A Texas-Size Win for Main Street

Amazon.com to begin collecting and remitting sales tax July 1

The state of Texas has struck a deal with Amazon.com that will require the online retailer to begin collecting and remitting sales tax to the state for purchases by Texas residents beginning July 1, 2012. The agreement also calls for Amazon.com to create at least 2,500 jobs and to make at least $200 million in capital investments in the state, according to the Dallas News [1].

“Obviously, in a perfect world, Amazon.com should have been collecting and remitting sales tax from the moment they opened their facility in Irving,” said ABA CEO Oren Teicher. “That said, we applaud Comptroller Susan Combs for drawing a clear line in the sand by not providing Amazon.com an extended sales tax exemption through another holiday season. Importantly, in striking this deal, Amazon.com has clearly acknowledged the obvious — that any company facility in a state constitutes nexus. We hope that states such as Massachusetts and New Jersey, where Amazon.com has facilities, follow Texas’ lead and require Amazon.com to collect and remit sales tax.”

The deal in Texas also resolves the $269 million in uncollected sales tax that the state comptroller’s office had assessed against the online retailer for sales made between 2005 and 2009, according to published reports. The comptroller’s office argued that Amazon.com’s distribution center, in Irving, Texas, and its subsidiary, Woot.com, constituted nexus in the state. As such, the retailer should have been collecting and remitting sales tax to the state. Amazon.com had appealed the assessment. Prior to the sales tax assessment, ABA had contacted the comptroller’s office numerous times regarding Amazon.com’s refusal to collect sales tax in the state, despite its facility in the state.

Comptroller Susan Combs told the Dallas News that Amazon had approached the state just a few weeks ago. “It’s a smart business decision,” Combs said. “They know where their customer base is and Texas has been a large growth state and will continue to be.”

In other states where Amazon.com has facilities, the online retailer has managed to score extended sales tax exemptions of two or more years by threatening to close down facilities or not opening up new ones. However, Texas would have none of it. Combs told the News that she “was very emphatic and insistent” that Amazon get its computer system up within 60 days to begin collecting sales tax.