Amazon.com will collect AZ sales tax

Settlement means biggest online retailer will charge state's 6.6% levy starting Feb. 1
2012-10-27T00:00:00Z Amazon.com will collect AZ sales taxHoward Fischer Capitol Media Services Arizona Daily Star
October 27, 2012 12:00 am  • 

PHOENIX - The nation's largest online retailer is going to start collecting sales tax on items ordered by its Arizona customers, which means Arizona buyers will soon be paying more.

Amazon.com announced Friday it has reached an agreement to settle the $53 million assessment against it by the state Department of Revenue for unpaid sales taxes.

The disclosure, made in a filing with the Securities and Exchange Commission, does not specify how much the company would pay. The statement called the amount "immaterial."

It is a victory for the state because Amazon and its subsidiaries will collect and remit the state sales tax beginning Feb. 1 for any goods sold to Arizonans. And starting July 1, Arizonans who order digital products or services, like downloading a book online, also will be paying the 6.6 percent levy.

In the interim, Arizona has agreed not to pursue the company for taxes on sales prior to those dates.

The settlement is also a victory for the Arizona Retailers Association, which has fought for years to end the advantage the online giant has over "brick and mortar" retailers, which have to impose the state's 6.6 percent tax plus any local levies.

How much the state might gain is unknown.

Matthew Benson, press aide to Gov. Jan Brewer, said the administration cannot provide any figures on possible financial gains to the state. Even if it could, he said, information about any individual taxpayer is protected by confidentiality laws.

But Benson said Brewer is pleased to be able to put the issue to rest.

"This agreement allows the state of Arizona to settle its dispute with Amazon without resorting to litigation, while securing partial payment and establishing that Amazon will collect and remit this tax going forward," he said. "Amazon is a quality employer that has invested more than $150 million in Arizona and created thousands of good jobs, and Gov. Brewer is proud to have them here."

The National Conference of State Legislatures estimated earlier that states lost an estimated $23 billion this year from out-of-state sales, with half of that attributed to Internet purchases.

Michele Ahlmer, executive director of the Arizona Retailers Association, said she was "thrilled" by the action. She said it will make a big difference for local stores.

The disadvantage for local stores is that the difference in what customers pay is not just the state's 6.6 percent levy but other local taxes, which can bring the total tax close to 10 percent, she said.

Traditional retailers "can only cut their costs so much in order to compete," Ahlmer said.

Amazon and other online retailers have been able to escape collecting sales taxes because of a 1992 U.S. Supreme Court ruling that said states can demand the money only if a company has a "physical presence" in the state.

That means the tax applies to an online marketer like Target.com because the company also has retail outlets in Arizona.

Seattle-based Amazon does not. However, what Amazon does have are distribution warehouses in Arizona where goods from elsewhere are processed and sent out to Arizona customers.

While the exact reason for the state's assessment remains confidential, lawmakers argued those warehouses provided the legal "nexus" to the state.

The state's $53 million assessment, levied last year, covered sales from March 1, 2006, through Dec. 31, 2010.

Company officials said Friday they "continue to believe the assessments were without merit." But they agreed to the deal, the "immaterial" payment and, most significant, the requirement to start collecting Arizona's taxes next year.

Ahlmer said she would have preferred the deal require Amazon to start collecting taxes immediately, ahead of the holiday season. But she said the Feb. 1 start date is probably faster than any legislation that could have been approved.

Anyway, Ahlmer said, that start date is earlier than the company has accepted in some other states where Amazon has already entered into deals to start collecting their sales taxes at some future point.

In Virginia, for instance, an agreement calls for the company to start collecting state sales taxes there beginning Sept. 1, 2013. That agreement was designed in part to derail legislation to force Amazon into immediately collecting the tax.

Company spokesman Scott Stanzel said Amazon already is collecting taxes in California, Washington, Kansas, North Dakota, Texas, Kentucky, New York and Pennsylvania. In addition to Virginia, and now Arizona, there are agreements to start collecting taxes in the future in South Carolina, New Jersey, Tennessee, Indiana and Nevada.

Legally, the agreement shouldn't bring in any more money because Arizona buyers are supposed to calculate their own tax and send it to the state. But that provision of the law is largely ignored and little-enforced for individual taxpayers.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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