Amazon will begin collecting sales tax from California residents by 2013, which will generate in increase of $200 million in revenue for the state.
After months of disagreements, Amazon negotiated a deal with California’s legislators last month. The Legislators agreed to delay the law one year if Amazon would agree to stop pursuing a ballot measure that would seek to repel the law.
Fresno State economics professor Sean Alley said, “when shoppers make out-of-state purchases online, it is very difficult for the state of California to tell where that transaction was made.” This results in lost tax revenue for the state because many individuals do not report their purchases and pay the obligatory sales tax as required by law.
“When you file your taxes at the end of the year, there is a box at the bottom for purchases made online which many people are not aware of or simply do not fill out,” Alley said. “Individuals who make purchases online are legally required to keep track of their purchases and pay the sales tax accordingly at the end of the year.
“Most people don’t even know that’s there, and with a retailer the size of Amazon you are talking about an extremely large amount of money,” Alley added.
Alley said the state of California is making an attempt to get companies such as Amazon to keep track of whom they are selling to and send the sales tax directly to the state. He pointed out that it is easier for the state to collect taxes at the point of transaction rather than audit millions of people.
Until January, online retailers will not be required to collect the appropriate state sales tax if they do not have a physical presence in close proximity of where the purchase was made.
Amazon announced on Wednesday that it will open distribution centers in California which would create 10,000 full-time jobs, 25,000 part-time jobs and a half billion in investments in California. This comes as a result of the negotiation between legislators and Amazon.
Opponents of the law see it as a job-killing legislation. Sen. George Runner told the North County Times, “Given all the competing interests, we’ll be right back in the same mess in a year; the stat of California will again be killing California jobs, driving away investment and inviting costly litigation.”
Major corporations like Walmart, Home Depot and other conglomerates that have stores in California agree with the new legislation since the lack of taxes allows out-of-state Internet retailers to have an advantage over them, the Los Angeles Times reported.
The Los Angeles Times reported that California consumers make 20 percent of Amazon’s market.
“I have purchased many items from Amazon including books, movies, toys, and gifts.
They have a great selection of things to choose from,” Fresno State student Andrew Stearns said. “As far as charging tax goes, I thought it was part of the sale along with shipping cost unless noted by the seller.”
“I order truck parts and video games from Amazon all the time. I had no idea that I had to report it on my tax return,” Fresno State student Jarred Allred said.
“I was under the impression that as long as it was coming from outside California, I didn’t have to report it at all. They should make sure this is clearly stated on the sites,” Allred added.