Amazon targeted by the US Senate to collect sales tax on online sales

The battle between click and brick-and-mortar systems is getting fiercer by the day. This nippy fight has now included the tax collection into the equation following a scandal that flooded the internet last weekend.

According to reports, Amazon.com offered a 5 to 10 percent discount to its customers, who entered the correct price—on Amazon’s smartphone application Price Check—of a product found at a local brick and mortar store and then bought it from Amazon.  

This spurred an enraged reaction from the brick companies, media and of all the places in the world, the US Senate. However, to Amazon this reaction did not come as a surprise. They refuted the allegation that this was a spy-promotion campaign.

The Senate, which is lobbying with brick system companies, reacted to the campaign by pushing the tax collection system for an approval. Led by Maine Senator, Olympia Snowe, the top Republican on the Senate’s Small Business and Entrepreneurship Committee,
has been working on enforcing tax collection on the online businesses like Amazon.

The US Supreme Court has ruled legislation, that without the consent of the Senate, online businesses will not be forced to collect sales tax from customers unless they has a physical presence in the same state where the warehouse or the store is situated.

As Amazon has only four physical stores in Kansas, Kentucky, New York, North Dakota and Washington therefore, it has been smartly skirting the tax collection in majority of states in the US. They already have a 6 to 10 percent advantage in price due to this
strategy.

They have signed a willingness to start collecting tax in Pennsylvania from February 1 and California come September.

However, there is one more problem that Amazon wants to be heard. Since only Amazon and its retailers, subscribed to their fulfilment services, are forced to collect tax on sales; other online businesses that don’t have a physical presence manage to ward
off the regulation.

Since the aforementioned rule is not coherent—Amazon’s retailers don’t have a physical presence as they do business on Amazon’s product catalogues—the regulation should either have exemption for them or it should include all the online businesses to collect
sales tax.

Amazon is currently backing such legislation to get an approval from senate on the basis of equality and fair competition.

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Posted by Usman Khalid on Dec 13 2011. Filed under Business, USA. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry