11/29/2012 11:07:00 AM Report: Online sales may have cost state $708 million in lost sales taxes this year
In November 2011 Arizona said Amazon owed the state $53 million in uncollected sales taxes from March 1, 2006, through Dec. 31, 2010, according to the company’s most recent quarterly earnings report. (Photo by Cronkite NewsWatch)
By Joe Henke Cronkite News Service
WASHINGTON - Booming sales on Cyber Monday might have meant savings for consumers, but they could also have meant lost revenue for the state of Arizona, a new report said.
The National Conference of State Legislatures said Arizona will watch an estimated $708 million in sales taxes go uncollected this year on online and catalog purchases, the ninth-highest amount in the nation.
Besides costing the state, online sales also put brick-and-mortar retailers at a disadvantage, said Arizona Small Business Association CEO Rick Murray.
"How do we level that playing field?" Murray said. "In Arizona it can mean several hundred dollars on some purchases. It's a huge issue for some of our small businesses."
Those complaints have led to pushes in Washington and in state capitals to require that online retailers collect sales taxes for states where they send the goods they sell.
They come as Cyber Monday sales - online purchases made on the Monday after Thanksgiving - hit a new high for a second consecutive year.
IBM reported Tuesday that online sales Monday rose more than 30 percent over Cyber Monday 2011, as shoppers not only took advantage of online deals but free shipping offers. And, in most cases, no sales tax.
A bill introduced in Washington in 2011 would address that last advantage by letting states apply their sales taxes to online purchases - with an exemption for businesses that have less than $500,000 in remote sales a year.
Under the Marketplace Fairness Act, states would first have to simplify their tax laws before being allowed to levy sales taxes on online purchases.
"At a time when state budgets are under increasing pressure, Congress should give state and local governments the ability to enforce their own laws," said the bill's sponsor, Sen. Michael Enzi, R-Wyo., at an August hearing.
"This will give states less of an excuse to come knocking on the federal door for handouts and will reduce the problem of federal attached strings," Enzi said in testimony to the Senate Commerce Committee.
In Arizona, supporters of the Marketplace Fairness Act include the Arizona Retailers Association and real-estate firms Vestar Development Co. and WDP Partners LLC, according to MarketPlaceFairness.com.
"It is like the title reflects. It is all about having an opportunity to compete fairly," said Michelle Ahlmer, executive director of the Arizona Retailers Association. "What we are focused on is the fairness more than the revenue."
Seattle-based Amazon.com, which has distribution centers in Phoenix, is also a supporter of Enzi's bill.
Arizona last November charged that Amazon owed the state $53 million in uncollected sales taxes from March 1, 2006, through Dec. 31, 2010, according to the company's most recent quarterly earnings report. While the report said the tax bill was "without merit," Amazon also said that it had entered into a settlement with Arizona.
Amazon will begin collecting and remitting Arizona sales tax beginning Feb. 1 for physical goods and July 1 for digital products and services.
"We are thrilled with the agreement that Arizona reached with Amazon," Ahlmer said. "We think that puts them in the position of being a true Arizona business partner."
The settlement with Amazon comes after state lawmakers earlier this year rejected a bill that would have achieved, at the state level, what Enzi is proposing on a federal level.
"Arizona is a state that would rather control its own destiny," Murray said. "But some folks think there should be something done on a national level because with Internet sales there are no borders."
"It is something that will have to be done in Congress. We have done what we can in the state legislature," she said.
Even if the tax issue is settled, Murray said online firms still have other advantages, such as not having to pay overhead on a physical storefront.
But Rick Marcum of the Yavapai College Small Business Development Center, said the gap between online and brick-and-mortar retailers may be narrowing.
"I've had a couple of them (small businesses) complain, but that is ending with Amazon next year as they will start collecting tax," Marcum said.
"From our small businesses, we hear more complaints about places like Wal-Mart. They have three physical stores here in Prescott," he said.
Posted: Saturday, December 1, 2012
Article comment by:
Carl Nye - Jerome
Sorry Mr. Maverick but that just isn't so. You can google "AZ use tax" to get all the details, but basically, if you buy something anywhere that there is no sales tax and you bring what you bought to Arizona, you are legally required to pay a "use tax" to the Arizona Department of Revenue on that item, whether it is a $1 candy bar or a $25,000 car. Not only that, even if you do pay a sales tax elsewhere, but it is at a lower rate than here (quite likely), then you still owe ADoR the difference between what you paid and what you would have paid if you had bought it here. The Arizona use tax has been around for many years, but has been generally ignored. However, beginning with the Arizona income tax forms for 2011, there was a new line added on which you were supposed to declare everything you bought in 2011 for which you didn't pay AZ sales tax (such as Amazon internet sales). What was that amendment about self-incrimination? After being threatened with a $53 million dollar lawsuit, Amazon caved in and agreed to start collecting AZ sales tax on their sales for items being shipped to Arizona. So, even if your relative in a non-sales tax state buys you a gift on Amazon, they will have to pay the AZ sales tax in order to have it shipped to you here. Level playing field?
Posted: Saturday, December 1, 2012
Article comment by:
Our state government is broken. It survives on the second highest sales tax in the country.
It survives on misappropriated federal bailout money earmarked for victims of mortgage fraud.
This state has managed to make its prisons a good thing for generating money and survives on for-profit prisons. Illegal immigrants and pot related offenses make up the majority of these prisons population.
Stealing from and or discontinueing many of the programs that were created to help poor people and minorities, and that even includes unemployment benefit. these are just other ways this state saves money for itself.
Our state government is broken, and is being misused in too many ways to list for this post. It is becoming too oppressive and expensive and corrupt for many people and businesses to continue living here, let alone consider moving here.
The government in Arizona is over-pricing its states appeal and it has backfired. That is evident by its innability to attract new business except for the negative prisons and border patrol.
Higher sales tax, imprisoning illegal immigrants, and people convicted of non-violent and victimless crimes. This is this states governments answer for increasing revenue for itself. It is a SICK way to create revenue.
Our state government is broken and guilty of bad buisiness practices, and would definitely get a negative rating by the Better Business Bureau.
Posted: Thursday, November 29, 2012
Article comment by:
In States that have very high sales tax like Arizona people do not want to pay that premium for the right to shop in Arizona or other States with huge sales tax rates. This is one example of our politicians looking at the short term when they pass their idiotic legislation. People can legally shop in the States that do not have a sales tax and bring it here with no penalty or discussion. Leave the Internet alone!