Sales Tax Slice: Shopping on Amazon Will Get More Expensive for Residents in Two More States


“Tax-free” shopping on Amazon.com will come to an end in just a few days for Minnesota and Maryland residents, as the online retailer will begin collecting sales tax on purchases made in both states starting Oct. 1, 2014.  Minnesota and Maryland will become the 22ndand 23rd states in which Amazon will be required to collect and remit sales tax. Customers in states in which Amazon is not required to collect sales tax still have the obligation to submit use tax to their states; however use tax compliance is difficult to enforce in most states. 

The debate on whether remote retailers should be required by federal law to collect and remit sales taxes on purchases made by customers in other states, when the retailer has no physical presence in the state,  is still ongoing. The physical presence standard was set in the U.S. Supreme Court’s landmark Quill Corp v. North Dakota, 504 U.S. 298 (1992), where the Supreme Court found that a taxpayer must be physically present in the state to be obligated to collect and remit sales and use tax to the state.  

With online shopping on the rise, the Quill decision is arguably antiquated, which has caused many states to enact their own click-through nexus laws with requirements that trigger sales tax collection and remittance obligations for remote retailers. The Market Place Fairness Act, which would give states authority to compel online retailers in other states to collect sales tax on Internet-based sales on their behalf, is currently pending in the House, after passing the Senate in 2013.

In Maryland, Amazon plans to open a fulfillment center in Baltimore, which will certainly create jobs for the state, but at the same time creates the obligation for Amazon to begin collecting tax from residents.  In Minnesota, although Amazon announced that it “will be required” to begin collecting tax, no known fulfillment centers have been spotted in the state.

Amazon already collects sales tax on purchases made by residents in the following states:

Arizona         Kentucky          Pennsylvania
California   Massachusetts   Tennessee
Connecticut   Nevada   Texas
Florida   New Jersey   Virginia
Georgia   New York   Washington
Indiana   North Carolina   West Virginia
Kansas   North Dakota   Wisconsin

 

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page:  Do you think residents in Minnesota and Maryland will continue to shop on Amazon.com even though their purchases will not be tax free? 

Sign up for a free trialof the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state sales and use taxes. 

By Ean Hamilton

Follow us on Twitter: @BBNAtax.