Amazon Sales Tax Now Reality For Over Half Of U.S. Population

By: Chris Crum - January 2, 2014

Consumers in more states are about to find themselves paying sales tax when they shop online at Amazon. Online businesses in all states may one day be required to collect sales tax from everyone anyway, but Amazon currently finds itself on both sides of the “to tax or not to tax” argument as it resists tax requirements in some states while supporting legislation that would make tax collection ubiquitous throughout the nation.

Should all online businesses be required to collect sales tax from all consumers regardless of location? Let us know what you think in the comments.

Amazon is now collecting sales tax in three new states: Indiana, Nevada and Tennessee. Now it is doing so for a total of nineteen states, which according to the Wall Street Journal, account for over half of the country’s population.

Amazon has gone out of its way to avoid this in various states. A month ago, the company was denied a chance to fight New York’s requirement for Amazon to collect sales tax from purchases made in the state. The company had sought to battle this in the U.S. Supreme Court, but the court refused to hear the case, saying that the state’s efforts are constitutional.

This followed a New York law, which took effect in 2008, which meant that Amazon had to collect taxes in the state because it sold ads through a New York-based firm.

The company has also cut ties with affiliates in other states like Minnesota and Missouri to avoid collecting tax.

In 2016, Amazon is expected to begin collecting sales tax in more states like South Carolina and Florida.

But by then, the Marketplace Fairness Act may have been passed anyway, meaning that all online retailers in the U.S. would have to collect tax from everybody regardless of whether or not they have a physical presence in a state. While you may not know it from the company’s resistance to these state taxes, Amazon is one of the biggest supporters of this bill, which passed in the Senate last year.

As our own Zach Walton explained in a recent article, it’s all about priorities for Amazon. “The Marketplace Fairness Act wouldn’t affect Amazon that much as it continues to build out more fulfillment centers in more states thus giving it a physical presence in more states. If the Marketplace Fairness Act isn’t passed, the retailer obviously doesn’t want to be stuck collecting sales taxes in states that it doesn’t have a presence in. That way Amazon can then barter with those states to collect sales tax in exchange for the state helping to build more fulfillment centers.”

And those are coming rapidly. In 2013 alone, the company announced new fulfillment centers for Connecticut, Wisconsin, California, Maryland, Florida and Texas.

As Walton noted, the situation in New York didn’t exactly cater to Amazon’s “play it safe” mentality.

Meanwhile, the Marketplace Fairness Act continues to sit in limbo as we head into the new year. House speaker John Boehner expressed his resistance to the bill last year, saying it would put “a big burden on some very small businesses,” as it would require them to comply with the sales tax codes of 50 different states. This has been a common point of conflict for those opposed to the legislation. Boehner said he would “probably not” vote to pass the bill.

Either way, it looks like Amazon shoppers in more and more states will be paying sales taxes as time goes on.

The latest states to adopt the Amazon sales tax are expected to generate $50 million in new revenue. Sales tax is 7% in Indiana and Tennessee and 6.85% in Nevada.

Should Amazon and other and other online businesses be required to collect sales tax in all states? Share your thoughts in the comments.

Chris Crum

About the Author

Chris CrumChris Crum has been a part of the WebProNews team and the iEntry Network of B2B Publications since 2003. Follow Chris on Twitter, on StumbleUpon, on Pinterest and/or on Google: +Chris Crum.

View all posts by Chris Crum
  • Sherm Stevens

    No, no, no, no, no, no in SO MANY WAYS. The government collects enough taxes. Let’s get rid of some of the ‘girth’ of government spending.

    This is just another cash cow for money-hungry politicians. Trying to comply with sales tax nationwide (and eventually worldwide, if the dhimmicrats get their way) is too big of a burden for small business. There are 88 counties in Ohio alone, and many cities within those counties that have different taxing districts. There are solutions that provide updated tax rates, but they are expensive to implement.

