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If you're familiar with the ongoing saga between e-commerce retailers and the states that want sales tax charged during online transactions, then you're probably aware that Amazon is slowly being forced to collect tax for a growing number of states. In fact, over the summer, we wrote about the eight additional states that can count on paying sales tax when making a purchase with Amazon. Last week, it was announced that Connecticut will be added to that list.
Beginning in November 2013 — just in time for the chaos of Black Friday! — Amazon will charge Connecticut residents the state's 6.35% sales tax. The seller also announced that it will invest $50 million in the coming years to open an Amazon facility in the state.
In general, an online vendor isn't required to collect sales tax if the site doesn't have a physical presence in the state where the order is placed, but as online commerce has grown, states have balked; many consumers don't report the sales tax on their tax returns like they should, and governments feel as if they're missing out on a large revenue stream. In fact, it's estimated that Connecticut will see $23 million in additional revenue in the first two years that Amazon collects sales tax. Brick and mortar retailers, too, have also pushed hard for web merchants to collect sales tax, arguing that it would make for fairer competition.
It's theorized that Amazon has relented in some states because the seller hopes to expand its network of U.S. warehouses, potentially offering same-day delivery to more consumers. This might explain Amazon's co-announcement that it will collect Connecticut taxes while also investing $50 million in development in that state.
But lest you think Amazon is now hunky dory with charging sales tax across the board, this news coincides with the fact that the merchant's lawyers are arguing in court that it should not have to collect in New York. The outcome of that appeal, which involves both Amazon and Overstock, is due in June, according to The Huffington Post. Thus, the collection of sales tax online is a hot button issue that isn't going away, especially as the U.S. Congress sits on legislation to universally address the issue.
Readers in Connecticut: Will this decision affect the way you shop? Will you be more willing to buy in-store, or will you continue to shop at Amazon at the usual rate?