A couple of days ago when I blogged about Amazon’s decision to start collecting sales tax amounts in 2017 on products it ships to Louisiana, I noted “…and counting” in the list of states where this already is happening.
I didn’t, however, expect to have to do some more sales tax math so soon.
But Jan. 1, 2017, also is the day that the online retail giant also will add sales tax amounts on products bought by shoppers in Iowa, Nebraska and Utah.
Merry Belated Christmas to all four of those state treasuries.
Use tax troubles: The 45 states that have sales taxes have been grappling for years with how to get the money, known as use taxes, to which they are entitled, but which residents refuse to remit.
A use tax, as the name indicates, is the companion to a state’s sales tax and applies to products bought elsewhere and brought into the state for the consumers’ use.
State residents either don’t know about the use tax — not so likely anymore, as many states have implemented aggressive education programs — or, more likely, they simply ignore their tax responsibility since it’s difficult for state tax officials to enforce the use tax.
State officials had hoped that a federal law would provide a comprehensive solution. But three recent iterations of a national online sales tax collection bill all stalled and many states have tired of waiting.
So instead of continuing the fruitless focus on taxpayers, these state have been looking at ways to force the tax collection by the online and catalog sellers.
Current law regarding a company’s requirement to collect sales tax is that it have nexus, or a physical presence per the standard established by the 1992 U.S. Supreme Court ruling in Quill Corporation v. North Dakota, in the state demanding the tax. States, however, have been devising alternate ways to define nexus, both legislatively and thought court cases.
The state efforts generally apply to all remote sellers, but since Amazon dominates this shopping segment, getting the major player in the tax collection fold is a big first step.
Utah sales tax success: Amazon does not have a physical presence in Utah, but has become the first online company to sign a voluntary compliance agreement to collect the Beehive State sales tax, effective with the arrival of the New Year.
The deal negotiated between Amazon and Utah reportedly allows Amazon to keep 1.31 percent of sales taxes it collects from Utah customers as a vendor discount for the cost of serving as a collection arm for the state as long as they are current on their filings.
Collections by Amazon will boost Utah’s effort to get the estimated $200 million in state sales taxes not being paid on online purchases. Another $100 million in local sales taxes also are going uncollected.
Iowa ‘required’ Amazon tax: Beginning Jan. 1, 2017, “Amazon will be required to collect sales tax in Iowa.” according to a company statement provided to KCCI.
There was no elaboration on the requirement, since, as in Utah, Amazon has no physical presence in the Hawkeye State.
Purely speculation on my part, but the company could be planning to build a distribution center in Iowa. It has done so in other states and agreed to pay sales tax in advance of that nexus component’s completion. Plus, additional distribution operations will help Amazon reach its goal of more rapid delivery across the country.
The Iowa Department of Revenue estimates the online sales tax collection will mean an additional $18 million to $24 million a year.
And there’s a public relations as well as tax bonus. Iowa’s small businesses could be a big beneficiary of Amazon’s tax collection, since it will eliminate the idea of a tax discount when buying from Amazon.
“It really is one of fairness to your brick-and-mortar, small-town retailers who have a physical presence here, who have employees, who have property tax that they pay,” said state tax department spokesperson Victoria Daniels. “They’re losing sales to companies that aren’t even here.”
Nebraska has no nexus either: Finally, Amazon announced on Friday, Dec. 22, that it will begin collecting sales taxes in Nebraska next year, even though the company has no physical presence in the Cornhusker State.
Nebraska Tax Commissioner Tony Fulton hailed Amazon’s decision as “a good example of responsible corporate citizenship.”
Fulton also hopes it will encourage the state’s individual taxpayers to report their out-of-state Internet purchases on their state income tax forms. Only about 1 percent of cyber buyers currently comply with the state’s use tax law.
“The tax is owed. So their announcement will just help Nebraskans to comply with the existing law,” Fulton said.
Despite Amazon’s welcome (to state officials, if not state shoppers), expect the Nebraska legislature to consider measures to require all online retailers to collect state and local sales taxes.
Previous estimates of Nebraska’s tax revenue lost to the nonreporting of all internet sales range from $45 million a year to $118 million a year.
Amazon collecting in 34 jurisdictions: The table below shows the full list (I think/hope!) of states where Amazon will be collecting sales taxes in 2017.
You also might find these items of interest:
- Amazon tax vs. state use taxes
- Full, permanent Internet access tax ban approved
- Cyber Monday sales & state sales tax collections are up