Arizona and Utah Senates Act on Sales Tax Fairness Legislation

The Arizona state Senate is scheduled to vote today on SB 1338, legislation that would clarify sales tax laws in the state by requiring any company with a warehouse or distribution center in Arizona to collect and remit sales tax. If signed into law, the bill would require Amazon.com, which currently has four warehouses in the state, to collect and remit sales tax on orders made by Arizona residents. The legislation, sponsored by Sen. Al Melvin (R-Tucson), successfully cleared the Arizona Senate Committee of the Whole on Tuesday, March 6.

Sen. Melvin said that SB 1338 is designed to close a loophole in sales tax law that lets some companies that do business in Arizona skirt collecting sales tax, as reported by the Arizona Daily Sun [1]. “The way I look at it, it’s a jobs bill,” Melvin said. “We’re trying to save the brick-and-mortar store jobs.”

If SB 1338 is enacted, Arizona could recapture more than 5,400 total jobs and stop future job losses, according to an economic impact study [2] prepared by Elliott D. Pollack & Company for the Arizona Retailers Association in partnership with the Arizona Alliance for Main Street Fairness [3]. The more than 5,400 direct and indirect jobs lost due to the absence of online taxation equates to more than $155 million in wages and $463 million in economic output, the study estimated. If SB 1338 is not signed into law, Arizona stands to lose nearly 9,000 jobs by 2015.

The Pollack study also confirmed the online sales tax loophole’s devastating fiscal impact on the state coffers.  Beginning in 2010, an estimated $317 million in sales taxes has gone uncollected in Arizona, with that number expected to grow to $576 million by 2015.  

The state of Arizona is seeking some $53 million in unpaid transaction privilege (or sales) tax plus interest from Amazon.com. Arizona issued the assessment in November.

Meanwhile, today in Utah the state Senate overwhelmingly passed H.B. 384 [4], legislation that would require remote retailers with nexus in Utah via distribution centers or subsidiaries to collect and remit sales tax for purchases made by state residents. The legislation, which passed in the Utah House last week, now goes to the governor for his signature.

If the bill becomes law, it will make clear that any remote retailer seeking to open a distribution center in the state, for example, would be unable to skirt collecting and remitting sales tax by opening the center under a separate entity.