Multi-State Tax Law Blog
As many know, Amazon has been clashing with many states whether it should be required to charge, collect, and remit sales tax. Many states have taken position that Amazon’s affiliates and distribution centers created the dreaded “nexus.” If an online retailer (or any company) has so-called “nexus” it is required to charge, collect, and remit tax in that state. With millions of dollars at stake, Amazon threatened to pull its affiliate programs in those states which, in turn, would cut tens of thousands of jobs. Fearful of huge job cuts in a struggling economy, many states allowed Amazon a grace period, permitting the company to continue its program and not collect sales tax for x number of years in the future. Once the grace period expired, then Amazon would have to charge, collect, and remit tax. In return, the state would keep its jobs as well as get more tax revenue going forward. It appeared to be a win-win for all parties involved.
It was recently announced that Amazon will collect tax in North Carolina. Based on projections, North Carolina is licking its chops at the increase of an additional $20-30 million in state revenue it will receive. North Carolina’s fiscal research division estimated that city and county governments would benefit to the tune of about $10-$13 million. The revenue should begin flowing for the state as soon as February 1, 2014 and it would be an understatement to say this will be a huge benefit for the state’s economy.
Taking a national view, each year that grace period is expiring in at least three more states. In states like Indiana, Nevada, and Tennessee online shoppers will be charged sales tax by Amazon. Overall, this brings the total to 19 states in which Amazon will charge, collect, and remit sales tax. Even more eye opening, those 19 states represent about 180 million or over half of the population in the United States. The addition of the three latest states will also generate more than $50 million a year in state tax revenue.
Looking even further into the future, Amazon’s grace period expires in South Carolina in 2016. Resulting from a $300 million multi-warehouse investment, Amazon recently reached a deal with Florida to bring in over 3,000 jobs. Although the date is not set in stone, most commentators have reported the Florida project will be complete between now and 2016 which would force Amazon to charge tax to some 19 million Floridians for online purchases.
About the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law Moffa, Gainor, & Sutton, based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact him via email JerryDonnini@Floridasalestax.com or phone at 954-642-9390. Please also visit his other sales tax blog, facebook, and Twitter