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by Harry Rabb, C.P.A.
Special to Tropical Breeze
Ever since Amazon first began selling
books online, brick-and-mortar stores have maintained that the
“e-tailer” had an unfair economic edge since it was not
required to collect sales tax in states where it has no presence.
But with Amazon’s rapid growth, booksellers began arguing, as
far back as nine years ago, that Amazon had a legal
“nexus” in most states and should be obligated to
collect tax, a position Amazon has firmly and successfully
rejected. There are signs, however, that change could be
coming.
In November, new members joined the
California Board of Equalization, and its new president, Betty Yee,
has indicated in public comments that she is inclined to support
the collection of online sales tax. Often in matters such as this,
as goes California, so goes the nation. The staff of the BOE, which
is California’s tax collection arm, has actively investigated
the Amazon sales tax issue in recent months, and the Northern
California Independent Booksellers Association is hopeful that a
decision is relatively close. The NCIBA’s position is that
Amazon’s affiliate programs constitute a nexus in every
state, and therefore the e-tailer should be required to collect
sales tax.
In addition to a possible decision by the
BOE, late last month Sen. Mike Enzi (R-WY) reintroduced the Sales
Tax Fairness and Simplification Act, legislation that would force
all e-commerce companies to collect sales tax, even in states where
they don’t have a physical presence. The ABA supports the
Enzi bill and is monitoring events in California as well. Experts
have observed that if the bill is passed it would create a federal
mechanism for states to collect sales tax. The problem with the
legislation is that states must “opt in,” meaning that
they must have their own laws that require e-tailers to collect
tax. At present, 21 states have such laws, but with a few
exceptions, most of the larger states do not. Since passage of the
federal law and then new state laws could take years, the ABA is
hopeful that a favorable ruling by the California BOE will speed
the implementation of other states collecting sales tax from
Amazon, much like a domino effect.
Amazon will not respond to questions about
the sales tax. The issue appears to be one of growing concern,
however. Recently, the Associated Press reported that the company
had hired a large lobbying firm to lobby Washington on a range of
Internet matters, including taxes. And big companies have been
known to change their stance on the tax question. Following its
acquisition of the 50% of Barnes&Noble.com that had been owned
by Bertelsmann, Barnes & Noble stepped up the collection of
online sales tax and now collects tax in all states that have a
sales tax. Two cases involving the collection of back taxes on
sales made before it began collecting the tax are still under
review.
Despite the length of time the BOE has
dragged its heels, the tax issue remains the NCIBA’s top
priority. Booksellers believe that if Amazon were forced to collect
sales tax, which averages about 8% in California, it may be forced
to reduce the deep discounts it gives on books. The issue remains
high on the agenda of the ABA as well. Ultimately, fair
administration of the tax law is the objective.
• • •
This information is provided as a public
service and should not be construed as individual accounting or tax
planning advice. For information on how these general principles
apply to your situation, please consult an accounting or tax
professional.
Harry Rabb is a C.P.A. and owner of
Accounting Services, Inc., 935 Main Street, Suite D-1, Safety
Harbor. Call 727-725-4121.
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