Arm twisting Amazon: More states to collect sales taxes

Tax collection begins tomorrow in Mississippi, Missouri, Rhode Island, South Dakota, and Vermont. It already started this month in Louisiana, Iowa, Nebraska, and Utah; and begins in Wyoming on March 1.

According to The Associated Press, many online U.S. shoppers have for years paid sales taxes whenever they bought goods from Amazon, but the company dragged its feet on collecting sales taxes in small and low-populated states where it has no distribution centers or corporate offices. An online publisher argues Amazon has been given little choice in the matter.

"Essentially Amazon is being bullied by the threat of additional regulatory burdens into collecting sales taxes for additional states," responds Ari Armstrong, publisher of Freedom Outlook.

"For example, Associated Press reports that Rhode Island was considering legislation similar to Colorado's so-called Amazon tax, which in effect forced or tried to force Amazon to comply with paperwork requirements basically making them serve as tax enforcers or else collect the sales tax themselves."

What about Amazon dragging its feet on collecting sales taxes in some states?

"According to now old court rulings, it's been the case for many years that if an online retailer has an in-state physical presence, then they have to go ahead and collect sales tax," answers Armstrong. "So for example, Barnes & Noble – if they have physical stores in your state [and] if they ship ... out of that state, they have to collect sales tax from the state where they have physical presence."

Armstrong explains that the same applies to Amazon where it has distribution centers.

"So for example, they're now opening new centers here in Colorado, which gives them a physical presence," he continues. "So ironically, the Colorado statutes aren't even at play in Colorado anymore because of the physical presence requirement. But those statutes are now forming a model for other states where there is no physical nexus for those states to essentially compel Amazon to collect sales tax."

Armstrong admits Amazon is set up to a large degree now to collect sales taxes; so the issue, he believes, is what this does to Amazon's competitors.

"There is a way in which this is actually good for Amazon, even though on net it's bad insofar as it puts Amazon's competitors who are not so equipped to comply with these paperwork and sales tax burdens," he explains.

"In a way it sort of sets Amazon to be even more a major player in terms of state-to-state sales. But nevertheless, I think whether you're talking about Amazon or other retailers, my personal view is that it's essentially unjust for state governments to seek to regulate businesses out of their states – and that's essentially what's going on here with basically making online retailers enforcements for state-level sales tax enforcements."