Sale Tax on Internet Book Sales

The American Bookseller's Association through its E-fairness campaign seeks to help the independent retailer remain competitive against the big box stores and internet behemoths.

Independent bookstores collect sales tax from their customers and this money is used by the state and the local community to provide services to the citizens. The major advantage that Amazon has over an independent store is cost. In some cases much of that cost advantage stems from the retailer's failure to collect sales tax.

Eliot Spitzer, before he fell from grace, was instrumental in getting this inequity reversed in New York State, although I think the issue is still being argued in the courts. Now, it seems that the Texas Comptroller's Office may have discovered a source of additional revenue, as well.


Bookselling This Week Reports

The State of Texas Comptroller's Office is currently investigating whether the presence of an Amazon.com-run distribution facility in the Dallas suburb of Irving means the online retailing giant has a physical presence in the state. If the Comptroller's Office determines that Amazon.com does have nexus, the retailer would be responsible for collecting and remitting sales tax for purchases made by Texas residents and potentially would be liable for back taxes.

The issue over the Seattle, Washington-based Amazon.com's Irving facility was first reported by the Dallas Morning News on May 9, after the newspaper contacted the Texas Comptroller to inquire why Amazon.com did not collect and remit sales tax even though it had a distribution facility in the state. The inquiry prompted the state to launch an investigation into the matter.

Following news of the investigation, Amazon stated publicly that, under Texas sales tax laws, it is not required to collect and remit sales tax because the distribution facility is operated by a subsidiary, Amazon.com.kydc, Inc.

Amazon.com's website notes that it runs fulfillment facilities in Kentucky, Pennsylvania, Kansas, Texas, Nevada, Delaware, Arizona, and Indiana. The company lists customer service centers in North Dakota, West Virginia, and Washington. At present, Amazon only collects sales tax in Kansas, Kentucky, North Dakota, and Washington. Delaware does not charge sales tax.

Lawyers get ready and let the battle begin. There are millions of $$$ at stake. Of course, none of the taxes - except past taxes not collected or paid - come from Amazon, but the need to collect them cuts into their competitive advantage.

So, if you are one of those who buy from Amazon to avoid paying sales tax, those days may be coming to an end. When the sales tax and freight is added to the cost of a book from Amazon, the cost advantage over an independent retailer becomes much less obvious.