For long, Amazon has fought against the collection of sales tax on the online purchases of its customers. But as the company expands physically, it has to make compromises. Now, the e-retailer has agreed to collect sales tax in Indiana, Nevada and Tennessee starting from Wednesday.
As long as Amazon does not have a physical presence in a state, it doesn’t need to impose a sales tax on the purchases within that state. However, as soon as the retail giant opens up a physical facility, such as a warehouse, it must collect sales tax in that particular state.
So Amazon has been trying to balance itself between opening new warehouses and limiting itself to minimum states so that it doesn’t have to gather sales tax. Despite such efforts, the retail giant is already collecting sales tax on purchases made from 19 states.
The reason why Amazon has fought fiercely against sales tax, albeit with little success, is because it eliminates the advantage Amazon has over regular brick-and-mortar retail stores. If it ends up charging the customers as much as regular retail stores, that can significantly impact its sales.
The company is embroiled in a legal dispute in New York State where although the company doesn’t have a physical presence, it has partners and affiliates who send traffic to Amazon’s online portal. Amazon has been asked to pay sales tax over such local partnerships, a demand which the company has tried to legally dispute with little discuss.
In the coming days, it is quite inevitable that Amazon will have to collect sales tax from virtually every state, especially because more warehouses and expanded physical presence is important to ensure quick shipments. Given these circumstances, it is no wonder then that Amazon is backing an online sales tax on all shipments nationwide. This, Amazon holds, will level the field for all online retailers.
Courtesy: WSJ
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