Starting in July, shoppers in Texas will no longer have to go through the hassle of calculating and paying all that sales tax that Amazon hasn’t been collecting on their purchases. On Friday, the Lone Star State joined a growing group of states reaching accords with the online giant about making sure those taxes get collected at the time of purchase.
Amazon has avoided the pesky business of collecting sales tax in Texas (and many other states) through a law that says a retailer is only responsible for collecting the tax if it has a physical presence in that state.
The definition of “physical presence” is what has been argued about over the last few years. Some states have enacted legislation determining that Amazon’s affiliate program, which allows third-party merchants — including bricks-and-mortar retailers — to use Amazon.com as a storefront for their wares, is tantamount to having a physical presence. In
most of the states that have created such laws, Amazon has merely cut ties with local affiliates.
Then there are those states that have claimed that the existence of an Amazon non-retail distribution center within their borders means the company must collect sales tax. In Texas, Amazon actually closed a distribution center in 2011 after the state claimed the company owed $269 million in uncollected sales tax.
The agreement announced Friday seeks to resolve both the tax and job-loss issues by including a promise from Amazon to create 2,500 jobs in Texas and make $200 million worth of capital investment in the state.
While we’re on the topic of Amazon and sales tax, a trial judge in Illinois surprised a lot of people by ruling that a new state law requiring the e-tailer to collect sales tax because of the presence of Illinois affiliates violates the Commerce Clause of the U.S. Constitution .