Amazon began collecting sales tax on purchases made by Ohio residents on Monday, June 1. The decision to collect is part of deal to build data centers in the state brokered through JobsOhio, a private nonprofit organization that promotes job creation and economic development for Ohio. The agreement includes millions in tax subsidies from the state, as well as land and tax deals with the three towns where the data centers will be located.
At a press conference on Friday, May 29, Ohio Gov. John Kasich called the deal an “intellectual triumph” that will “send a message to our young people that, you want to think, you want to live in the future, you want to understand technology, you stay right here in Ohio,” as reported by the Associated Press.
The Columbus Dispatch reported that the Ohio Department of Taxation has estimated that Ohio will lose out on about $400 million in unpaid sales or use tax on remote sales in 2015.
In April, ABA and Barnes & Noble together sent a letter to Gov. John Kasich, urging him to require Amazon to collect and remit sales tax. In the letter, ABA CEO Oren Teicher and Barnes & Noble CEO Michael Huseby stressed: “Allowing the current inequity to continue unabated, while providing large remote retailers with tax subsidies, is bad for Ohio. And, as e-commerce continues to grow, the toll this inequity has on communities across the state will only increase, resulting in unavoidable budget cuts as well as lost jobs and revenue.”
About this week’s developments, Teicher said, “While it is certainly good news that Amazon has finally agreed to collect sales taxes in Ohio, we believe that these massive tax subsidies undermine the positive effect that collecting and remitting sales tax might have for Ohio taxpayers. Ultimately, the cost of these arrangements fall on the shoulders of Ohio consumers and Main Street retailers that are being forced to, in essence, subsidize their own competition. There is unmistakable evidence that, in the long term, giving away the store to one behemoth business never helps a state’s economy.”
Amazon is currently in the process of opening three data centers in the state under its Vadata subsidiary. The affiliate is getting some $81 million in tax incentives from the Ohio Tax Credit Authority, as well as property tax breaks from Hilliard, Ohio, and free land in Dublin, Ohio, two of the cities where Amazon’s facilities are being built.
The third data center will be built in New Albany, which has offered Amazon a 15-year, 100 percent tax abatement, according to the Columbus Dispatch. The article noted that Amazon said it will invest $1.1 billion and create 1,000 jobs with an average salary of $80,000 over the next several years. The deal was initially announced in August 2014 but was expanded to include two more data centers.
In an op-ed published in the Minneapolis Star-Tribune, which was republished in Bookselling This Week, Olivia LaVecchia, research associate with the Institute for Local Self-Reliance Community-Scaled Economy Initiative, wrote: “While brick-and-mortar retailers employ 47 people for every $10 million in sales, Amazon employs only 14 people per $10 million in revenue, according to U.S. census data and Amazon’s annual reports. This means that as Amazon grows and crowds out other businesses, the result is a net decrease in jobs.
“Within that slice of bricks-and-mortar retailers, it is independent retailers that create even more jobs, our research has found — 57 jobs for every $10 million in sales. In other words, providing tax breaks to giant companies like Amazon disadvantages the locally owned enterprises that add real value to the economy.”