8 More States Added to Amazon's Sales Tax Roll. Will It Tax the Online Giant?

Attention Amazon shoppers: According to CNNMoney, your online order might be getting pricer. At least eight states have asked Amazon to change sales tax on its orders. California and Pennsylvania sales tax will go into effect starting in September, while New Jersey and Virginia will begin in July and September 2013, respectively. Beyond 2013, Indiana, Nevada, and Tennessee will collect sales taxes beginning in January 2014, and South Carolina in January 2016.

These states will join the six who already charge sales tax on orders via Amazon: Kansas, Kentucky, New York, North Dakota, Texas, and Washington state. But how much sales tax is charged depends on the state, and could affect customers' bottom lines. CNN Money estimates that in California, the cumulative effect could be as much as $9.75 on a $100 purchase; in Pennsylvania, it'll cost consumers an estimated $8. New Jersey's sales tax is currently 7%, or $7 on a $100 purchase.

Amazon had long fought states' efforts to collect sales tax, and many observers believe it will continue be an uphill battle for the many state governments. But none seem to be relenting. Cash-strapped states have been fighting hard to collect the extra revenue. "Government operates like a business, where they see how they can change things or collect more money," said Maureen Riehl, Vice President of Government Affairs at the Council on State Taxation. "And 30 states have addressed or have projected revenue shortfalls for next year."

Bricks and mortar retailers, too, have also pushed hard for web merchants to collect sales taxes, arguing it would make for fairer competition. Meanwhile, legal pressure has mounted on companies such as Amazon to collect tax before lawyers come after them.

"Some state legislation has allowed people to bring whistleblower suits against companies who do not collect sales tax — and you're not only talking taxes and interest, but triple damages," says Stephen P. Kranz, a partner at Sutherland Asbill & Brennan LLP in Washington D.C. who specializes in tax policy matters. "There are more than 200 suits pending in Illinois alone, and this is an area that we're going to see exploited."

For Amazon and all web retailers, the matter of collecting tax in all 50 states will ultimately be resolved when Congress moves forward on the Marketplace Fairness Act. This law will essentially allow states to collect sales tax on items sold from out-of-state businesses.

Yet Amazon's power as a retailing giant puts it in a good position to keep up strong sales and set benchmarks other retailers would still have to match or beat. What's more, the Financial Times reports that Amazon will actually use the tax kerfuffle as an opportunity to expand its network of U.S. warehouses from the 34 it had at the end of 2011. That way, it plans to offer same-day delivery to more consumers living in or near major markets.

And as many consumers see it, instant gratification via same-day delivery is hardly taxing. But will paying sales tax affect your bottom line purchase at Amazon? Sound off in the comments.

Front page photo credit: Bloomberg
Photo credit: CNN Money

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