The new year will bring higher prices if you shop at Amazon.com. Starting Jan. 1, the online retailer will hit Nevada customers with sales taxes, per a 2012 agreement between the company and the state. The deal and the collections that result from it are another step toward full taxation of all Internet sales.
Tired of making tough budget decisions in the aftermath of the Great Recession, local governments and states across the country want more spending money. Web sales are an inviting target. If every Internet business collected and remitted taxes on sales to Nevada buyers, the state estimates it would realize more than $300 million in new annual revenue.
Brick-and-mortar businesses love the idea of taxing online sales, arguing it’s a matter of fairness. But if an Internet retailer is located outside a taxing district, and it doesn’t benefit from the services those sales taxes fund, that argument fails. Indeed, a 1992 U.S. Supreme Court ruling on catalog shopping held that businesses could not be forced to collect taxes for jurisdictions where they have no physical presence.
However, Amazon agreed to collect and remit Nevada sales taxes because it has a physical presence in Nevada: It has distribution centers in Northern Nevada and Southern Nevada, and its Zappos subsidiary is headquartered in downtown Las Vegas. (Zappos already collects and remits sales taxes.) Amazon resisted collecting sales taxes, but finally relented once it realized it had little chance of prevailing in a court battle.
Of course, now that Amazon is stuck with the burden of collecting sales taxes in Nevada and elsewhere, it wants all online retailers to share the pain. The company supports federal legislation that would allow states to collect sales taxes on Internet purchases by their residents and compel online retailers to comply. That’s no small task, especially for small businesses. There are almost 10,000 separate sales tax districts in the United States. Large companies are better positioned to handle that challenge, giving them one more potential competitive advantage over little guys without lobbyists.
The U.S. Supreme Court’s refusal this month to intervene in New York’s sales tax battle with online retailers will increase pressure on Congress to enact a solution in search of a problem. Consumers don’t want to pay sales taxes on their Internet purchases. They know that, ultimately, they’re the ones who pay the tax and a company’s costs in collecting it. In Nevada, voters overwhelmingly rejected the idea of online sales taxes in 2008 and 2010.
This issue is driven by governments’ desire to spend and avoid finding ways to save, not the pursuit of “fair” tax policy. They’ll never have enough of your money.