Friday, May 09, 2008

End of the Free Ride at Amazon?

I buy a lot of music online these days; in fact, it's rare for me to make any purchases from a brick-and-mortar music retailer at all anymore, unless it's a used store like Recycled or CD Source (the only exception being when I have a Barnes and Noble coupon that takes even more off the price than my membership does). When I'm ordering online, it's common for Amazon and B&N to have the same price on certain CD's; if that's the case, Amazon wins for me, because they don't charge state sales tax. But that might soon be changing:
Texans who shop to avoid paying sales taxes may not have that luxury for long.

The Texas Comptroller's Office is investigating whether the Internet retail behemoth, with sales last year of $14.8 billion, owes Texas possibly millions of dollars in uncollected sales taxes on purchases made by its customers in the state.

Seattle-based has been operating a distribution center in Irving since 2006, giving it a "physical presence" in Texas, a longstanding litmus test for when sales taxes must be collected by an online or mail-order company.

The issue came to light last month after Inc. sued the state of New York over whether it should begin charging customers state sales taxes, citing the federal law it appears to be breaking in Texas.

[...]For e-commerce, Texas and most states follow federal law that allows states to impose sales tax obligations on out-of-state retailers with a "physical presence" in their state. "Physical presence" is defined as anything from a store, warehouse or distribution center to a sales agent or delivery truck, according to the Texas Comptroller.

The state's tax-collecting agency didn't know was operating a facility here until this week when The Dallas Morning News called to ask why the online powerhouse wasn't charging Texas customers sales taxes, said Robin Corrigan, the comptroller's team leader for sales tax policy.

"We will definitely send out a team to investigate," Ms. Corrigan said. She is the state's representative to the Streamlined Sales Tax Governing Board, a national group that's sought uniform standards for e-commerce and mail-order companies since 2000.
That was yesterday's story, for which Amazon was unavailable for comment. But today, the online giant fired back: Inc. said Friday it believes it's in compliance with state laws after the Texas Comptroller's Office said this week it is investigating whether the Internet retailer should charge sales tax to Texas customers.

A spokeswoman for the Seattle-based chain said that its distribution center in Irving is operated by a subsidiary called Inc. and not by Inc.

Under Texas law, the subsidiary isn't required to collect sales taxes, said spokeswoman Patty Smith.

"We continue to interact with and cooperate with local and state Texas tax officials at many levels," she said. "The state of Texas is fully aware of's subsidiaries' Texas operations, and we remain in compliance with all Texas laws governing sales tax collection."
So this will probably go back and forth for a while, and who knows how it will all end. If nothing else, I'm glad that the taxing authorities took it easy on Net-based businesses in the early days of e-commerce, or the whole thing might never have gotten off the ground in the first place. And while I'm no fan of the government finding every possible way to take more money out of our pockets, I can see how the growth of online businesses could make them nervous about lost revenue. Hopefully, this will work out well for everyone.

I can has award? K thx bye: Congrats to I Can Has Cheezburger?, probably the top lolcat site on the Internet, for winning two categories (yes, that's right, cat-egories) in the 12th annual Webby Awards.

UPDATE: It turns out that ICHC is growing so much that the site is hiring more people. (It's probably one of the few businesses that not only disregard spelling mistakes--or would that be "misteakz"--on resumes, but they probably encourage it.)

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