It’s only fair all businesses compete with the same set of rules, so it’s good news Amazon.com will soon face nearly the same sales tax burden as Texas’ online and brick-and-mortar retailers — even though consumers probably won’t like picking up the tab.
Texans who’ve grown accustomed to saving on sales taxes by shopping online at Amazon.com will see a 6.25 percent hike in their e-bill beginning next month. While consumers likely won’t applaud the change, it defuses a battle that saw the Internet retailer shut down its Texas warehouse and put the state’s demand for payment of $269 million in unpaid sales taxes in court.
In October, State Comptroller Susan Combs sent a $269 million bill to Amazon.com for what the comptroller’s office said were uncollected sales taxes along with penalties and interest on sales from December 2005 to December 2009. The demand was based on Texas’ contention the Seattle-based company’s Texas warehouse obligated it to collect taxes on sales made to Texas residents.
The company disagreed.
But in April, Ms. Combs and Amazon officials announced they’d come to an agreement to resolve the dispute. Amazon agreed to bring 2,500 jobs and $200 million in capital investments to the state, along with collecting 6.25 percent sales tax on purchases made by Texas consumers. In exchange, the state dropped its $269 million demand.
“This is an important step in leveling the playing field in Texas,” Ms. Combs said in a statement at the time. “However, Congress should enact federal legislation that will give states access to revenues that are already due, which would resolve this issue fairly for all retailers and all states.”
The deal doesn’t put Amazon in the same position as local retailers, who tack sales tax of 8.25 percent onto purchases. The state levies a 6.25 percent rate, and the remainder goes to local government. Amazon will collect only the state’s levy.
But it’s still better than nothing. Estimates are $600 million a year would be added to state revenue if sales taxes were collected on all purchases Texans made with online retailers.
The Texas-Amazon deal is not unique. As online sales have grown, states have looked for ways to apply the same sales tax rules to them that apply to traditional businesses. Many, like Texas, had laws on the books requiring residents to report purchases on which state sales tax was not collected and remit the appropriate amount to the state — but few people did so and enforcing the law was impossible.
This year has seen Amazon cut deals with Texas and New Jersey to collect sales taxes, and it’s likely others will follow.
We sympathize with those who lament the apparent end of tax-free online shopping, but it’s not like it could continue without end. Since Texas funds a chunk of state government with sales tax revenue, officials were ultimately going to have to raise the rate to maintain the revenue stream or find a way to collect on the growing volume of untaxed online transactions.
Either way, Texas consumers would pick up the tab. With this deal, Amazon is on basically the same footing as other Texas businesses — and that’s the sort of equality under the law upon which this country was founded.