It is shaping up to be a notable year for sales tax fairness, as more states introduce, pass, or sign sales tax fairness legislation into law despite threats by Amazon.com and Overstock.com to terminate sales affiliates or close warehouses. In addition, the issue continues to garner widespread media coverage. Here is a brief update on what’s occurring on the sales tax fairness front in a number of states.

Arkansas

Gov. Mike Beebe signed Senate Bill 738, sales tax fairness legislation, into law on Friday, April 1, according to MobyLives.com [1]. The law now requires remote retailers with nexus in the state through a broad network of online affiliates acting as sales agents to collect and remit sales tax on orders made by the states’ residents. It is anticipated that the law will go into effect in late July, according to a spokesperson for the governor.

Gov. Beebe noted, “We have a lot of local businesses in Arkansas, both small and large companies, that collect sales tax and we’re trying to level the playing field,” as reported by MobyLives.com.

Arkansas is the seventh state to enact sales tax fairness legislation, joining Colorado, Illinois, New York, North Carolina, Rhode Island, and South Dakota. It is the fifth state to pass an affiliate nexus version of sales tax fairness legislation.

The MobyLives article notes that, thus far, there’s been no word on whether Amazon.com has cut its ties with Arkansas-based online affiliates. Amazon.com has fired its affiliates in every state that has passed sales tax fairness legislation, except for New York State, where it filed a legal challenge. Two New York State courts have ruled the state’s affiliate nexus law to be constitutional. [2]

California

On Monday, April 4, the California Assembly Revenue and Taxation Committee held a hearing on AB 155, a sales tax fairness bill sponsored by Assemblyman Charles Calderon (D-Whittier), as reported by SFGate.com [3]. This bill, if enacted, would clarify state tax code as to what constitutes physical presence in the state. It makes clear that corporate investments in the state, when related to a corporation’s retail business, give that corporation retail nexus, and thus require it to collect and remit sales tax.

The state estimates it loses about $1.1 billion a year in revenue through uncollected “use taxes” from online sales, SFGate.com reported. Gene DeFelice, general counsel of Barnes & Noble testified before the committee, the article noted. “For retailers like us, this has become a serious competitive issue,” Felice stated.

Assembly Calderon stressed, “You cannot build your entire business plan on the avoidance of taxes,” the article reported.

Massachusetts

On Thursday, April 7, in Boston, bookseller Carole Horne, general manager of Harvard Book Store [4], in Cambridge, Massachusetts, is scheduled to be among those testifying in support of e-fairness before Massachusetts’ Joint Committee on Revenue.

The committee is considering three affiliate nexus bills: H01731, sponsored by Rep. Martin J. Walsh; S01554, sponsored by Assistant Majority Leader, Sen. Steven A. Tolman; and S01450, sponsored by Sen. James B. Eldridge, as well as a bill that would bring the state into compliance with the Streamlined Sales and Use Tax Agreement. The affiliate nexus bills would require remote retailers that have nexus in the state through a broad network of online affiliates acting as sales agents to collect and remit sales tax to the state.

According to the Sun Chronicle [5], proponents of sales tax fairness have allies among Republican lawmakers, who note that the law is a matter of fairness. Rep. Jay Barrows (R-Mansfield) told the Sun Chronicle that allowing Internet sales to be exempt from sales taxes “is kind of kicking the crap out of Main Street America.”

Look for more on this story in next week’s issue of Bookselling This Week.

South Carolina

In South Carolina, Amazon.com is seeking to open a distribution center near the city of Cayce, but the company has threatened to pull the plug on the facility if the state does not provide a sales tax exemption. The threat has spurred a statewide debate over whether it is worth it to the state to provide the exemption.

A law passed in 2005 exempts large distribution centers from collecting state sales taxes, but the law expired in June, Free Times [6] reported in early March. State commerce officials have told Amazon.com that they would “try to ensure” that the online giant would still “get the exemption,” the article stated.

Now, the state legislature is exploring the idea of providing a sales tax exemption to Amazon.com, but only for a limited time, as reported by the State. [7] Thus far, Amazon.com has balked at the idea.

Republican Gov. Nikki Haley has said she opposes the idea of providing Amazon.com a sales tax exemption, though she said that she would allow the state legislature to ultimately decide.

“I will sit and wait at my desk and, if it comes, we certainly will let it go,” Haley said at press conference on April 6, according to the State. “This is not about Amazon. We want companies in our state. What we don’t want is to change tax policy to get them here…. There is no more bigger priority I have than jobs, but I will not do it on the backs of businesses we already have.”

Tennessee

A fight over sales tax fairness is now brewing in Tennessee. With the state trying to entice Amazon.com into opening two distribution centers, in Hamilton and Bradley Counties, House Finance Committee Chairman Charles Sargent (R-Franklin), wants to know exactly what kind of sales tax breaks the state is offering the online giant, as reported by the Times Free Press [8]. “I think a number of people, representatives, would like to see what transpired, how it’s going to work, what are the consequences of this particular situation – and what consequences there could be for the future,” Sargent said.

According to the article, some believe that the state has plans to exempt Amazon.com from having to collect and remit sales tax for purchases made by Tennesseans in exchange for opening the distribution centers. “We want competition to be fair,” Roland Myers, president and CEO of the Tennessee Retail Association, told the Times Free Press. “Tennessee’s consideration of a plan to exempt Amazon from collecting state sales tax does the exact opposite and retailers across the state are justifiably upset.”