Render unto Amazon.com

Posted: April 21, 2010 in Government, Taxation

The following is a news report about attempts by North Carolina to tax sales of Amazon.com products:

http://news.cnet.com/8301-13578_3-20002870-38.html

Now if Amazon.com has salesmen or representatives in a State, then Amazon must collect taxes on sales into that State.  That’s because it would have what’s called “nexus.”

Businesses have to be careful about that.  If they’ve got any reps going throughout a State, those reps would generate substantial nexus for sales tax, or even business license fees, a nasty little surprise for some businesses.

However, if a business has no reps or salesmen in a State, and only fulfills orders over the Web or over the phone, then there’s no substantial nexus, and they don’t have to charge tax.  The Supreme Court has frowned down upon States that try to force tax collections in those instances.  (See Quill Corp. v. North Dakota, National Bellas Hess v. State of Illinois, etc.)

Presumably, Amazon.com didn’t have any significant connections with North Carolina, so was not required to pay sales tax.  However, North Carolina is trying to collect customer information so they can hit up those customers for use tax.

Lots of luck on that.

It’s likely the Supreme Court would rule against it as a burden on interstate commerce, not to mention running afoul of privacy concerns.

I agree with the Congressional moratorium on Internet taxation.  One of the worst things about online orders is the shipping costs.  When you purchase over-the-counter, you don’t have to pay shipping charges, but every item purchased online costs you about $3 or $4 dollars or more of shipping per item.

I’ve cancelled a number of orders already because the shipping charges were too high.  This is a disadvantage online businesses have, and adding a tax on top of that would probably kill Internet sales.

In any case, I think it’s a long shot for North Carolina, but it would be nice if the Supreme Court would rule on it once and for all.

Vern

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