SC&H Group Blog: "Expertise Beyond the Numbers"

Maryland to Get Sales Tax From Amazon Customers

Today, Amazon has officially started charging Marylanders the 6% sales tax on purchases made through this popular on-line shopping site.  This is the result of the company now having physical presence in the state with a Baltimore warehouse and distribution facility that is opening soon.

Amazon is opening the Baltimore facility and several others throughout the country with the stated goal of improving customer service through shorter delivery times.  The trade-off is that the company must now charge and remit sales tax in each of those states.

Karen T. Syrylo, CPA, Principal, SC&H State and Local Tax, provided this comment to Expertise Beyond the Numbers.

“Maryland has been looking for this tax for a long time.  The Comptroller’s Office many years ago told us that Amazon purchases made up the largest part of the ‘sales tax gap,’ the tax amount that the state doesn’t collect due to purchases that are made over the Internet rather than from stores physically located in the state.  The company didn’t have to charge the tax, and even though the purchasers were by law required to directly pay the tax to the state, most individual citizens don’t do that.  The Office had said that many other online sellers, particularly the ones that also had subsidiaries that operated stores in Maryland, had begun charging sales tax even on their Internet sales.  But Amazon, having no physical presence in the state, did not.”

Syrylo added “For years Amazon has fought the states that sought to force it to collect the taxes, including taking New York to court.  The U.S. Supreme Court declined to hear the company’s appeal of that litigation loss.  And after New York’s new law, there were several years in which our Annapolis legislators proposed legal changes that would have mimicked New York and would have required Amazon to charge Maryland sales tax if it had ‘affiliates’ in Maryland – people who are located in Maryland and advertise for Amazon via a website that clicked through to the Amazon site.  Those proposals did not pass, mostly because other legislators preferred the broader solution of the proposed federal legislation that would change the physical presence rule, rather than Maryland having to deal with almost certain litigation if the state tried to implement its own rule.”

The federal legislation, the Marketplace Fairness Act that would apply to all remote sellers and all states, is still being debated in Congress.  We will keep you posted on the outcome.

Meanwhile, the story of Amazon and Maryland has its ending:  the company gets their business model of shorter delivery times and the state gets the sales tax collection.

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