Sunday, February 21, 2010


Amazon Gets Up A Creek

Last year I noted in Slate that Amazon's been having it both ways for a while on state sales taxes -- not paying any where they were not due, and not paying any even where they were due: has spent a decade opposing the enforcement of online taxes so that its noncollection of sales tax creates a powerful pricing incentive over bricks-and-mortar competitors. Why buy a MacBook Air in Boston, after all, when online you'll save nearly 90 bucks in Massachusetts sales tax? But there have long been warnings that consumers just might get ruinously addicted to the tax-free ride Amazon and others appeared to be giving them—and that states might just get, well, ruined.

I say the ride appeared tax-free: In fact, there is tax due on some online sales. Amazon and other online retailers have benefited from the lack of an enforcement mechanism. States have started taking notice, and when New York state recently attempted to fix this situation, took them to court—and got shellacked. The company, Manhattan Supreme Court Justice Eileen Branstein ruled last month, did "not come close" to showing that the state was wrong to demand that these taxes be collected. With millions in desperately needed uncollected revenue from online retailers at stake for the state, hasn't said yet whether it will appeal.

You wouldn't expect a financially ruined state like California to leave that kind of money laying on the table -- and now they're not. From Friday's Tech Flash:

Things are heating up for on the sales tax front again. The California Senate just passed a bill that would require online retailers like Amazon to collect sales tax on web purchases. According to reports, the measure was part of a $5 billion budget package making its way through the California legislature. Virginia, Colorado and Illinois are also considering sales tax bills targeting online retailers.

Amazon's been able to fight this off for years, but the stakes -- and the state budget gaps -- are getting much higher now.

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