Nevada state government to benefit from sales tax deal with Amazon.com
CARSON CITY — Government will become a bit richer next year in Nevada because the governor signed a sales tax collection agreement with Amazon.com.
Starting Jan. 1, Internet sales giant Amazon will begin collecting sales taxes on purchases made by Nevada customers.
When he announced the agreement with Amazon in April 2012, Gov. Brian Sandoval estimated the deal would bring Nevada $16 million a year in additional sales taxes. That is not enough to bring back the good old days of rapidly expanding spending, but it’s not chump change either.
Nevada state government is set to send $3.125 billion this fiscal year, of which $970 million comes from sales taxes.
Amazon is the world’s largest retailer with more than 225 million customers. It started in 1994 selling books, but now sells just about everything. It also produces the Kindle e-book reader and the Kindle Fire tablet computer.
Under state tax distribution laws, most of the Amazon tax revenue will be transferred to local governments and schools.
State Taxation Director Chris Nielsen said he does not know if the $16 million estimate will be accurate.
Amazon, like other companies with a physical presence in the state, will pay the sales taxes it collects in January near the end of February. By March, Nielsen will have an idea if the tax is coming in as projected.
Companies with a “nexus” or physical presence in the state are required to collect taxes on Internet purchases made by Nevada customers.
Amazon has “fulfillment” or distribution centers in Fernley and Clark County, but had balked at collecting sales taxes before the deal with Sandoval. It also has a subsidiary, Zappos, in Las Vegas. Nielsen said Zappos already collects and remits sales taxes.
Speculation at the time was that Amazon agreed because it realized it could not win if Nevada sued it in court.
SUPREME COURT RULES
That speculation proved to have merit, since the U.S. Supreme Court on Dec. 2 rejected an appeal by Amazon and another company to block New York from forcing them to remit sales taxes on Internet purchases at the same rate that brick-and-mortar stores there do.
Commentators already are saying the decision will bring a drop in Internet sales and could lead to Congress approving national legislation to require sales tax collection on all Internet purchases.
“I think it is going to happen,” Nielsen said about Congress voting to require sales taxes on Internet purchases. “Far too many local businesses have pushed their legislators on doing something.
“It is not fair that local business pays the tax and the Internet companies don’t.”
Congress is now considering the Marketplace Fairness Act.
According to the Marketplace Fairnesss Act website, the legislation would grant states the authority to compel online and catalog retailers — no matter where they are located — to collect sales tax at the time of a transaction as do local retailers.
The National Council of State Legislatures estimates that states lost $23.3 billion in potential revenue in 2012 because of their inability to collect sales taxes on online and catalog purchases.
Past estimates have suggested Nevada lost $114 million in 2010 and $330 million in 2012 because of its inability to force Internet companies to collect sales taxes.
The Retail Association of Nevada and state Sen. James Settelmeyer, R-Minden, have led the charge in Nevada to force the collection of sales taxes on Internet purchases.
Their view is that local stores are put at a competitive disadvantage because they must collect the 6.875 percent state sales tax — or, in the case of Clark County, which has local optional rates, 8.1 percent — while Amazon and other Internet companies do not.
“To me, this creates a level playing field for our businesses,” Settelmeyer said in 2010 before his Nevada ballot question to make it easier to force collection of Internet taxes failed 2-to-1.
“Now we have a situation where Main Street businesses must collect the 7 percent to 8 percent in sales taxes, while e-commerce businesses do not. Give mom-and-pop businesses a fair chance to compete.”
COMPARATIVE SHOPPING
Amazon charges $3.99 for shipping if you order one book on its website. So an actual customer — who bought an $18 book online on Cyber Monday — paid that additional charge.
If you could have bought the same book in Carson City for $20, then your sales tax would have been about $1.40.
For purchases of multiple books or other items that reach a certain combined price, Amazon.com does not charge for shipping.
But it is clear that, in some cases at least, people who buy online are paying more than if they bought the same items in stores in their communities.
People who buy in stores must buy gasoline to get there and take more time shopping. But purchasers at stores also get immediate gratification, while Amazon customers must wait for their books or other items to be delivered.
So, it depends on a number of factors whether it is a better deal to buy online or in stores.
Bryan Wachter, a spokesman for the Retail Association of Nevada, said it is “a choice” by Amazon and other online companies to charge for shipping, but Nevada-based stores don’t get to decide to not collect sales taxes. They must under state law, he said.
Wachter hopes the Supreme Court decision brings the course change needed to induce Congress to approve the Marketplace Fairness Act, now in a committee.
“The bill has the support of Amazon and our association and retail associations around the country,” he said.
Collecting extra money for state and local government is a secondary concern for the Retail Association, according to Wachter. Its primary goal is to create a level playing field.
“This (the marketplace fairness bill) would allow all businesses to be treated fairly. If you seek out and sell to customers, you should operate under the same rules,” he said.
Carole Vilardo, president of the Nevada Taxpayers Association, said her organization out of fairness also supports requiring Internet companies to collect sales taxes. She noted that by state law people already are supposed to pay taxes on online purchases, but the state lacks the ability to audit those who don’t comply and cannot force them to pay.
Other than conservative blogger Chuck Muth, Independent American Party Chairman John Wagner is one of the few public officials in Nevada who opposes requiring online companies to collect sales taxes for the state.
One of his points is that the out-of-state companies receive no police services, fire services or other benefits for collecting the taxes.
His other key point is that Nevadans, not the Internet companies, are paying the taxes, and they already are being taxed enough.
“Governments of all kinds are eyeing getting more money,” Wagner said. “Sooner or later, the poor taxpayer gets it from all angles.”
Nevadans don’t like Internet taxes.
The state’s voters in 2008 and 2010 overwhelmingly rejected ballot questions that would have made it easier for the Legislature to implement Internet sales taxes quickly if Congress ever permits states to collect such taxes.
Vilardo said the language in the question was confusing and the outcome on the ballot question might have been different if people had understood the actual intent.
She said some people voted to increase the sales tax and expand collection to include now-untaxed services.
Estimates were Nevada governments lost $114 million in potential sales taxes in 2009 and $330 million in 2012.
But if you look at the issue from the other way, Nevada residents were spared from paying $114 million in sales taxes in 2009 and $330 million in 2012.
Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901. Follow @edison vogel on Twitter.
