This week, the Center on Budget and Policy Priorities (CBPP) released a report that calls into question Amazon.com's justifications for opposing e-fairness legislation that has been passed or introduced in a number of states. The report, Amazon's Arguments Against Collecting Sales Taxes Do Not Withstand Scrutiny, by Michael Mazerov, senior fellow for CBPP's state fiscal project, found that Amazon.com's opposition to sales tax collection is "simply a desire to maximize the significant competitive advantage it gains over its rivals when they must add the typical five percent to 10 percent to their prices but Amazon does not."
CBPP, which works at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals, noted that Amazon's refusal to collect sales tax in most states negatively impacts state and local governments' ability to finance education, health care, and other services. "States and localities lose more than $7 billion a year in uncollected sales taxes," said the report.
In 2008, New York State passed an e-fairness provision that updated sales tax laws and stated that Amazon.com's online affiliates, which act as virtual sales agents, constitute nexus in the state. But, CBPP said, "Amazon has taken the lead in opposing New York's law in the courts... in the media, and in the legislatures of other states that have considered adopting similar laws."
The CBPP study noted that online retailers' arguments against being required to collect sales tax in other states are unconvincing for a number of reasons, among them:
- Amazon says collecting sales tax would be burdensome, but Amazon already collects sales tax in virtually every state for numerous other companies.
- Amazon argues that it does not directly benefit from the public services paid for by sales tax, but "Amazon and its subsidiaries have facilities in at least 17 states that levy sales tax. Those facilities, and the people who work in them, receive the same kinds of state and local public services received by every local retailer that is legally obligated to charge sales tax." Amazon collects and remits sales tax in only four of those 17 states.
- Amazon contends that its opposition to collecting sales tax has nothing to do with wanting a price advantage, but its "top management has said publicly from the founding of the company that not charging sales taxes gives it a key competitive advantage over its Main Street rivals," the report noted.