Amazon’s Multi-State Sales Tax Battles are a Sideshow to the Real National Solution, and the Politicians Know It

Revenue-hungry state governments are licking their chops. Stuck with declining tax collections and soaring costs for services, they’re chasing around the country in a series of attempts to make it collect sales taxes.

That’s led some to wonder whether this high-tech round of whack-a-mole might be the front edge of a viral political movement that spreads across the country, wiping out tax-free shopping for millions of consumers and dragging down profit margins of and other e-retailers.

Fat chance.

The volley of lawsuits, rhetoric from fired-up tax collectors, and Amazon’s hardball response tactics are certainly entertaining to watch from afar. But any real resolution will almost certainly come from a much more boring, slow-moving effort to get state sales taxes on a common source code, and then change the federal laws.

Here’s why:

—It’s not clear that the newly popular approaches to wringing more sales taxes from Amazon customers are legally enforceable. That means potentially long court battles, such as one under way in New York.

—Amazon has shown no real signs of giving up its fight, even if that means cutting jobs. Some politicians are already knuckling under.

—Others are already working on a comprehensive fix. It’s the realistic vehicle for national online retail taxes, an approach that Amazon has supported, and everyone knows it.

The question here is not whether Amazon and other online retailers should have to pay taxes. It’s whether they have to collect taxes for the government.

In states where a retailer doesn’t have an office, the answer is generally no. The U.S. Supreme Court said so in a 1992 case, ruling that forcing a company to navigate the thousands of different … Next Page »

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10 responses to “Amazon’s Multi-State Sales Tax Battles are a Sideshow to the Real National Solution, and the Politicians Know It”

  1. Did you know that there are 13,000(!) and rising separate tax jurisdictions in our great nation? And that since government budgets are so broken, rates and tax classifications across jurisdictions change on a daily basis?

    So how does that affect you?

    Depending on where you live, delivering products or services to you could involve as many as five overlapping tax jurisdictions, each with its own forms, filing deadlines, and rates.

    Every one of these jurisdictions has legal authority to compel the business to collect taxes from you as their agent, on the items they choose to tax, at the rates and terms they prescribe. And, of course, legally they place the duty on the business to know and comply with all their stuff.

    That little web business with the really cool product you love? Right now, when you buy, that business has to stop focusing on you to take care of the government paperwork that your purchase just created.

    Think about it–if you want that item, and you bought it in a local shop, you would just pay the tax, right? And let’s be clear, the business doesn’t *pay* the tax–you do. The business collects, reports, and remits the tax as the tax authorities’ agent.

    So it’s not about the money, it’s about the work that business you love has to do to comply with all those tax jurisdictions. Here’s one example that made the news last year:

    In 2010 the Washington state legislature passed a tax on candy (which was not taxable before). The tax only applied to “candy that does not contain flour”. (Presumably flour means food, and food is not taxed in Washington.)

    The state Department of Revenue subsequently inspected some 11,000 candy items and posted a list of 3,000 that were taxable. All retailers were required to (re)categorize, tax and file accordingly.

    A short time later, voters repealed this particular tax, but that’s pretty unusual. In most cases tax categories and rates are handled quietly and administratively, and the dialogue runs between the tax authority and the business.

    Government uses our tax money to do its work–this is how we the people want it, and that’s fine. But we the people need to tell our government that the hidden cost of compliance with over 13,000 tax jurisdictions cuts productivity, slows the recovery, and makes people angry.

    The Streamlined Sales Tax Initiative ( is a state-level group working to create a national solution. Probably Congress will need to get involved, too.

    Tell your legislators and congressional representatives to fix this problem and make it easy, simple, and cheap for business to collect the taxes that we the people voted for.

    Here’s what you’ll get:

    That wonderful local shop (with its mail order internet business), and that great web site that you love (that also might have a shop somewhere else) can stay 100% focused on *you*.

    And that’s what’s really important, right?

  2. David MillerDavid Miller says:

    The SSTI is still problematic because implementing it means an expensive trip to your software vendor to rewrite your shopping cart. I’m not generally in favor of VAT or national sales taxes, but if SSTI came up with a national single rate approach that would be ideal.

    At a minimum, online sellers should have one place to electronically file their sales taxes if other jurisdictions are going to get in the mix. It’s bad enough figuring it out on a state-by-state basis.

    David Miller

  3. @David, interesting point re: a VAT-type system. I’d say a single- or very few-rate approach is not the kind of thing the SST project could pull off because of state sovereignty.
    Of course the sub-categories of local and regional taxes matter there too: We’ve got more than 350 individual taxing districts in Washington state.

  4. Thank you for your thoughtful article. When the Supreme Court ruled on this matter in 1967 and 1992 it was too difficult for a remote seller to keep track of the thousands of jurisdictions – which is why they were exempted from the obligation to collect. Moving forward to today, large internet retailers easily manage thousands of items for sale at any given moment, and even the smallest internet retailer can calculate accurate shipping rates to every corner of the country in a blink of an eye – it is no longer too difficult to keep track of a few thousand local jurisdictions.
    Technology makes it easy for anyone to open a Web business, manage inventories, use target marketing, calculate shipping etc. Technology has solved this problem also. My company,, offers a service (called TaxCloud) that enables merchants to accurately calculate local sales tax. The service is completely free to merchants.
    It is better that Congress address this issue so that all businesses collect the correct tax. Until then, more and more states are going to be attempting on their own to collect these taxes, which will increase complexity and result in continued litigation.

  5. Ray Kumar says:

    Amazon does collect sales tax on sales by its marketplace merchant, Target and many others (complete list at the end), so evidently cost and complexity is not an issue for them to do the same for sales by itself.

    The Streamlined Sales Tax Agreement makes it possible for even small merchants to comply easily and for FREE. The Federal Tax Authority, a private company also known as, launched last year its TaxCloud software-as-a-service application that it plans to offer SST-participating merchants for NO CHARGE.

    “A merchant using TaxCloud doesn’t have to know anything about sales taxes other than where it’s shipping from, where the customer’s destination is, and the class of goods the customer is buying,” says R. David Campbell, co-founder and CEO of He says most retailers can sign up for TaxCloud and begin using it in 20 minutes.

    Here is a good write-up in Slate on this subject.
    “Every Day’s a Tax Holiday: How undersells Best Buy, the Apple store, and almost everybody else.”

    Here is a partial list of merchants selling items at for which it collects sales tax. All states other than VT
    Harper Collins Publishers, LLC: All States
    Penguin Group (USA) Inc: All States
    Electronic Arts, Inc.: All States except for AK, ID, ME, MS, ND, NM, SD, VT, WV, and WY
    New York Times, Inc.: AL, DC, KY, and NY
    Hachette Digital, Inc.: AL, AZ, CO, CT, DC, HI, ID, IN, KY, LA, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY
    Simon & Schuster Digital Sales, Inc.: All states other than AK, DE, MT, NH, and OR
    Macmillan: AZ, CO, CT, DC, HI, IN, KY, ME, MS, NC, NE, NJ, NM, SD, TN, TX, UT, VT, WA, WI and WY
    Dow Jones & Company, Inc: AZ, CT, DC, HI, ID, KY, NC, SD, and TX
    Zondervan Corporation LLC: CA, CO, FL, GA, IA, IL, IN, LA, MA, MD, MI, MO, NC, NV, OH, PA, SC, TX and WA