Factbox: States gird for battle in Web tax war
Thu Jun 30, 2011 10:29am EDT
(Reuters) - Over the past few years, new battle lines have been drawn in the war over taxing Internet sales. States where revenue is climbing back at a slow rate from recessionary lows are calculating the money they have forgone by not collecting sales taxes on goods sold by big on-line retailers such as Amazon.com Inc and Overstock.com.
But just as each state is unique, these fights differ from place to place. Most disputes revolve around whether a worldwide company has a physical presence in a state or if it sells goods through smaller companies, also known as affiliates, in the state. Meanwhile, companies fear that they will be entangled by the wide variety of laws within and among states, having to work to comply with 50 separate tax codes.
"In fact, only Congress has the authority to let states require the collection of the billions of dollars in uncollected sales tax revenues from e-commerce transactions," wrote the Council of State Governments in a recent report.
A 2009 study by the University of Tennessee estimated that annual national state and local sales tax losses on Web commerce will grow to more than $11 billion in 2012 and could be as much as $12.65 billion.
The study found that over a five-year span starting in 2007, California would lose the most money at $8.7 billion. Arizona, Florida, Georgia, Idaho, Louisiana, Minnesota, New York, Ohio, Pennsylvania, Tennessee, Texas, and Washington all would lose more than $1 billion in revenue.
Below are the recent developments in the states' battles over what some call "The Amazon Tax."
California
Governor Jerry Brown signed legislation at the end of June that goes beyond most laws by also levying taxes on those who develop products the retailers sell and by giving the state's Board of Equalization the power to determine which businesses must collect sales taxes. Amazon told its 10,000-plus California sales affiliates that it may sever ties with them. Amazon may not be able to cut off all of its work force in the wealthiest state, though, given that its subsidiary in the San Francisco area develops its popular Kindle electronic reader.
South Carolina
In April, the House defeated an amendment that would have provided a five-year sales tax exemption to Amazon in exchange for the on-line retailer building a distribution center in the state. Amazon canceled plans to build in South Carolina.
Arkansas
In April, Governor Mike Beebe signed a law requiring Amazon and Overstock, along with other Internet retailers, to collect sales taxes on purchases if they generate more than $10,000 a year in sales to Arkansas residents through local affiliate websites. Overstock told its affiliates in the state they will no longer do business with them unless they relocate to a state without a tax law.
Illinois
In March, the state began requiring retailers and their affiliates to collect sales taxes on purchases made by Illinois residents in a "click through" law. Amazon has threatened to cut off affiliates in the state.
Colorado, North Carolina, Rhode Island
Amazon terminated its affiliate programs in the three states after they too passed "click-through" laws.
Texas
In September Texas Comptroller Susan Combs sent Amazon a bill for $269 million for uncollected sales taxes, interest and penalties for the period December 2005 to December 2009. Combs says Amazon has a presence in the state and must pay sales taxes. But Amazon countered that its location, which is owned by a subsidiary, does not constitute the kind of physical presences the state's tax law requires. It announced it would close its distribution center, shedding 119 jobs.
Tennessee
Amazon is finishing a distribution center in Chattanooga and plans to construct another site nearby in Bradley County. The company will hire more than 1,400 full-time workers and more than 2,000 part-time workers through its centers. Tennessee officials say taxpayer confidentiality laws keep the state from stating if it gave Amazon an exemption from a law requiring any retailer with a physical presence in the state to collect sales taxes on in-state purchases.
New York
The state passed legislation in 2008 requiring Amazon to collect sales taxes. Amazon is challenging the law in court.
Washington, Kansas, North Dakota, Kentucky
Amazon collects taxes in these four states because it has a physical presence there. Washington is its headquarters. Kansas and North Dakota are home to its call centers and the company processes returns in Kentucky.
Utah
Overstock collects taxes there because it is based in the state.
SOURCES: Reuters reports, Southern Legislative Conference of the Council of State Governments
(Editing by Kenneth Barry)
Credit: Reuters (www.reuters.com)
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