Massachusetts Added to Growing List Forcing Amazon to Charge Sales Tax

Massachusetts is the latest in a growing list of states that are looking to force Amazon to collect sales tax from residents.  A group of businesses, state officials, and union representatives have joined together in pushing for the Massachusetts Department of Revenue to impose a sales tax on any purchases made through the online retail giant.  The group is seeking for this change to be made as early as July 1, 2012.

The group, led by the Massachusetts Main Street Fairness Coalition, sent a letter to the commissioner of the Massachusetts Department of Revenue, Amy Pitter, claiming the state needs to act in correcting the “disparity in state sales tax collection.”  The group is seeking to apply the state sales tax rate of 6.25% to Amazon’s online sales, to place the retailer on equal footing with local businesses that are struggling to match Amazon’s low prices.

The Coalition’s letter stated that “forcing Amazon to play by the same rules as everyone else would create a level playing field for our small Main Street retail businesses.”

Massachusetts state laws, which are similar to those of many other states, require that retailers with a physical presence in the state must collect sales tax from buyers.  Historically online retailers have been exempt as result of a loophole of sorts.  Laws governing sales tax collection were generally written before online retailers existed, much less accounted for such a large amount of sales.

Online retailers are not required to collect sales tax in states where they do not have a physical presence.  But generally, which is true for Massachusetts, residents are supposed to pay unpaid sales  tax amounts when they submit their state income tax return.  However, the Departments of Revenue for various states have generally not taken steps to pursue individuals for the collection of unpaid sales tax or otherwise enforce the measure.

A spokesman for the Massachusetts Department of Revenue would not comment on the current situation or the impact on individual taxpayers.

Amazon has commonly become the primary target of efforts of state lawmakers to enforce the collection of sales tax, even in states where the seller does not have a physical presence, because Amazon is by far the largest such retailer.  For the calendar year ended December 31, 2011, Amazon had revenues of approximately $48 billion.

Estimates by the National Conference of State Legislatures indicate Massachusetts will lose out on approximately $250 million in sales tax revenue during 2012 if purchases through Amazon are not charged sales tax.

Federal lawmakers are considering legislation that would close the sales tax loophole for online retailers for all states.  Other states have already stepped up their efforts to collect sales tax from Amazon.  Texas will begin collect sales tax from Amazon beginning in July 2012.  New Jersey will begin collecting sales tax in July 2013.  Both states announced these plans to collect sales tax along with moves by Amazon to construct distribution and other facilities within those states.

Arizona and other states are considering individual measures as well.

Amazon did not respond to requests for comments on the situation in Massachusetts.

by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.