Californians Rush To Buy Before Amazon Starts Collecting Sales Tax

Starting September 15, Amazon.com will start collecting sales tax on purchases made by residents of California. So with the clock counting down, a number of shoppers in the state are buying what they can in the next week and a half.

“I’ve ordered nine things in the last two weeks,” one Californian tells the L.A. Times about his last-minute purchases. “Any time you can save money, that’s a good thing.”

Another man explains to the Times that he intends to save hundreds on new computers in the coming days.

“It makes a huge difference,” he says. “If there’s anything else I can think of where I can fork up some money and save a couple hundred bucks, I probably will.”

Of course, these shoppers are not technically saving money — and it would be a mistake to label these purchases as tax-free — since buyers are still supposed to pay any applicable sales taxes when they file their tax return.

The fact that most Amazon shoppers (presumably) do not fess up to owing this money is part of the reason states have been making deals with the online giant — it puts money (sales tax in CA runs anywhere from 7.25% to 9.75%) in the states’ coffers and saves everyone the cost of a possibly lengthy legal battle that could ultimately go either way.

Though Amazon is keeping mum on any uptick in sales from California, the Times reports that evidence on social media points to a definite cash-in from frugal Californians.

Amazon had enjoyed the freedom from the onerous tax of collecting sales tax thanks to a federal law that only requires e-commerce sites to collect a state’s sales tax if the company has a bricks-and-mortar retail location in that state. Since Amazon had no such outlets anywhere in the U.S., it didn’t have to worry about collecting taxes.

Then states began going after Amazon’s affiliate program, which allows third-party sellers to use the site as an online storefront. A number of these sellers have actual retail locations, which some lawmakers said meant that Amazon must collect sales tax.

Meanwhile, some states argued that Amazon’s warehouse and distribution centers were the same as having a bricks-and-mortar store.

At first, Amazon attempted to counter by cutting off affiliates or shutting down warehouses in disputed states, but as the challenges grew, the company began making deals. And all this is happening while the federal government pushes for a federal law regarding online sales tax collection.

Bricks-and-mortar retailers have pushed for Amazon to collect taxes, claiming it is only fair.

“Every retailer has the ability to match a price, but no brick-and-mortar retailer can say to a consumer, ‘Don’t worry, I won’t collect that sales tax,'” said a spokesman at the Retail Industry Leaders Assn. “That 6 to 10% price advantage is a huge problem and distorts the free market.”

At least the people of California had a while to do their not-exactly-tax-free-but-sort-of-if-you-know-what-we-mean shopping. We here in Pennsylvania only had a few days — and during a holiday weekend at that — before hearing that taxes were be to collected and the taxes actually being collected.

Californians spend freely on Amazon.com before sales tax deadline [L.A. Times]

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  1. Maltboy wanders aimlessly through the Uncanny Valley says:

    Amazon’s Texas tax has put a crimp in my online shopping for sure, but I can often find the same item for less from another vendor.

    BTW, I heard a rumor that Texas is allowing Amazon to keep the sales tax in exchange for building new distribution centers and employing several thousand people. Has anyone else heard this? Seems like a conflict of interest if it’s true.

    • YouDidWhatNow? says:

      Not really…businesses are given tax breaks (down to zero) on a regular basis in exchange for locating their [whatever] in [that place where we want it to be].

      Might be novel to do it on sales tax instead of other taxes, but not a new concept by any stretch.

    • AcctbyDay says:

      I believe how it shook out was that amazon has to collect in Texas going forward, but that Texas will not go after amazon for back taxes if they build and hire in Texas.

    • Oh_No84 says:

      I am letting my amazon prime die. I wont renew because of TX sales tax. I already stopped buying anything from Amazon.
      I like Amazon prime video along with the 2 days shipping, but them collecting sales tax over the internet is a joke when I can just go to the next site.

      This has to severely be hurting their business. I cant believe they are caving in to these states and screwing over customers.

      • luxosaucer13 says:

        Lemme get this straight, you’re gonna stop shopping thru Amazon because they’re collecting sales tax??? What’s next, you’re gonna stop buying EVERYTHING to avoid that tax. At least you don’t have income tax in TX to deal with too!

        Here in Oregon, we don’t have sales tax, but we pay for it dearly with a 9% personal income tax, for annual incomes over $3000, and ridiculous property taxes. Up until 2 years ago, the corporate tax was as low as $10, but the voters changed that. My property is assessed at $122000, I pay $1400 per year (and every year it goes up 6%) in property tax and I live in a town of about 8000 people! Plus, the State of Oregon charges a frickin’ fee for just about everything, including visiting a state park. BTW my property tax is on the LOW side for my area. By the way, unemployment benefits are still taxed at that 9% income tax rate. We also pay 49.4 cents per gallon in gas tax (national average is 48.9 cents/gallon and TX is 38.4 cents/gal….source: http://www.api.org/Oil-and-Natural-Gas-Overview/Industry-Economics/~/media/21EBD0B62EBA42B1965EE82EFFB6585D.ashx)

        So I ask you what’s worse: Paying tax on only what you spend, or paying tax on your ENTIRE income (except for Social Security)?

