Amazon To Collect Sales Tax From Connecticut Customers As Part Of Deal With State [The Hartford Courant]
(Hartford Courant (CT) Via Acquire Media NewsEdge) Feb. 05--Amazon, the world's largest online retailer, will begin collecting sales tax in the state this November as part of an agreement that Gov. Dannel P. Malloy says will mean hundreds of new jobs and a $50 million Connecticut distribution center.
It also means that residents will pay a 6.35 percent tax on every book, DVD, electronic device or tube of toothpaste bought and shipped to their doorstep from Amazon. And the tax will be paid when consumers click "Place Your Order" instead of at tax time, when state tax forms ask residents to declare online purchases. Many people have not declared those purchases and have not paid the tax, state officials say.
The agreement, signed Sunday and announced Monday, allows the state to address the long-standing issue over online collection of state sales tax and follows similar agreements in Massachusetts in December and New Jersey in 2011.
State officials expect the tax deal to bring in about $15 million yearly. Putting it in place in November will allow the state to capture taxes on much of Amazon's sales during the busy Christmas season, Department of Revenue Services Commissioner Kevin Sullivan said.
"This has been one of our top priorities for over a year now," Sullivan said.
The governor presented the agreement as a victory for the state's traditional retailers who previously had to compete with a major online retailer that didn't have to charge a sales tax. Federal law does not require online retailers without in-state brick-and-mortar operations to collect state and local sales taxes.
"All in all, this is a win for our state's taxpayers, our main street retailers, and our workforce," Malloy said.
It was not clear Monday when or where the new Amazon distribution center would be built.
In the past, Amazon has taken the position that it does not have to collect sales taxes in states where it does not have a physical presence.
Connecticut legislators in 2011 passed a law requiring web retailers to collect taxes on sales arranged through affiliates. But by year's end Sullivan had decided against pursuing the money, citing a compromise Amazon had reached on the issue with California and saying he did not want to send Amazon "the wrong message."
For Amazon, the new Connecticut agreement takes off the table the potential for the state to recover unpaid taxes on past sales, according to Malloy's office.
The hope at the state Capitol is that agreements like these will stoke federal efforts to pass a comprehensive online sales tax fix. Malloy and Sullivan are optimistic that such a law could be passed in the next few years. A larger, national deal could address other retailers, such as Overstock and Zappos.
"If Amazon is the 900-pound elephant in the room, Overstock is the 200-pound elephant," said University of Connecticut law professor Richard Pomp, an expert on state and local taxation.
With the tax issue out of the way, Amazon will establish an order fulfillment center somewhere in the state within two years, where at least 300 people will work, the governor said. These warehouses receive and fill orders, then ship the packages to customers.
Malloy said the deal is not contingent on tax breaks or economic assistance.
Why Amazon agreed to the deal was not clear, though tax experts say the changing business of online shopping and the potential of a bad outcome for Amazon could have caused the shift.
Had the deal not been made, Malloy said, his administration would have kept arguing that Amazon had a substantial business footprint in the state and so should collect sales taxes.
UConn's Pomp said it looks as though the company is choosing to cooperate with states rather than keep the discussion in the courtroom, where a judge could choose to compel the company to pay sales taxes on all past purchases, a decision that Pomp said could open up Amazon to "an awfully large retroactive exposure."
What exactly it says, however, is being kept a secret by state officials. Commissioner Sullivan said that he could not release the settlement, citing a state statute that governs disclosure of tax records.
With the tax standoff resolved in Connecticut, state businesses affiliated with Amazon will again be able to sell products through the retailer. In 2011 when the state legislature passed a measure that would tie Amazon to the local affiliates to compel it to collect sales tax, Amazon stopped doing business with affiliates in Connecticut.
John Berky, who sells recordings of Austrian composer Anton Bruckner through his company, Charter Oak Recordings, was one of the affiliates dropped. He made some money on sales, but most of the income came from sales referrals through ads on his website.
"I'm glad they came to some sort of agreement," said Berky, adding that he might jump back into the affiliate program.
Malloy said at a morning press conference at the State Capitol that the "issue of tax fairness and compliance needs to be address at the federal basis. We will join with other state to put as much pressure on online retailers as well as the federal government to address this issue."
Paul Misener, Amazon vice president for global public policy, said in a statement that the company looks "forward to working with Governor Malloy toward passage of the legislation now being considered by Congress that would finally resolve the sales tax issue, level the playing field for all retailers, protect states' rights and allow states to collect the revenue owed."
(c)2013 The Hartford Courant (Hartford, Conn.)
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