Tuesday, March 28, 2017

Amazon Will Collect Sales Tax Everywhere There Is One

Amazon.com Inc. will begin collecting State Sales Tax on orders from consumers in Hawaii, Idaho, Maine, and New Mexico starting on April 1. In doing so it will conclude a near decade-long story about Sales Tax collected on Online orders, regardless of whether the e-retailer selling the goods has a physical presence, or nexus, in the State.

Under the Supreme Court, Quill Corp. v. North Dakota, 504 U.S. 298, decision, which I was part of.

Amazon has no physical presence in these four States and thus is under no Legal obligation to collect Sales Tax on orders from Residents in those States. It also doesn’t have a physical presence in Iowa, Missouri, Louisiana, Mississippi, Nebraska, Rhode Island, South Dakota, Utah, Vermont, and Wyoming. Amazon began collecting Sales Tax from Residents of those States during the first quarter.

In effect, on April 1st Amazon will be collecting Sales Tax for all States, and the District of Columbia, that have a Sales Tax. States that do not collect Sales Tax:

New Hampshire

Amazon has been steadily adding States where it collects Sales Tax since 2011. But more typically collection began when Amazon began having a physical presence in a State, such as with a fulfillment center.

Legislators have introduced numerous Bills in recent years to change the Law, however none have succeeded in overturning the Federal lLw established 1992. The Quill decision prohibits States from imposing Sales Tax collection and remittance obligations on businesses that lack a Physical presence in the State. But Quill needs to be updates to handle online sites that pass orders to Amazon and collects a fee. Should these sites be considered Sales Representatives and from which State, as they are working from the Cloud?

Amazon’s history over the Sales Tax collection issue is a complex one. Initially, it opposed requiring Sales Tax collection on Web purchases. It also operated some fulfillment centers under the subsidiary company Amazon.com Kydc LLC, which Amazon.com contended was a separate entity from Amazon’s retail business and thus did not qualify it as having a physical presence, or nexus, in the State for Amazon.com orders. When Texas challenged this in 2011 by presenting Amazon with a bill for $269 million, Amazon threatened to close its one Texas fulfillment center and nix plans for another it had in the State. It eventually worked out a deal with Texas and began collecting Sales Tax there in 2013. It has since opened or announced plans for nine additional facilities in Texas.

As Amazon began rapidly expanding its fulfillment network to provide faster delivery to consumers, it began to change its position, and was able to use Sales Tax as a negotiating point when it came to building out its network. For instance, Amazon and South Carolina in 2011 worked out a deal whereby Amazon would open distribution facilities in the State but not have to collect Sales Tax from South Carolina Residents for five years. Amazon began collecting in South Carolina in 2016.

By 2013, Amazon supported the collection of Sales Tax in States where it had physical presence. It supported the Marketplace Fairness Act (MFA), a Bill from Federal Lawmakers that was intended to give States the right to require e-retailers to collect Sales Tax. The U.S. Senate approved MFA but it failed to pass the House of Representatives.

Alaska> does not have a State Sales Tax, it does allow Localities to impose Sales Taxes, which range from 1% to 7%. Therefore, the average Sales Tax rate Statewide in Alaska is around 1.75%

Delaware does not have a Sales Tax, but does impose a Gross Receipts Tax on businesses that can be as high as 2.07% of the total receipts from goods sold and services rendered in the State. This Tax is generally not passed directly on to the consumer, although its effects can be seen in sales prices of goods and services.

Many of the States that have Sales Taxes Exempt Food from those Taxes. These State do not Exempt Food items from their State Sales Taxes:

South Dakota

In addition, there are some States that charge a smaller Sales Tax on Food items, including:

Arkansas (1.5%)
Illinois (1%)
Missouri (1.225%)
Tennessee (5%)
Utah (3%)
Virginia (2.5%)

In a few States, including, Food is subject to Local Sales Taxes, even if it's Exempt from State Sales Taxes:

North Carolina

All States except for Illinois Exempt Prescription Drugs from State and Local Sales Taxes. In Illinois, Prescription Drugs are subject to a 1% Sales Tax.

A handful of States also Exempt Non-Prescription Drugs from Sales Taxes. These include:

District of Columbia
New Jersey
New York

Clothing is Exempt from State Sales Taxes in a few states, mainly in the Northeast. These include:

New Jersey
New York
Rhode Island

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