One of the great advantages that online sellers have enjoyed - and consumers benefited from - is the absence of sales tax. With pressure from states to get their share of the billions being spent on web stores rising, Amazon has changed the game by reaching an agreement with Massachusetts to start collecting sales tax.
Online retailers without a physical presence in a state haven't had to collect sales tax. Indeed, the onus is on consumers to later report their purchases and then pay the taxes directly to the state. Think about the last time you did that.
Traditional sellers have cried foul over the lack of sales tax charged online. That amounts to a 6.25 percent lower price from the outset in Massachusetts if you purchase online. Of course, lower overheads already give online sellers a price advantage.
While only a handful of states have such agreements with Amazon and their online rivals haven't yet embraced the concept, seeing the biggest web retailer of them all make such a deal suggests that change could be in the air. The retail giant is also pushing for a law to require all those who sell online to have to collect state sales tax - as an equity issue. But it is also possible they're just trying to make nice by getting out front on collecting taxes prior to actually opening some sort of facility in Massachusetts - when they'd actually be required to collect tax, anyhow.
Amazon hinted as much.
"We appreciate Governor Patrick’s commitment to Massachusetts jobs and investment and his support for legislation now before Congress that would provide a final resolution to the sales tax issue,” said Paul Misener, Amazon vice president of global public policy. “We look forward to creating hundreds of high tech jobs in Massachusetts and continuing to work with Governor Patrick, state leaders, retailers and Congress to pass federal legislation permitting interstate sales tax collection. Federal legislation is the only way to level the playing field for all sellers, the only way for states to obtain more than a fraction of the sales tax revenue that is already owed, and the only way to fully protect states’ rights."
The question is will this continue to spread as Amazon shows interest in opening more distribution centers and attempts to force its rivals to collect taxes, too. It's a necessary move for Amazon to create that pressure since they are now ceding the sales tax advantage they have long enjoyed over their brick and mortar competitors.
Massachusetts consumers have a little breathing room. The change doesn't start immediately. The agreement takes effect Nov. 1, 2013.
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About the author
Mitch Lipka is one of America's leading consumer journalists and advocates. He is an expert in product safety, recalls, scams, and helping consumers get out of jams. He is a nationally known consumer columnist and runs TheConsumerChronicle.com. He lives in Worcester. You can find him on Facebook or reach him at ConsumerNews@Aol.com