Author: BEN CASSELMAN / Source: New York Times
When Amazon agreed last year to begin collecting sales tax in New Mexico, state officials celebrated what they said could be tens of millions of dollars in annual tax revenue.
But they aren’t cheering in Albuquerque City Hall. A year after that announcement, New Mexico’s largest city hasn’t seen a dime from Amazon. That’s because the online shopping giant’s deal applied only to the 5.125 percent statewide tax, not to the 2.375 percent tax tacked on by the City of Albuquerque.
“The loser in that arrangement is cities,” Mayor Tim Keller said. “Cities are really being left to themselves.”
Thanks in part to a series of deals with state governments in recent years, Amazon is collecting sales tax in every state that has one. But those deals don’t always extend to taxes assessed by local governments. The company still isn’t collecting sales taxes in dozens of cities, including Philadelphia, Pittsburgh and Cedar Rapids, Iowa, according to a new report from the Institute on Taxation and Economic Policy, a left-leaning think tank.
Carl Davis, the report’s author, said local governments were missing out on millions in tax revenue when other income streams are also under strain. And local retailers, many already struggling to compete with online retailers, are effectively forced to charge more for their products than online sellers that aren’t required to collect local taxes.
“It’s just a direct price advantage that shows up on customers’ receipts,” Mr. Davis said. “You never want to end up in the situation where the companies you’re offering better deals to are the ones that don’t even have roots in your community.”
Amazon says it collects taxes in every jurisdiction where it is required to do so, and Mr. Davis’s report found that the company does collect local taxes in most states. But a hodgepodge of state laws govern tax collection, meaning there isn’t a simple solution for municipalities that are now left out.
For example, sales tax rules based on the location of the seller may be impossible to enforce if the company has no physical presence in that jurisdiction. And smaller online retailers can escape collecting sales taxes in more places than Amazon does — even when they use Amazon to sell their products.
Amazon is facing increasing scrutiny over its tax policies. Despite being one of the largest retailers in the country by revenue, Amazon pays relatively little in federal income tax, largely because of its low profit margins. Until several years ago, Amazon also collected little in state sales taxes, and in most states still does not collect taxes on goods sold on its platform by third…
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