Amazon to Begin Sales Tax Collection in Arizona in February

On October 26, in its SEC quarterly filing, Amazon.com announced that, as part of a settlement with the state of Arizona, on February 1, 2013, the company would begin collecting and remitting transaction privilege tax (TPT, Arizona’s sales tax) to Arizona on in-state purchases.

In the same filing, Amazon announced that beginning July 1, 2013 it will collect sales tax on the in-state sale of digital goods. Last November, the Arizona Department of Revenue assessed Amazon.com approximately $53 million, including tax and interest, in uncollected TPT for the period of March 1, 2006 through December 31, 2010. Amazon.com has four warehouses in the state totaling four million square feet.

“We are thrilled that Amazon will be collecting the tax on sales to Arizona customers and will become a business that is investing in Arizona alongside the brick-and-mortar retailers,” Michelle Ahlmer, executive director for the Arizona Retailers Association, said in a statement.

“This is a tremendous victory for proponents of sales tax fairness, and we are extremely grateful to Michelle Ahlmer for her hard work in leading this effort,” said ABA CEO Oren Teicher. “Due to her persistence, sales tax fairness in the state has now become reality.” Teicher also praised Gayle Shanks co-owner of Changing Hands Bookstore [1] in Tempe, Arizona, for her “tireless work on this issue.”

The victory in Arizona, Teicher continued, is another indication that the tide for sales tax fairness has turned in favor of Main Street, and that the time has come for Congress to act and to pass federal sales tax fairness legislation [2]. “Once the exception, sales tax fairness is slowly becoming the norm,” Teicher said. “We continue to ask independent bookstores to urge their lawmakers and governors to support federal sales tax fairness legislation, so that those states without sales tax fairness laws in place can pass legislation to level the playing field.”

In Amazon’s recent SEC filing [3], under “Other Contingencies,” the online retailer noted:

“In November 2011, the State of Arizona issued assessments on behalf of the State and certain cities in the amount of approximately $53 million, including tax and interest, for uncollected tax for the periods March 1, 2006 through December 31, 2010. The State of Arizona alleged that we should have collected a transaction tax that is similar to a sales tax on applicable transactions during those years. While we continue to believe the assessments were without merit, in September 2012, we entered into a settlement with the State of Arizona that included an agreement that Amazon and its wholly owned retailers collect and remit Arizona sales taxes
beginning February 1, 2013, for sales of any physical goods, and July 1, 2013, for sales of digital products or services, as well as resolution of Arizona sales taxes up to those dates and an immaterial payment to the State of Arizona.”

A spokesperson for Arizona Gov. Jan Brewer said the governor is happy that the settlement will create an equal playing field for businesses in the state, as reported by the Arizona Republic [4]. “The agreement allows the state to settle this dispute without litigation while securing partial payment and establishing that Amazon will be collecting and paying taxes going forward,” said Director of Communications Matthew Benson. The Republic included estimates that put Arizona sales tax to be collected by Amazon.com at more than $11 million per year.