        • MuleHeadJoe says:

          I know I may very well be in the minority, but I believe that the only fair tax is a progressive income tax. Sales taxes and property taxes put a disproportionate burden on poor people and people with low incomes. Why should a person be disallowed to own a home just because they don’t have sufficient income to pay property taxes? Let’s say a person inherits a house and that is their sole residence, but doesn’t have any income to pay property taxes — by most state’s property tax systems that person would be forced to sell the home and possibly forced into homelessness by taxation. That just ain’t right.

          Contrary to the Republican’t vision for Murica, the rich of this country by far receive more benefit from all the governmental (i.e., social) systems that taxes pay for … police, fire, roads, schools, military, courts … all of these things bring immense benefit to rich people, far and above the benefit that poor people receive from all those same governmental systems. Police & courts protect the lives & property of rich people far more than they protect poor people. Poor people don’t benefit from rich people being locked up in prisons, but rich people sure do benefit from poor people being locked up. The benefit is lopsided, and rich people ought to pay their fair share, and the only fair measure is on how much money you take in (note I don’t say “earn” … the vast vast vast vast vast majority of rich people haven’t “earned” a single penny).

      • Martha Gail says:

        But people aren’t paying the sales tax they’re supposed to anyhow. They were never supposed to be tax free purchases. I say, let them collect the taxes and let them bring new jobs to Texas.

  2. dush says:

    “That 6 to 10% price advantage is a huge problem and distorts the free market.”

    yeah govt, your sales taxes are distorting the free market. stop it.

  3. scoosdad says:

    “Next up on Hoarders: ‘I Filled My House With Stuff from Amazon to Save a Few Bucks on the Tax'”.

  4. sparc says:

    oh please, this is just a cash grab from states like CA who are in a budget crisis. Even with the tax, Amazon will come out ahead in prices on many items.

    • YouDidWhatNow? says:

      More like essentially all items. Online vendors as a rule are always cheaper than B&M for many obvious reasons. Paying the same amount of tax on an online purchase as a B&M purchase means that the online purchase is still just as much cheaper as it was before.

      • redwall_hp says:

        And this is going to be horrible for small online businesses. The growing trend of tax grabs means the small business owner is going to have to deal with the local sales tax minutia of each state, which I think most people would agree is completely unreasonable.

        We need to either stick to the current scenario, where you don’t collect sales tax for any state but ones you physically operate in (which is why Amazon doesn’t collect tax in most states, but Apple has to, because of their retail stores) or we make sales tax federal and the states just get a share of it. Or just get rid of it, since it’s essentially a tax on the poor.

        • Extended-Warranty says:

          Stop feeding on the BS of Amazon PR. There’s a thing called technology that handles everything we do, even putting sales taxes in a database.

          • edman007 says:

            As someone who has done this for a small buisness, NO, it is NOT easy. The databases are not too difficult to get, however the individule rules are far too complicated, and there are a lot, as an example the rules for NY are posted below. But for an online store, you need to abide by the tax rules in every tax jurisdiction in your state (finding the jursidiction is the easy part), and then you have to know the rules in that jurisdiction, and multiple jurisdictions apply to the same objects. A quick example $120 pants in NYC have a tax rate of 8.875%, if they are $100 the tax rate is 0%, in Albany $120 pants are 8% tax, but 4% if $100. In CT at least, they do a tax free clothing week, for 2012 clothing under $300 is tax free from Aug 19-25. Every state has these laws, and then you have to consider that you have to figure out what jurisdiction they are on (many towns span two tax jurisdictions, so you have to go down to the house number).

            Thus it is not as simple as “what is the tax rate for this person”, that would be easy, instead every item has to be classified by type, is it clothing? What states consider it clothing? NY considers yarn clothing, does CT? What dates does that jurisdiction put it’s taxes into effect? Some states define the tax differently if it’s different.