    I’m not excited about Boner’s lukewarm ‘no’ to the bill. If we continue with the same ass clowns in federal government beyond 2014 and 2016 — just bend over and grab your ankles, ’cause we’ll ALL be paying more taxes.

  • Jeff

    What can you tell me about Amazon lifting restrictions for possible affiliates in certain states? I live in IL……can IL residents become Amazon affiliates again or not? Thanks…..

  • Joe P

    No No No and NO! Just because these corporations are now getting so large that they are required to collect taxes in ever state, let the be good enough. Small Businesses do not have the resources to spend hours upon hours of remitting tax returns because our politicians are irresponsible and can’t get their budgets under control.

  • mm

    Here is the issue… We are a very small company. For companies like ours to track, collect and file paperwork for 50 states, is an administrative nightmare. I’m sure there will be payment processors who provide this service, but at what cost? This is only driving up prices for everyone because we have no choice but to pass the cost on to our customers. AND as the laws of supply and demand dictate, if we do that, we’ll sell less for sure.

    The lawmakers have this all wrong. They need to FUEL the economy, not put another wet blanket on it.

    At what point do we just fold up and quit?

  • Carol

    With over 9,000 sales tax districts in the USA, each with a different sales tax rate, it would be an accounting and reporting nightmarish burden if I had to process sales tax for every district in every state, especially for a small businesses like mine with only a single business location.

  • Laurie G.

    It would put “a big burden on some very small businesses,” like myself,as it would require us to comply with the sales tax codes of 50 different states.I am against the sales tax from all consumers regardless of location.

  • steve lowen

    It is only fair that ALL businesses play by the same rules.

    • Adam

      This the case currently. Small businesses collect and pay sales tax in the states in which they are physically located. The proposed bill would give an unfair advantage to monopolistic corporations and drive small businesses out of business.

  • Joel

    The current bill sets the threshold far too low, and may put some small companies out of business. Expecting the gov’t to provide seamless software for companies to manage this is not realistic.
    i.e the Obamacare website fiasco.

    IMO, a much higher threshold, and based upon gross (or net)profits rather than sales, might be more realistic.

  • Gregory Dennis

    I welcome with open arms the “Marketplace Fairness Act”. I cannot wait for it to pass.

    You see, this law, like most other halfway thought out laws, will force all small business in the U.S. to fold, and send more business to our good friends over in China, so we can continue to help them fund the weapons they want to use against us.

    Then, our politicians, infinite in their wisdom, like King Solomon, will no longer be able to collect taxes, because there won’t be anyone left except for Amazon proper, as all of the sellers in Amazon Marketplace will have been forced to shut down due to their inability to keep up with the Federal governments plan to raise taxes more as a way to plug the gaping holes in our Federal deficit, which is, of course, caused by political over-spending to begin with. Ebay will also soon find all of their “shops” gone, as it will return to being populated by people getting rid of junk, with no actual real income to tax.

    Naturally, this law’s spectacular failure won’t teach our politicians anything, and when “everything is on the table” to be cut, that naturally does not include their bloated six-figure salaries, which are undeserved, as any private sector employee who fails and wastes as much as an average Congressman or Senator would find himself on the unemployment line quite rapidly, yet politicians continue to do not what is best for the country, but what is best for them.

  • Robert in Vancouver

    How about the government just take all of our money then give us just enough to stay alive. Yahooooo!

    That’s the ultimate wet dream of the left-wing and other big government types.

    (Of course, people running the government would be exempt from the 100% tax. They would get most of the money that they don’t give back to us – like Castro in Cuba, most leaders in the Middle East, and other dictatorships.)

  • Scott

    I think Internet purchases should be taxed the same way items that are ordered from mail order catalogs are purchased. If you buy something from a mail order catalog then those that live in the state where the mail order company does business are taxed, while people that live in other states are not taxed.

