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Amazon Sales Tax on the Horizon?
Alabama’s sales tax holiday is August 5-7, helping families send the kids back to school. A weekend without sales tax on clothing, supplies and computers is a big draw for retailers. What if a store never collected sales tax? Online and mail-order retailers such as Amazon, Newegg and HSN aren’t required to charge out-of-state customers. Rather, it’s the consumers’ responsibility to remit “use tax” on their purchases. The issue is nexus - if a store doesn’t have a physical presence in a state, it doesn’t have to charge sales tax. This is why you are charged 4% tax when ordering Moneyball from the Barnes & Noble website but not from Amazon.
The rate of collection of use tax is low, as evidenced by the form letters from the Alabama Department of Revenue which seek use tax from residents. Alabama residents are supposed to report their use tax due on the AL 40 line 19b. The catch is that states have no actual idea of the amounts due from taxpayers and rely on them to report use tax due. Without a consistent manner to catch violators, 19b often remains empty.
As states across the country attempt to expand sources of revenue, many have turned to the under-collected use tax and hope to force retailers to collect sales tax. Efforts have been lukewarm and results nominal, but states are pushing forward slowly. California has been the largest state to pass such a measure (both North Carolina and Colorado lost in court). If California’s law lasts, expect other states to follow suit. Tennessee is being pressured in the form of a lawsuit from in-state retail stores to start collecting use tax from Amazon’s customers. The permanent sales tax vacation for online retailers may quickly be coming to a close.
Unfortunately, it is impossible to give comprehensive tax and accounting advice over the internet, no matter how well researched or written. Before relying on any information provided here, contact a tax or accounting professional to discuss your particular situation.
