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Amazon in Danger of Sales Tax Again
As a result of the economic downturn in the United States, several states are revisiting the possibility of imposing a sales tax on Internet retailers, including Amazon.com Inc. (“Amazon”), a Washington-based, multinational electronic commerce company. Currently, U.S. retailers must collect sales taxes only in states where they have a physical presence, allowing e-commerce companies such as Amazon to realize a competitive advantage over traditional, brick-and-mortar businesses. In an attempt to generate additional tax-revenue in 2009, some states argued that the “physical presence” requirement was met by an Internet retailer if an affiliate with a physical presence used ads on its own website that linked to the Internet retailer. Amazon pushed back with a high-profile and partially successful challenge to the proposed bills, calling them unconstitutional and threatening to end affiliate programs. To date, only a handful of states, including North Carolina and Rhode Island, have imposed a sales tax on Internet retailers; and Amazon continues to only collect sales tax in four of the 17 states where it or its subsidiaries have a physical presence. However, with states still facing serious fiscal challenges, and the potential of tens of millions of dollars in extra tax revenue, lawmakers may revive efforts to impose such a tax this year.
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