Amazon's fight against tax on Internet sales | Arkansas Blog

Monday, March 14, 2011

Amazon's fight against tax on Internet sales

Posted By on Mon, Mar 14, 2011 at 6:49 AM

Arkansas is not the first or only state where legislation has been introduced to force on-line retailers to collect the sales tax owed on Internet purchases. It's elemental fairness for in-state bricks-and-mortar retailers. It's potentially new revenue — now going uncollected — for cash-strapped states.

Amazon, a major target, is fighting back. It's threatening to close warehouses in states such as Texas seeking to collect taxes owed through Amazon, which has used a multi-state ownership scheme to evade even the law that requires collection by companies with tangible presences in a state, such as a warehouse.

Amazon collects sales tax in only five states — Kansas, Kentucky, New York, North Dakota and Washington — where it has offices or another physical presence.

It avoids collecting in several other states where it has warehouses by assigning their ownership to a subsidiary. Until the tax dispute in Texas, Amazon had encountered few problems with that arrangement.

Noted: multi-state corporations use similar ownership trickery in Arkansas to avoid payment of corporate income taxes. That's why Rep. Jim Nickels introduced legislation requiring consolidated income tax reporting. Walmart, which is going after Amazon on its failure to collect sales taxes, fought to preserve its advantage under the corporate income tax filing loophole. THAT special treatment on corporate taxes is perfectly fair in Walmart's view, though small businesses that operate only in Arkansas and can't avail themselves of the artifice tend to think otherwise. Trickery for Amazon when Walmart has to pay the sales tax here? THAT is unfair.

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