States Could Benefit from High Court’s Refusal to Hear Amazon Case

NJ Spotlight News | December 3, 2013 | Law & Public Safety
Online retailers may be required to pay sales taxes since U.S. Supreme Court won't rule.

By David Cruz

Kristen Scalia’s Kanibal Home in Jersey City is a one-woman operation. She’s salesperson, checkout person and — most importantly — bookkeeper, which means she’s the one who does the bills, including taxes.

“I pay monthly taxes, as well as quarterly taxes as well as final year taxes. So this is definitely a burden that you pay, but it’s something you know to do when you’re operating a business,” she says.

Except that, for the longest time, online retailers like Amazon have gotten around paying sales taxes in states where they don’t have a physical presence. It’s been a boon to their business and helped them gain a foothold in the marketplace by saving customers a few bucks every time they make a purchase. But that seems likely to change since the U.S. Supreme Court refused to hear an appeal from Amazon and Overstock that will eventually mean they have to collect sales tax just like Scalia.

“If online retailers aren’t paying taxes, then I think that vendors who are starting out who do markets and other such events shouldn’t pay taxes, either, because they don’t have a brick and mortar location,” she adds. “I think it’s not so much whether online retailers shouldn’t [collect sales tax] and this person should; it should have categories of who’s exempt and who’s not exempt.”

Sawyer Smith owns Smith & Chang in Jersey City. He pays his sales taxes quarterly and says he feels it on his bottom line every time he writes out a check. So, does he feel resentful when he hears that Amazon is not paying any? “I don’t know if I’m necessarily resentful,” he says. “That’s their business model and that’s the way regulations are right now, so you can’t really be resentful, but it would be better if there was a more uniform system for sales tax.”

There is such a move underway. The Marketplace Fairness Act would require all online retailers to collect their share of sales taxes. In New Jersey, some estimates are that the state could see about $200 million a year from something like that.

But online retailers don’t see it the same way. They say big box stores like Walmart keep their costs down because they’re so big, but the web provides opportunities for smaller retailers to get a start.

“It’s the way that an innovator with a new product or service can find customers around the country and around the world, and that innovation, that path to competition for some start-up businesses is a path that’s going to be cut off if those businesses also have to file, remit taxes and be subject to audits from 46 different states,” says Steve DelBianco, executive director of NetChoice, a trade association of eCommerce businesses.

The measure has passed the Senate but is stalled in the House. Yesterday’s decision by the high court could break that logjam as cash-strapped states look for any avenue to raise funds.