ABA to Arizona: Require Amazon to Collect Sales Tax

On September 24, the American Booksellers Association wrote to the Arizona Department of Revenue to point out, once again, that Amazon.com's distribution facilities in Phoenix and Goodyear, Arizona, constitute a physical presence in the state and require the online giant to collect and remit sales tax for purchases made by Arizona residents. The letter, from ABA CEO Oren Teicher, urged the state "in the strongest terms possible to enforce existing sales tax laws and require Amazon.com to collect and remit sales tax on purchases made by Arizona residents."

The ABA communication on behalf of the state's member bookstores came on the heels of a recent New York Times article touting the two Arizona facilities. ABA had previously contacted the state's revenue department regarding this issue. ABA is now calling on booksellers to follow up on its letter and contact their state lawmakers and Gov. Jan Brewer to demand that the state require Amazon.com to follow existing sales tax laws.

"Though the in-depth Times article was hardly necessary to back our contention that Amazon.com has nexus in the state, it makes abundantly clear how absurd it is that anyone would try to claim otherwise," said Teicher. "We've contacted the Arizona Department of Revenue before in regards to this egregious inequity and, so far, they have done nothing to indicate that they plan to take action. Our independent bookstore members obey sales tax laws, and so should Amazon.com."

In the letter, Teicher wrote: "It is both disappointing and disheartening to see that the Department of Revenue has done nothing to rectify this egregious sales tax inequity. Your inaction affects every law-abiding, tax-paying business in Arizona."

Teicher noted in the letter: "Arizona businesses are asking themselves how is it fair that two warehouses larger than 600,000 square feet do not constitute a physical presence in the state but that a 2,100-square-foot bookstore does. How is it fair to communities throughout the state, which depend on sales tax revenue to fund such services as first responders and schools, that the Department of Revenue allows a large, out-of-state retailer to skirt state laws? It is unconscionable that at a time when Arizona has a projected $4 billion shortfall -- and is expected to lose some $243 million in sales tax revenue to e-commerce sales -- that it should respond to news of a sales tax scofflaw with silence and inaction." (To read the letter in full, click here.)

Teicher urged booksellers to contact their lawmakers in regards to this sales tax inequity and encouraged them to ask their retailing neighbors to do likewise. To help Arizona booksellers in this important advocacy outreach, ABA has prepared a template letter that can be adapted and sent to the governor and to their state senators and representatives.

The following is the text of ABA CEO Oren Teicher's letter to the Arizona Department of Revenue.

September 24, 2009

On behalf of the American Booksellers Association's many bookstore members in the state, we are following up on our previous letter of November 7, 2008, to reiterate our contention that Amazon.com's two massive distribution facilities clearly constitute nexus in the state. To underscore this fact, enclosed please find a recent, in-depth article from the New York Times about Amazon.com's two Arizona-based distribution facilities. While the article itself is hardly necessary to prove our assertion, we do believe it ends all serious debate on the issue. By any definition, Amazon.com has nexus in the state, and the Arizona Department of Revenue is obligated to enforce sales tax laws by requiring the company to collect and remit sales tax on purchases made by Arizona residents.

In your response dated November 28, 2008, you stated that the Arizona Department of Revenue "seeks to administer the tax laws fairly." However, a year later, it is both disappointing and disheartening to see that the Department of Revenue has done nothing to rectify this egregious sales tax inequity. Your inaction affects every law-abiding, tax-paying business in Arizona. When your department ignores Amazon.com's sales tax avoidance practices, you punish those in-state businesses that respect existing sales tax laws. Moreover, you provide a massive, out-of-state retailer with a significant pricing advantage over smaller, in-state retailers, which must charge sales tax on products while Amazon.com offers sales tax-free shopping. In addition, these Arizona retailers also must use their resources to administer regular sales tax filings to your department.

Arizona businesses are asking themselves how is it fair that two warehouses larger than 600,000 square feet do not constitute a physical presence in the state but that a 2,100-square-foot bookstore does. How is it fair to communities throughout the state, which depend on sales tax revenue to fund such services as first responders and schools, that the Department of Revenue allows a large, out-of-state retailer to skirt state laws? It is unconscionable that at a time when Arizona has a projected $4 billion shortfall -- and is expected to lose some $243 million in sales tax revenue to e-commerce sales -- that it should respond to news of a sales tax scofflaw with silence and inaction.

We know some would argue that Amazon.com's two facilities provide much-needed jobs, but that argument is, at best, shortsighted. The two Amazon facilities do not provide as much in-state employment as do the hundreds of thousands of law-abiding in-state businesses throughout Arizona. Moreover, if Arizona continues to fail to enforce existing state law regarding the collection of sales tax, it is certain that, little by little, businesses on every Main Street in the state will shutter their doors and lay off workers. That hardly seems like a viable long-term economic plan.

The well-known 1992 Quill United States Supreme Court decision defined nexus as when a company has a sales agent, an office, or a warehouse in the state. If a company met just one of those conditions, the United States Supreme Court ruled that it had nexus in a state and was thereby required to collect and remit sales tax. As the evidence clearly shows, Amazon meets at least two of these conditions. ABA's Arizona-based bookseller members follow existing sales tax laws, and collect and remit sales tax, and so should Amazon.com.

Amazon.com's status is quite clear and does not require any investigation. As such, we urge you in the strongest terms possible to enforce existing sales tax laws and require Amazon.com to collect and remit sales tax on purchases made by Arizona residents. In addition, we will be bringing this matter before state legislators and the Governor.

Sincerely,

Oren J. Teicher
Chief Executive Officer
American Booksellers Association