Sales-tax deal with Texas is Amazon's latest

Fri Apr 27, 2012 6:57pm EDT

A worker loads a shipment of outgoing boxes at the Amazon.com warehouse facility in New Castle, Delaware in this November 24, 2006 file photo. REUTERS/Tim Shaffer/Files

A worker loads a shipment of outgoing boxes at the Amazon.com warehouse facility in New Castle, Delaware in this November 24, 2006 file photo.

Credit: Reuters/Tim Shaffer/Files

Related Topics

(Reuters) - Amazon.com agreed to begin collecting sales tax in Texas on Friday, forging a deal that promises to bring more jobs to the southern U.S. state and as the online marketer lost another round in a series of state-by-state sales tax battles.

The agreement, to take effect on July 1 for Texas' 6.25-percent sales tax, follows another accord reached with Nevada earlier in the week to begin collecting that state's 8.1 percent sales tax on January 1, 2014.

Amazon rings up an estimated 20 percent of all U.S. online retail sales, making it the country's largest online retailer.

Most online purchases are free of sales tax, which has given the company an edge over traditional, bricks-and-mortar retailers that do collect sales tax.

As online sales have grown, and municipal budgets have tightened, states have been pushing hard to capture more e-tail sales tax revenue.

Under federal law, retailers with physical facilities in a state can be forced by the state to collect sales tax on purchases made by a resident of that state. That includes e-tailers with distribution centers. E-tailers without physical facilities in a state need not collect the tax.

BEST TAX TERMS

As Amazon has grown, it has needed more distribution facilities, and in the past few years has parlayed the promise of new facilities in exchange for the best tax terms possible with states across the country.

The importance of that advantage was clear when Amazon pulled up stakes in Texas last fall, shutting down its distribution hub at the Dallas-Fort Worth airport after Texas State Comptroller Susan Combs sent Amazon a $269 million bill covering sales taxes it did not collect from 2005 to 2009.

In exchange for Amazon's promise to collect future taxes, create at least 2,500 jobs and make at least $200 million in capital investments in the Lone Star state, Combs is dropping the demand for back taxes.

Texas will bring to six the number of states where Amazon currently collects sales tax.

According to its website, it already collects sales tax in five of the 50 states -- Kansas, Kentucky, New York, North Dakota and Washington -- on purchases made by people who live in those states. Those are the five states where it has physical facilities or affiliated sellers and no agreement with state governments exempting Amazon from collecting sales tax.

A comprehensive federal solution to the question of which companies must collect sales tax on online purchases has yet to reach a vote in Congress.

In announcing the deal with Texas, Amazon's Vice President of Global Public Policy, Paul Misener reiterated the company's support for a national solution.

On Thursday, Amazon reported net sales of $13.18 billion for the first quarter of 2012, up 34 percent from the same quarter last year, with net income of $130 million.

(Reporting By Nanette Byrnes; Editing by Howard Goller and Kevin Drawbaugh)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.