    • Bill

      What every new source out there misses is this bill is not just internet seller its ALL REMOTE sellers this includes mail order catalogs and phone orders TV info coms. it all sellers that sell outside of their state.

  • Andrew

    They should but they shouldn’t !_! I think the “Con’s outweigh the Pro’s

  • Phil Hulings

    I think that if online businesses are to have to collect sales tax, it should be a flat rate for all states, collected and paid into the fed govt who will distribute to the states.

    • DMO

      UFB! Another idiot calling for an entire new layer of bureaucracy at the federal level! This is the problem with America. It is called INSANITY!

  • Ginger R.

    I guess because I have been on both sides of the fence as both a brick and mortar manager and an online business owner. I do agree that it is unfair or online business to not charge the sales tax. I have suggested to my Representative a central office for us to pay a flat rate internet tax to base on our total sales. They would then distribute the tax to each state based on the filing form that reports the sales amounts shipped to each State. No fancy software required. Of course no tax collected for States that do not have a sales tax. Problem solved. It would be up to the states to decide how to distribute the money.

  • Mike

    One of the things that made online shopping great was the no sales tax.
    Now, with decreasing tax revenues, all states that have sales tax would like it to be collected and sent to them.
    Previously you collected sales tax based on the residency of the buyer and the tax laws in your state.
    I think that this should not change, IE: my business is based in Washington state, and has a local and state sales tax combined of 8%, that would be charged on all sales to Washington residents. If you were from out of stated, you would not get charged sales tax.
    Now basically if I sell something to someone in a state with sales tax I am required to collect it based on the tax rate of the buyer, and send it to that local jurisdiction, on a monthly or quarterly basis.
    My opinion is that this is a bit more administrative overhead, and I get nothing in return.
    So, I don’t like it but if I start selling on the Internet as opposed to my store front, then I guess there is no choice but to comply, or risk penalties and perhaps paying some inflated rate based on someone elses calculations of taxes owed to perhaps several thousand different localities…

  • Gill ApMadoc

    How would we as a small business pay sales tax in every state some one needs to set that up on line.

  • DMO

    No State shall enter…pass any”’ Law impairing the Obligation of Contracts.
    Sales taxes impair contracts. Plain and simple.
    Purchases from Amazon are 2 party contracts. How can any govt entity INJECT itself as a third party in direct violation of the above provisions of the US Constitution?? The answer is simple. They Can’t!
    BUT, who gives a rat’s *ss what the US Constitution says!!!!!!

  • The Vineyarder

    I am so tired of our government wasting our hard earned cash, just think about how many times you pay tax on your same hard earn $$$$$ all the way to death tax, over and over and over. I will continue to purchase where tax is not charged and avoid it whenever I can. Taxing my salary and savings plus income tax is enough

  • Paul Richards

    I am not a bottomless pocket into which the Government(s) can stick their hands to pull out my hard earned money and in turn squander it upon an endless array of projects that profit only their cronies.

  • Doc Sheldon

    What I can’t understand is why an online business should be handled any differently from a brick & mortar business. Presently, I believe that if an out-of-state resident orders something from a brick & mortar vendor, that vendor isn’t required to collect sales tax unless they have a physical location in the state where the delivery is to be made. This makes perfect sense, and doesn’t create an unmanageable burden for the vendor.
    What I can imagine happening, if a federal sales tax is implemented, is that the feds will take the tax (and of course, waste it), and the states will want to tax ALSO, as will some counties and municipalities. We’ll soon be paying 40%-ish more for everything.

  • PJ Chase

    Absolutely NOT

  • Antonio Morejon

    The Marketplace Fairness Act will put a lot of online retailers out of business and it is against what this country’s founding fathers fought against, “Taxation without representation” why should you pay taxes to a state outside where you do business.

