States Primed for Higher Tax Collections After Amazon Holiday

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By Ryan Prete

Amazon likely topped $1 billion in sales during the company’s Prime Day 2017 event, and states will share in the tax-related spoils.

The 30-hour shopping spree that ended July 11 was the company’s biggest day ever in sales. The e-commerce giant reported a 60 percent increase in sales and 50 percent more purchases from Prime Day 2016—which most analysts estimated to pull in between $500-600 million—according to a company press release.

Amazon now collects sales and use taxes in all 45 states that impose them at the state level, reaching agreements with the final 16 states this year. Sales tax collection data from this year isn’t yet available from many of those states, but a handful that have published figures have seen an uptick compared to the same periods in 2016 and 2015 ( see chart below).

In Louisiana, where Amazon began collecting sales tax in January, revenue has skyrocketed. The state has accounted for nearly $300 million more in revenue in its first quarter compared to last year’s first quarter, but officials say it’s difficult to attribute a particular portion of the increase to Amazon.

“There could be any number of factors contributing to an increase in sales tax revenue,” Byron Henderson, public information director at the Louisiana Department of Revenue, told Bloomberg BNA in an email. “For example, we had a flood in August 2016 that damaged homes and property in large areas of the state. Consumer spending on the recovery could have spurred a lot of retail activity, which could have had an impact on sales tax revenues, there are just too many variables at any given time to attribute any change to any one factor.”

Henderson mentioned that under Louisiana’s Revised Statute 47:1508, any data submitted to the DOR by a retailer remains confidential.

For the first nine months of Alabama’s fiscal year (through June 30), a new simplified sales and use tax remittance program has brought in $39.1 million, according to Frank Miles, a revenue department spokesman. This compares with $2.3 million for the same period a year ago, when only about half as many companies were participating and Amazon hadn’t begun collecting in Alabama yet.

Amazon reported almost $136 billion in sales in 2016. The Seattle-based megacompany accounts for about 43 percent of all U.S. e-commerce sales, according to most estimates.

Skepticism Over Lasting Effect

States will inevitably see revenue from the July 11 Prime Day, but predicting Amazon’s long term effect on state’s sales tax revenue is far from clear, according to one practitioner.

“I don’t think its possible to predict the magnitude of the increase in revenue,” Jamie Yesnowitz, state and local tax practice and National Tax Office leader for Grant Thornton LLP, told Bloomberg BNA in an email. “Moreover, future national, regional and local economic conditions are unpredictable and can significantly impact the amount of sales tax revenue the states bring in, independent of the state’s efforts on nexus, rate increases and base expansion.”

Yesnowitz noted that states can take measures to further benefit from Amazon’s unprecedented sales.

“States can attempt to raise sales tax rates on transactions that are already taxable, or impose higher tax rates on certain types of transactions, such as luxury items,” Yesnowitz stated. “They also can attempt to broaden the base to subject a wider variety of services to the sales tax.”

These efforts may result in incremental increases in sales tax revenue overtime, but Yesnowitz said there is significant resistance to these efforts from some businesses and consumers.

Lawsuits are pending in South Dakota, Alabama, Tennessee, Wyoming, and Indiana, and are expected in Minnesota, Washington, and Ohio over those states’ recent expansions to their online sales tax regimes. A growing number of states have tweaked their laws in recent years as part of a growing effort to challenge the U.S. Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, which prohibits states from imposing sales and use tax collection obligations on vendors without a physical presence in-state.

With assistance from Christopher Brown in St. Louis, Nushin Huq in Houston, and Chris Marr in Atlanta

To contact the reporter on this story: Ryan Prete in Washington at rprete@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

State Sales Tax Collections in States Where Amazon Started Collecting in 2017
StateAmazon Sales in State (2015)Start Date for Sales Tax CollectionOverall Sales Tax Collections January - March 2015Overall Sales Tax Collections January - March 2016Overall Sales Tax Collections January - March 2017
Arkansas$433.4 millionMarch, 2017$502.7 million$499.5 million$531.8 million
Hawaii$255.6 millionApril, 2017$782.3 million$818.3 million$831.8 million
Louisiana $755.7 millionJanuary, 2017$651.8 million$642 million$938 million
Maine$205.6 millionApril, 2017$207.9 million$231 million$235.4 million
Mississippi$405.6 millionFebruary, 2017$763.8 million$781.9 million$777.5 million
Nebraska$333.4 millionJanuary, 2017$419.2 million$519.4 million$532.7 million

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