Amazon

Gov. Jan Brewer tours an Amazon warehouse in Phoenix in 2011. (Capitol Media Services file photo by Howard Fischer)

The nation's largest online retailer is going to start collecting sales tax on items ordered by its Arizona customers.

Amazon.com announced Friday it has reached an agreement to settle the $53 million assessment against the company by the state Department of Revenue for unpaid sales taxes.

The disclosure, made in a filing with the Securities and Exchange Commission, does not spell out how much the company would pay. The statement called the amount "immaterial.''

But the real victory for the state is that Amazon and its subsidiaries will collect and remit the state sales tax beginning Feb. 1 for any goods sold to Arizonans. And starting July 1, Arizonans who order digital products or services, like downloading a book online, also will be paying the 6.6 percent levy.

In the interim, though, Arizona has agreed not to pursue the company for taxes on sales prior to those dates.

The deal is a major victory not only for the state, which will now benefit from the additional proceeds, but also the Arizona Retailers Association which has fought for years to end the advantage the online giant has over "brick and mortar'' retailers which have to impose the state's 6.6 percent tax plus any local levies.

It also makes unnecessary perennial efforts to redefine the Arizona tax code to close what some lawmakers have argued is a loophole that Amazon uses.

How much the state might gain is unknown. Even research reports on the legislation to tax Amazon did not provide an estimate.

Matthew Benson, press aide to Gov. Jan Brewer, said the administration cannot provide any figures on possible financial gains to the state. Even if it could, he said, information about any individual taxpayer is protected by confidentiality laws.

But Benson said Brewer is pleased to be able to put the issue to rest.

"This agreement allows the state of Arizona to settle its dispute with Amazon without resorting to litigation, while securing partial payment and establishing that Amazon will collect and remit this tax going forward,'' he said. "Amazon is a quality employer that has invested more than $150 million in Arizona and created thousands of good jobs, and Gov. Brewer is proud to have them here.''

But the National Conference of State Legislatures estimated earlier this year that states lost an estimated $23 billion this year from out-of-state sales, with half of that attributed to purchases made on the World Wide Web.

Michele Ahlmer, executive director of the Arizona Retailers Association, said she was "thrilled'' by the action. She said it will make a big difference for local stores.

"Where there is a pricing advantage that is unfair, they can't recoup that,'' she said. That difference is not just the state's 6.6 percent levy but other local taxes which can bring the total tax close to 10 percent.

"They can only cut their costs so much in order to compete,'' Ahlmer said.

Amazon and other online retailers have been able to escape collecting sales taxes because of a 1992 U.S. Supreme Court ruling which said states can demand the money only if a company has a "physical presence'' in the state.

So, for example, the tax applies to purchases made through Target.com because the company also has retail outlets in Arizona. By contrast, Seattle-based Amazon does not.

What Amazon does have are warehouses in Arizona for distribution -- the company calls them "fulfillment centers'' -- where goods from elsewhere are processed and sent out to Arizona customers.

While the exact reason for the state's assessment remains confidential, lawmakers argued those warehouses provided the legal "nexus'' to the state. And if there were any question about that, Sen. Al Melvin, R-Tucson, offered legislation to spell out that a warehouse is, in fact, physical presence.

That measure failed after the Senate voted 20-8 to kill Melvin's legislation.

The state's $53 million assessment, levied last year, covered sales from March 1, 2006 through Dec. 31, 2010.

Company officials said Friday they "continue to believe the assessments were without merit.'' But they agreed to the deal, the "immaterial'' payment -- and, most significantly, the requirement to start collecting Arizona's taxes next year.

Ahlmer said she would have preferred that any deal require Amazon to start collecting taxes immediately, ahead of the holiday season. But she said the Feb. 1 start date is probably faster than any legislation that could have been approved.

Anyway, Ahlmer said, that start date is earlier than the company has accepted in some other states where Amazon has already entered into deals to start collecting their sales taxes at some future point.

For example, Virginia Gov. Bob McDonnell announced earlier this year that the company would start collecting his state's sales taxes beginning Sept. 1, 2013. That agreement was designed at least in part to derail legislation to force Amazon into immediately collecting the tax.

Company spokesman Scott Stanzel said Amazon already is collecting taxes in California, Washington, Kansas, North Dakota, Texas, Kentucky, New York and Pennsylvania. Aside from Virginia -- and now Arizona -- there are agreements to start collecting taxes in the future in Scoth Carolina, New Jersey, Tennessee, Indiana and Nevada.

Legally speaking, the decision by Amazon to start collecting the state sales tax should not make a difference in state revenues. That's because Arizona law requires those who purchase items from out-of-state retailers to compute and pay "use taxes'' directly to the state.

But that provision of the law is largely ignored and little enforced for individual taxpayers, though major manufacturers can find themselves being audited for their out-of-state purchases.

(19) comments

johnmiller

According to 20four7va retailers, they knew it was coming. Now it's happening not only in AZ but to some states as well.

4358


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Bluepoet

Amazon is still a better deal than brick and mortar shopping. They have free shipping, for most of their products. Their service is excellent, and I don't have to waste gasoline, and time, driving all over to go shopping.

Retail businesses are closing and boarding up, not because they can't compete price-wise, but because they can't compete with the economy that was brought to us all, by the banks and Wall Street.

