Amazon's Bezos: Federal Legislation Required To Address Sales Tax Issues

In comments at Consumer Reports’ headquarters, founder and CEO Jeff Bezos stated that federal legislation is required to address differing state policies on the collection of sales taxes from e-commerce companies. He also said that the company will continue to drop affiliates in states that require them to collect sales taxes from their local marketing partners. “The big affiliates will pick up and move, which we’re grateful for,” he said.

Bezos said that, in more than half of the markets where the company does business, it already collects sales taxes, or international equivalents, such as Europe’s Value-Added Tax. In the U.S., states are only allowed to require that businesses collect sales tax if they have a local presence or “nexus,” and not all states make such demands.

Our point-of-view on this is that we should simplify the sales tax system, and we’ve been insisting on this for 10 years. We support the streamlined sales tax initiative, and 22 states have signed on. The right way to fix this is with federal legislation. Sales tax is very complicated. We’re no different from big chains of retailers. They don’t collect sales tax in states where they don’t have nexus either. So everyone is following the same rules.

Lawmakers in several states have passed “Amazon laws” requiring that e-commerce companies with a local presence collect sales tax from their customers. When Illinois passed such a law in March, Amazon cut off local affiliates. The company has also tried a carrot-and-stick approach with state lawmakers, and has told Tennessee legislators that it would build two distribution centers in the state — if it could be exempt from sales taxes. If, however, the state passes a pending bill requiring the company to collect taxes, Amazon says will pull out.

In his comments at Consumer Reports, Bezos said that the tax laws don’t just affect Amazon. “People who make money through affiliate programs, usually Amazon’s just a piece of their business and they all get affected by these new laws. It makes sense for them to do something different.”

Bezos joked that the company had no intention of collecting sales taxes in states that don’t have laws requiring it to do so (most states require consumers to pay sales taxes on out-of-state purchases, even if merchants don’t collect them). “I don’t think our customers would say, ‘why don’t you optionally collect the tax. I know you’re not required to do it, but go ahead.'”

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.