  • Keith

    I agree that the burden placed on small business would definitely cause some businesses to shut down and send more business overseas. I also think the leaders of this country should spend far more of their time trimming the wasteful spending, instead of looking for any way possible to get more money to spend buying votes. Most of them have no real clue as to finances and economics and very few have ever had the experience or really running a business.
    With all that being said, If “The marketplace fairness act”, which is a totally misleading name, were to be passed, it should only be done with a flat tax with the same applied to all states. There should be one short form that you could enter total sales for each state, and you would send 1 check along with the form to a central agency who is responsible to distribute the funds to each state.

  • Stanchion Masters

    The Internet was doing fine on its own creating millions of jobs since the mid 1990’s. Now the greedy government politicians, as they do so well, will do more harm than good as they get involved.

    Let things be. The money spent online and earned by small business gets taxed already. Why squeeze or put small business out of business?

  • http://MyGrandpasToystore Richard Viers

    When will we have access to Amazon affiliate in North Carolina.
    Someone should just put together the fulfillment options.

  • ME

    In Colorado we already taxes online if we buy from someone instate. It really sucks, we pay exorbitant postage and now taxes?

  • Bill Burns

    No its a consumer responsibility. Its between the state they live in and there local taxing authority.

  • test

    The reason politicians want sales taxes is because they ALWAYS think of themselves first. That is the nature of the beast. They want their salaries and their pensions covered first and that is what sales taxes does in spite of that fact that politicians claim otherwise. Politicians want money for themselves and this is how they get it. Taxing someone who wants to buy is a dirty insidious way politicians control the money flow.
    In my opinion, there is not much that can be done abut it.

  • Will

    simply stated: No
    all income is already taxed once as income.

  • Will

    simply stated: NO
    all income is already taxed once as income.
    any sales tax is a consumption based tax on post tax money.
    To me, the entire arguement is flawed anyway. It’s never been about tax, it’s been about the use of the taxed money and how inefficient the government is.
    2nd argument: who would want to set up an internet based business and be held responsible for collecting taxes for all 50 states plus every nation that has sales tax or VAT?! It’s adding a huge unnecessary burden to the entire concept of commerce.

  • test

    Wasn’t the reason people left the old world and came to the new world to get away from the unreasonable pronouncements of authoritarian politicians and church members? A revolution was required to required to break away from these authoritarian obstacles to freedom. Might a new revolution be required for online people?

  • Dwain

    When states start paying for the shipping, then it will be fair to pay sales tax on internet purchases.

  • Dianne Gregg

    I don’t mid charging sales tax in GA where I live. But it’s not right to charge sales tax for states that I don’t reside in. How is a small business owner, how can I keep track of the sales tax % in each state? And, this will definitely hurt my bottom line.

  • ebayseller

    As an ebay seller who sells collectibles as a hobby (NOT a business), I am very concerned that any new internet sales tax collection law would eliminate my ability to sell on ebay.

    I have a storefront because I have a lot of items to sell, but I typically just recoup or almost recoup the money that I spent on the items in the first place – I don’t make any profit at all when tracked by year and never have. So, If I had costs and labor associated with collecting and reporting sales tax, I would neither want to nor be able to continue selling.

    How would online auction hosts such as ebay and amazon be able to distinguish between businesses and non-businesses or would they make EVERYONE collect sales taxes? If collecting for everyone, would they increase their fees to manage the taxes for small sellers?

    I don’t believe that sales tax should be collected on used items sold “flea market”/”yard sale” style by non-businesses in any case. As long as any profit is reported on your 1040 form, that should be as far as it goes.

  • Ronald Illingworth

    IF this concept becomes law, it needs to be well thought out and not applied to persons who live in places where there is not tax. Zip codes are inaccurate as they do not provide sufficient differentiation. I live in a State with no state tax and I live in the country, not in a city. The zip code we have is the same as the nearest city (a small town or just over 1000) which does have a sales tax. However, I live 7 miles away from that city. This policy should be able to provide that level of differentiation.