The State is just doing what it must do, in order to stay afloat. We, as voters, aren't willing to vote for taxes, for even the most basic services, even though there are more of us using more of those services every day. In a climate where raising taxes mean assured loss of your job, where do you go for needed revenues?

Sales tax...that's where...

scyntax

Gotta love all the chest-thumpers out there: Harumph! That does it for me! I'll never shop at (fill in the blank) again!

They're probably shopping there right now.

And to everyone out there screaming "Greed, Greed, Greed". How is collecting money to run a state greed? Politicians do mismanage funds, but how do you ascribe greed to that? Another example of the misinformed screaming at the top of their lungs nonsense that just makes them feel good about themselves.

xyno

If the online retailers are made to collect the sales tax, we just might get the sales tax lowered.

DrJCA1

Larry: would you prefer to live in a state that is going under? Taxes are the only way any government has income. If anything reduces that income, the amount they have to spend is obviouly reduced. Real estate, income, and sales taxes aree vital to evry state as they cannot just print money like the imbeciles in the federal government can.

Jacktar

Well taht does it for me,for i will no longer order or make any further purchase from Amazon ,for there is a whole internet out there to select from with no tax and free shipping.To each his own i say.

larry who cares

You people who believe that the state should collect sales tax are brain dead.

For one Arizona has a surplus state budget. Do they ever refund extra taxes to you? Second, by legislative action the state has turned the retailers into state collection agents. Retailers spend there own time and money just to collect for the state. This adds to the sellers overhead. Amazon sells good merchandise and delivers to the door at lower prices. . There warranties and free prompt shipping are outstanding. I can shop easily on line and do not have to run all over town in this God forsaken heat to buy something, On larger items like furniture the retailers complain because they do not always carry an adequate selection of good products and they charge extra for delivery. Bottom line is that the GREEDY state continues to suck money from the poor tax payer. AND THE CONSUMERS LOOSE.

DrJCA1

I suppose the folks who shop online just love the empty store-fronts in so many shopping centers. Years ago they complained about Wal-mart destroying small family owned business, but apparently it's OK if the internet does it. Pehaps someday you internet shoppers can sit down in front of your computer with your grandchildren and window shop for birthdays or the holidays. What an incredible sad scenario that is. I have shopped locally my entire life and go out of my way to support my local businesses and organizations. I am willing to spend a few extra dollars to be treated like a human, to be respected by the owner, to make friendships with these folks, and to get the servie I deserve as a customer.

As a side note, the last thing fat Americans need is another way not to move around. Drive-through everything and now "drive-through" shopping. How lazy can you possibly get?

truthorconsequences

Well, it looks like most of you get it. This is nothing more than the gov. disease GREED!!! Besides that they want to raise the sales tax again...in some stores that will bring it to over 10%. It's already 9.6%. Check your reciepts if you don't think so! We need to get a grip on this "legal robbery" that all govt's are guilty of! The mesateacher who feels guilty for not paying more taxes must be getting govt. paychecks!!!

wellreadone

Crack can appear safer than giving $$$$$ to the political machine in Arizona when I consider how too much of OUR money is used to further entrench the reigning con artists in our legislature, state, county and city governments (not all government folks mind you but even a few are way too many) and that fact sure seems to harm us more often than not.

Thegweni

This is nothing but greed on the part of Arizona politicians. They want the money and do not give a toss if it forces Amazon to move out of state or the jobs that will be lost. I for one am tired of financing these high spending high rollers in this state.

Oh - vote a resounding NO on making the 'temporary' 1% tax increase permanent.

Suziehaystack819

Politician are like crack addicts only money=crack

Amazon could do like about every other American company has done cross the border and set up shop.

Pragmatic

Taxes are a fact of life. They rise not fall. Amazon has a local (State) presence and should pay their way like like other businesses. The only tax applied is for "in state" sales.
We would be better served by demanding better controls on the government spending end of the pipe line, keep the services and cut the excesses and waste.

soricobob

Well, it was nice while it lasted, but I also like that I can use my credit card "points" for purchases. Also, it's nice to shop without getting warn out or finding they're out of something.

Bob In AJ

The "Brick and Mortar" guys crying amazes me. Online purchases (from other states) carry with it freight costs which can easily double the price of purchases. Trouble is, you drive all over the state and not find what you want from the locals (in some cases). So there is NO ADVANTAGE for the online companies overall!

So far as state revenues are involved, delivery companies (UPS, FEDEX, etc.) more than make up for losses in sales tax, through gasoline taxes, payroll taxes, etc.).

You're looking at GREED, GREED and more GREED from State government and local retailers!!

Deddzone

Well, they may move from the state. I'm not opposed to the idea and it will make folks buy local---I just don't trust what dumb thing Jan will do with the $$.

Harmsway

Sigh...Amazon has lost it's advantage. I'm not opposed to paying taxes, and I do buy most of my stuff locally, as even avid internet shoppers do. But...giving more money to incompetent politicians to waste is a shame.

Guess I'll be looking to other online retailers to buy from. Any ideas which ones still don't charge sales tax? Ebay is always a choice, and overseas...

mesateacher

This is a good thing. And long overdue. I confess to loving Amazon for its speed, quality, selection, and price. But I have felt guilty about it - it isn't fair to the local shop owners who have to collect sales tax. Now, my guilt is assuaged. And I'll order from Amazon almost guilt-free.

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