Amazon Making Customers Pay Sales Tax, Other Online Retailers Could Follow Suit

States have been trying for years to make online retailers collect sales taxes

Amazon Making Customers Pay Sales Tax, Other Online Retailers Could Follow Suit
Image: Pexels
March 31, 2017

Beginning on April 1, if you live in a state requiring sales tax, you will now have to pay it when shopping on Amazon as well as at physical stores—and other online retailers may soon follow suit.

At this time, 45 out of the 50 states require merchants to collect sales tax. Alaska, Delaware, Oregon, Montana, and New Hampshire do not.

States have been trying for years to make online retailers collect sales taxes but have had little success. In 1992, the U.S. Supreme Court ruled that states can require retailers to collect state taxes in only those places in which the retailer has a physical presence.

The National Conference of State Legislatures estimates that the states lost $23.3 billion in 2012 because they couldn't collect online sales taxes.

Several states have tried to solve the problem by asking consumers to report online purchases on their annual tax returns. Few people know about this requirement, however, and so lawmakers decided to require all online marketplaces to collect sales taxes on the state and local levels.

The tech industry has argued against sales taxes for online retailers, saying that they could hinder Internet entrepreneurs and artisans. But there is no denying that the funds could do much to close budget gaps in cash-strapped states, especially as more shoppers migrate away from brick-and-mortar stores to online marketplaces.