Talk of Amazon site raises tax question
Mass. office could mean levy on sales
When Bob Dwyer needed a new light bulb, he didn’t go to his local hardware store.
He went to his computer, clicked on Amazon.com, and had the $5.40 Sylvania fluorescent light bulb delivered to his Wellesley doorstep.
“You can spend a weekend tramping to a hardware store looking for this light bulb, or you can go to Amazon,’’ he said.
And at Amazon, there’s no sales tax.
That could soon change for thousands of Amazon customers in Massachusetts who patronize the virtual megastore for cheap prices that are kept low in part because it doesn’t charge the state’s 6.25 percent sales tax.
The Globe reported this week that Amazon plans to open an office in Cambridge and hire as many as 150 people, which likely would leave it subject to collecting sales taxes on customers in Massachusetts. Generally state law requires a company to pay taxes on its business activity if it has so-called nexus here, which in the past has been defined as having a physical presence such as an office.
Amazon did not reply to a request for comment, and has not confirmed that it plans to open an office in Massachusetts.
The Massachusetts Department of Revenue would not comment on the potential Amazon move.
But Dwyer, who is a part-time wine blogger whose site links to products on Amazon.com, said it doesn’t make sense that the Internet giant isn’t collecting taxes on Massachusetts sales.
“Doesn’t it seem like a bit of an anachronistic loophole that could have been closed a long time ago,’’ Dwyer said. “I think the playing field should be leveled.’’
There is a lot of money at stake, and cash-strapped states are eager to get a portion of the billions spent every year in Web sales. The National Conference of State Legislatures estimates that Massachusetts will lose out on $268 million in tax revenue from online purchases in the current fiscal year. Nationally, they say it’s a $23.3 billion loss for states.
Massachusetts has a reputation within the legal world for aggressively pursuing such tax cases - and winning. It prevailed in a big case against Toys “R’’ Us and another with Capital One, in which courts ruled that the state can tax profits from the business activity those companies had in Massachusetts. The companies had asserted that their business presence wasn’t significant enough to warrant taxation.
“This is major revenue for states,’’ said Neal Osten, director of the Washington office of the National Conference of State Legislatures. Without a government plan to tax those sales, he said, “that loss will continue to grow, and as more people feel comfortable not paying sales taxes online, they also see it as a right not to pay online sales tax.’’
Most brick-and-mortar retailers want their online competitors to bear the same tax burden.
Dana Brigham, manager of the Brookline Booksmith, supports Internet retailers having to pay state sales taxes “1 million percent.’’
All too often, she said, her store is just a showroom for customers who browse there and then purchase their books online. But if Amazon suddenly has to pay sales tax, will that change?
“It wouldn’t change them being the huge company that they are, or their long-range plans to be even more huge. But it would be a lot more fair,’’ she said. “It gives them a distinct monetary advantage over us brick-and-mortar types who have to charge the 6.25 percent sales tax.’’
Bill Rennie, vice president of the Retailers Association of Massachusetts, said if Amazon is going to open a Massachusetts office, it should pay state sales taxes. “They should recognize their obligation of a retailer with a physical presence in the state and they should collect sales taxes on Massachusetts purchases,’’ he said. But, as he pointed out, it’s not always cut and dry. “Amazon has a history of trying to avoid state sales tax everywhere they go,’’ he said.
For instance, even though Amazon, which has it headquarters in Seattle, has locations in California and Tennessee, it battled collecting sales taxes in those states.
It lost those fights and will start to collect sales taxes in California next year, and in 2014 in Tennessee.
Daniel Bertrand, spokesman for the state Department of Revenue, pointed out that Massachusetts residents are already supposed to be voluntarily paying a “use tax’’ on purchases made from out-of-state retailers.
Few do. According to the Revenue Department, just 1.6 percent of all tax filers in 2010 paid a use tax.
Amazon.com executives have said the company is in favor of pending federal legislation that would streamline or simplify the process for online sellers to collect state sales taxes.
And if Amazon does end up assessing Massachusetts sales tax, customer Ann Collins of Ashland, won’t mind.
“Even if it had sales tax,’’ she said, “a lot of the items are still lower in price than some of the stores around here.’’
Michael B. Farrell can be reached at email@example.com.