Connecticut Cuts Deal With Amazon

Connecticut Gov. Dannel Malloy has announced that as of November 1, 2013, Amazon.com will begin collecting state sales tax in exchange for opening a distribution center in Connecticut and bringing jobs to the state.

This week, Connecticut Gov. Dannel Malloy announced that as of November 1, 2013, Amazon.com will begin collecting state sales tax in exchange for opening a distribution center in Connecticut and bringing “hundreds of new jobs” to the state, according to the governor’s office. Over the next two years, Amazon will invest $50 million in Connecticut in the construction and operation of the new facility.

“All in all, this is a win for our state’s taxpayers, our main street retailers, and our workforce,” said Gov. Malloy in a statement. “Amazon’s multi-million dollar investment and the hundreds of jobs that will come with both the construction and operation of their future facility will unquestionably boost our local economy. Their agreement to begin collecting revenue is a great step, but federal action on this issue is still necessary.”

Connecticut has been trying to get online retailers to collect for some time now. In May 2011, the state passed an affiliate-nexus law requiring all remote sellers with online sales agents (known as affiliates) generating $2,000 or more per year in annual sales to collect and remit sales tax to the state for purchases made by Connecticut residents. Following the passage of the legislation, Amazon.com and other companies, such as Overstock.com, fired their large network of affiliates in order to not collect sales tax.

According to the Connecticut Mirror [1], under the deal Amazon.com will open a distribution center within the next two years and will hire about 300 people. In addition, the Mirror reported, the company will be rehiring its online affiliates. If true, this would presumably give Amazon.com a competitive advantage over other remote retailers that no longer maintain their affiliate network in Connecticut due to its affiliate nexus law. The Mirror reported that Amazon.com fired about 3,000 affiliates rather than collect state sales tax.  And, according to the article, the Performance Marketing Association, which represents online sales agents, is now urging state lawmakers to have the affiliate nexus law repealed.

The Mirror also noted that Connecticut garnered about $3.3 billion in sales tax revenue last year, though only $10 million of that was paid via income tax filings from residents reporting their use tax.The governor told the Mirror that the state believes it will garner about $15 million per year in sales tax from Amazon.