State Sales Tax and Your Online Shopping Cart

Excerpted from Crain’s ChicagoBusiness.com October 24th, 2013

Effective Nov. 1, the Midwestern state said sales tax will be added by Amazon to purchases made by Wisconsin residents because the online retailer is opening a distribution center in Kenosha, giving it a physical presence in the state. In states where Amazon has no physical presence, the company does not generally collect the tax, giving it a pricing edge over bricks-and-mortar merchants.

The new 5-percent “Amazon tax” will add about $30 million a year to state revenue, Wisconsin Department of Revenue spokeswoman Laurel Patrick said on Wednesday. The state collected a total of $4.4 billion in sales taxes in fiscal 2013.

The company’s website lists 13 states where it is already collecting taxes and turning over the proceeds to state coffers. The United States has no national sales tax and Congress has not moved ahead with proposed legislation that would give all states the power to enforce their sales tax laws on e-tailers. Under a 1992 Supreme Court decision, retailers without a physical presence in a state do not need to collect and remit taxes in that state on each sale.

Amazon supports federal legislation for nationwide state sales tax enforcement, but other online retailers, including eBay Inc and Overstock.com.  Fitch Ratings has estimated that states in which Amazon does not collect sales tax are losing out on $11 billion in revenue. Colorado’s 2010 legislation requiring reporting by retailers to the state of sales tax owed from online purchases is being challenged by the Direct Marketing Association, a trade group. Last month, Amazon and Overstock asked the Supreme Court to hear oral arguments in a dispute over New York’s law for sales tax collection from out-of-state retailers.

The 13 states in which Amazon is now collecting sales tax include Arizona, California, Georgia, Kansas, Kentucky, New Jersey, New York, North Dakota, Pennsylvania, Texas, Virginia, Washington and West Virginia.

Consult a qualified tax preparer.