health care, job retraining, and the like. Given that backdrop, it’s no wonder that more politicians are trying to tap into the stream of taxes that their own residents are dodging when they buy stuff online.

Two approaches have emerged in recent years. New York and a few other states have used Amazon’s marketing tie-ins with other websites to claim that Amazon has a “nexus” in their state and therefore must submit sales tax collections.

In other states that have tried this, Amazon has simply cut off the affiliate programs that were at issue, or at least threatened to. In New York, however, Amazon is fighting the law in court (and collecting sales taxes from New York customers in the meantime).

In Texas, officials tried to grab more tax collections because Amazon had an affiliated shipping center in the state. This argument seems a bit more solid, since it revolves around brick-and-mortar facilities with real people who get an Amazon paycheck. Amazon argues that the shipping centers are not really part of the Amazon retailing business, but instead are sister shipping companies.

When that argument didn’t work in Texas, Amazon pulled out of its distribution center there, leading Texas Gov. Rick Perry to say the state probably messed up. In South Carolina and Tennessee, the company got promises that its shipping warehouses won’t make the retailer subject to collecting sales taxes.

Any lawsuits over these attempts to get more tax money will take a long time to wind their way through the court systems. That could discourage other states from joining the fun.

So what can be done? It’s clearly unfair that some shoppers aren’t paying … Next Page »

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