Amazon Tax Law
Amazon Tax Law
After several weeks of “Debt Ceiling Crisis” media coverage it’s fairly clear that our government has difficulty balancing the budget. Taxes are at some of the lowest rates ever, and spending on entitlements and other government programs are continuing to increase. We’ve also seen a state, Minnesota, shut down government run entities for a week because they could not agree on a new budget and there wasn’t enough money to pay these government workers.
The dire situation that some states are in should hopefully give you some context into the creative measures that state governments are taking in search of more revenue. The federal government has maintained that businesses must collect sales tax from their customers “only in states where they have a business presence” (such as a storefront or a warehouse). This has allowed online retailers to sell goods free of sales tax in most states which, along with streamlined fulfillment services, helps them consistently beat physical retailers on price.
Without action on the federal level, states have taken it into their own hands to pass laws that mandate sales tax be paid on purchases from all state residents – regardless of whether they made the purchase online or in their home state. This type of law that states are enacting has been dubbed the “Amazon Tax” because, as the largest online retailer, Amazon.com takes the brunt of the blame for all online retailers that do not collect state sales tax.
The challenge for online retailers is that states are drafting legislation that is not uniform, and they’re all at different stages in the process. This infographic highlights the states that have enacted an “Amazon Tax” law and where they are in the process. It also shows several areas of the country that this battle has dragged down to the local level with cities passing laws that increase taxes at the city level to make up for the lost government revenue from online retail.
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