Amazon will begin to charge sales tax Saturday
by Brian Leubitz
I’ve mentioned before that online purchases aren’t supposed to be tax-free. Purchasers are supposed to pay use tax, but it turns out that few people actually do that. After the big hubub last year with Amazon threatening California affiliates, they agreed to start collecting taxes in 2012. And guess what, that date is tomorrow, September 15.
A deal inked last year between Amazon and Sacramento means that, for most items shipped from the online retailer’s warehouses, sales tax will be collected at checkout starting tomorrow. But, as CNET reported earlier this week, that doesn’t apply to hundreds of thousands of items “fulfilled” by Amazon from its warehouses on behalf of other sellers.
That means a New York camera shop could have inventory located in an Amazon warehouse outside of San Francisco, and provide next-day — or even same-day — tax-free delivery to northern California customers.
“You can assume we’ll have ways of finding out who’s holding stocks of goods in California,” a representative of the State Board of Equalization, which collects California sales taxes, told CNET. “We have enforcement authority to obtain information in a variety of ways. We’ll be approaching them with respect to their tax obligations.” (CNET)
It won’t bring the deficit down overnight, but everything helps these days. The marketplace sellers, while substantial, are relatively small, but those too will also come in line.
The State should collect about $500 million in sales and use tax on Amazon sales to Californians in the first 12 months.
Here’s my (crude) math)…. Amazon sales last fiscal year of $54 Billion…. assuming 15% to Californians (that would be $8.1 Billion)…. about 25% of Amazon rev are estimated to be through their reseller marketplace program so 75% are from Amazon itself (now we have about $6.1 Billion in sales)… at 7.25% state base sales and use tax rate that would be $440 million… now Amazon revenues are growing so the next 12 months should be higher than last year and I believe that California charges sales tax on any shipping charges as well…
… so $500 million in new tax revenue to California may even be light. Now $500 million ain’t chump change but it won’t dent our financial problem. $500 million is less than 1% of the individual income taxes we collected in 2011…. if we had a voluntary “pay 1% more to save our State” box on our tax return… it might raise more $ than this Amazon change.
Currently, Amazon does not have any distribution centers in California but it will move into one in San Bernadino this year and add one in Patterson within a year.