The Street takes a look at the national picture of Amazon’s battles with states over collecting sales taxes.
In the past, Amazon has been protected by a 1992 Supreme Court ruling (Quill Corporation v. North Dakota) that prohibits a state from forcing a business to collect sales tax unless it has physical stores in the state.
While tax payers in most states are required to pay the tax directly to the government, few actually do.
But now several states are seeking to get around these restrictions by passing laws that expand the definition of physical presence.
The target has been on those e-commerce sites that work with affiliates. Affiliates are partner sites that earn commissions by advertising or linking to an online retailer’s merchandise.
In response, Amazon has threatened, and in some cases, ended partnerships with affiliates in states looking to revise these rules.
Amazon already collects sales taxes in a few states. A couple of others have codified exemptions for it. Many are working on or have passed legislation like Texas that would require Amazon to pay up. I’ll say again, I don’t know how long it will take, but I firmly believe that federal action to require online retailers to pay local sales taxes is the endgame. I just wonder how much Amazon will spend in the meantime fighting against it.
Great article. I agree that the Federal legislation will be the endgame. However, I also think it is important for the state’s to take action themselves and do what they can to protect their existing small businesses and not give big online-only retailers like Amazon a free pass.