  • BobP

    It is insane to pay taxes to any taxing authority outside the taxing jurisdiction of the items’ physical location at point of sale. I am not a slave working as an unpaid tax collector or payer of taxes for governments that provide me with no actual services rendered or representation. As the hidden purpose of government appears to be the destruction of small business, expect the worst possible to become law.

  • Alex

    Whilst I’m from England I can understand everyone’s anger. Last year a number of he British chains had skipped on millions of tax – Starbucks being one. Closer to home, the dreadful transport system I use to get to work (Metrolink) have upped their prices, despite being utterly incompetent. Not a good start to the year.

  • G Lilly

    No, taxes of sales should only be required in stores areas within the actual state of purchase.

  • Gary

    NO NO NO NO NO NO NO NO!!!!!!!!!!!!!!

    We are already taxed once as in income tax. The money used to pay this new tax has already been taxed. Ever hear of double taxation?

    We do not receive services from the state of shipment, so why pay them for services not received?

  • mottalibb

    We do not receive services from the state of shipment, so why pay them for services not received?

  • Ra Gee

    Amazon alone should pay all taxes not those who sell on Amazon and not the buyer. Amazon is cleverly doing what they do best crushing everyone else trying to make a living and hogging it all for themselves. Once the competition is dead prices will go up. And Amazon must be monitored that they pay every cent due. They allegedly want people to pay sales tax. And for that I will never shop with them again. Stop internet taxation. And if one must charge Sales Tax (what isn’t taxed) let it be a flat 5% across the board. In all States the same except those whop have no sales tax like Oregon. (They tax your gas and everything non food–tax upon tax upon tax is why the 1% like Jeff Bezos (they call him Beezlebub) are so wealthy. We, the 99% say no. And we want a vote on where our tax dollars go. (Never to war).

  • Peter

    Surely the easiest option is for these taxes to be collected at the point of sale, and no I am not talking about Amazon, but the payment gateway companies like the credit card companies, PayPal etc. that are already charging exorbitant transaction fees to the online sellers. It amazes me that in the technological world we now live in that this is not possible to be implemented. How simple would it be for these “relatively few” payment gateway companies to set up a simple computer program to work out the relevant state taxes on each purchase, add them up and send an electronic payment to each State government at the end of each day. Surely this would be a easier option, than imposing the administrative and regulative nightmare on to hundreds of thousands of online sellers.

    • Peter

      I think it was Benjamin Franklin that said, “there is nothing certain in life, except death and taxes” Let’s face it, none of us think it is fair, but it is going to happen, so surely it is more important to simplify the process and take the responsibility away from the majority, when it is possible for the tax to be implemented and collected by the few companies involved in processing the order payments. No doubt they will add their percentage on to the total tax inclusive purchase amount, but at least it keeps it simple.

  • John

    The more we’re taxed, the more money gets wasted.

  • Sherry G

    I don’t think small business owners who sell online are going to have to worry about this for very long. Amazon is whoring out product directly from the manufacturers to the public and have been for quite some time. They only use the sellers as a ploy to find out what sells, then call the manufacturer and set up to sell the inventory direct as “Fulfillment by Amazon.” In fact, I watched a show on CNN at the beginning of 2013 and it was declared “the year of cutting out the middle man,” and the commentator explained that the manufacturers no longer need retailers now that they can sell directly to the public. I don’t know about you, but I have a small line of products I can sell online now, because the people who used to sell to me are selling the inventory to the public through Amazon.

  • L.

    If they want to charge taxes – FINE – but seriously, why do they now insists on collecting a years worth of BACK TAXES that people cannot even pay. It's insanity. I chose to buy from Amazon to avoid going to crowded malls. I knew they would probably start charging taxes in 2014; I never once expected to be charged taxes on everything I ever bought +some. I don't mind paying sales tax at the time of purchase, but lets face it, I never tried to dodge paying them in the first place. It's the states fault and the websites fault for not collecting them sooner. Why should I pay for their mistakes?