            In a B&M store, you know the rules where you are, and if something changes you can change, on an online store you have to listen to the rules everywhere. Did county XYZ just pass a law exempting diapers from sales tax? Now you have to go through your entire inventory and identify items as diapers, do you count rags that could be used as cloth diapers? Well depends on the definition, maybe that county says it is only if it says for use as diapers while other counties say it’s not, so now you have two different definitions, and every item in the store needs to be classified against both definitions. And when it’s all done, you’ve done some ridiculous amount of work, for what probably amounts to less than 1% on your average purchase. These laws really need to be fixed, just charge the consumer the max tax in the county and let them file with the state for all the stupid little exemptions, that would make is easy for websites, what we have now is NOT easy.

            http://www.tax.ny.gov/pubs_and_bulls/publications/sales/rates_by_local_jurisdiction.htm

    • dangermike says:

      What I’ve heard is that Amazon is getting kickbacks (err, excuse me, *incentives*) from the sales tax for having opened the new distribution centers. As in, they effectively get to charge Californians more because of the corruption of state and local officials.

    • Oh_No84 says:

      They wont come ahead on most items vs other online retailers.
      Amazon prime with the 2 day shipping made it cheaper than other retailers.

      With them charging sales tax, I am just going to buy from cheaper sites and wait a few days longer for shipping. I cant support a website that charges sales tax. the internet is inter-nation and even outside the earth, there should be no taxes on the internet.

  5. ScandalMgr says:

    I’m only here for the whiny Californian’s, and out of state snark.

  6. Suburban Idiot says:

    “Every retailer has the ability to match a price…”

    They should think about doing that then.

    I still order from Amazon just as much as before even though they started collecting sales tax this summer. It’s still less expensive and more convenient than anybody local.

    Though I still say the fact that they give the sales tax to the county/city of my delivery address is unfair in instances when I make wholly electronic purchases away from home (if I’m at my Mom’s house in Arkansas and decide to buy and download an MP3, why should Dallas get that sales tax money? They weren’t party to the transaction at all. If I buy a CD at the local Wal-Mart in Arkansas, they don’t charge me Texas sales tax and send it to Dallas).

  7. dangermike says:

    Most of what I would usually buy from amazon is also sold either by retailers in california that I like better (newegg, microcenter) or retailers that I like better and don’t have a presence and do not charge sales tax (midwayusa, gamefly, etc.). I accepted their free prime trial for the this final month of tax-free purchases but it will be up in a few days, and Amazon will have lost their position as the go-to online retailer for the games, electronics, and outdoors goods I’ve shopped for there.

  8. dangermike says:

    The primary rationale I’ve seen for use taxes is to try to prevent mail order goods from undercutting local retailers. This is the very definition of pretectionist tarriffs. Unfortunately, the US Constitution very specifically reserves the sole right to set interstate tariffs for Congress. That is, any other body attempting to enact and enforce an interstate tariff is doing so in violation of the US Constitution. It is very cut and dry. I have no doubt the reason we haven’t seen Use taxes challenged in the Supreme Court is that they are written as a voluntary remission. That is, on state returns, you have to declare how much you’ve purchased, and if you lie, the state would have to assert powers specifically denied them by the Constitution in order to collect. Amazon made a huge mistake in my eyes. They were in a unique position due to their size and prominence. They could have fought this to the top. Instead, they went ahead and made a backroom deal. They agreed to open up two Californian distribution centers (which, frankly, won’t deliver any sooner than their centers in neighboring states) in exchange for some kind of refund of the taxes they collect. So basically, they’re allowing the state to strong arm them into offering the same service but for more money, and they’re sharing in the newly collected revenue. This is why I will not shop with them in the future. Residents of the neighboring states should also be upset. I guarantee their Arizona and Nevada distribution centers will see lower volumes. I expect it will mean fewer employees in those centers. And for what? To try to help fund a failing and broken legislature in Sacramento. Bravo.

  9. Extended-Warranty says:

    Thank god. Although I wish there would be national legislation. You would think with a shortage of budgets, jobs, etc, this would have been solved years ago.

    B..b..but Amazon has 20% lower prices! No one will stop buying because of sales taxes!

    • dangermike says:

      The only reason they have to remit sales tax now is that they’ve agreed to open distribution centers in California, which establishes a business presence. The not-discussed-enough rationale for them to open these centers is that the incentives they’re receiving to do so from the local municipalities is effectively a kick-back of that taxpayer money. There is still no justification for one state to charge sales (or “use”) tax on business conducted across state lines. Unless and until the US Constitution is update to extend this power from Congress to the states (or enact a federal sales tax on interstate purchases). http://en.wikipedia.org/wiki/Commerce_Clause#Significance

    • Oh_No84 says:

      Amazons prices are not lower than other online retailers.
      Most of their products are actually independent sellers that sell through amazon by letting amazon stock pile their inventory. Amazons prices are on par with other online retailers so now with sales tax other online retailers are cheaper as they dont charge it.

  10. nXt says:

    Amazon just opened a brand new distribution warehouse in San Bernardino, CA (few miles from me, friend got hired there), also they’ll be opening another one in North California this year too.

  11. dcatz says: