–From the DailyRecord
BY: NICHOLAS SOHR
A deal that will require mega-retailer Amazon and other online shops to pay sales tax in California has sparked renewed hopes of reaching a similar agreement in Maryland.
“It’s a break in the sense that the largest state, economically, in the country has reached an agreement with the largest online sales retailer, which gives us hope,” said Pat Donoho, president of the Maryland Retailers Association. “If you’re going to do it for California, why wouldn’t you do it for Maryland?”
Advocates say the issue comes down to a matter of fairness — customers pay sales tax on a book at a brick-and-mortar bookseller, but not on the same paperback bought from Amazon. But also at stake is $184 million in sales taxes on online purchases that will go uncollected in Maryland next year, according to a University of Tennessee study.
Amazon avoids Maryland’s sales tax because it does not have a physical presence, or nexus, in the state. Residents who make online purchases that do not include sales tax are supposed to pay the tax quarterly, but the state collects less than $1 million from that every year.
Lawmakers have tried and failed to force Amazon and other online-only companies to collect and pay sales tax on purchases in the state with legislation that would use Maryland-based websites that refer business to e-retailers as the nexus.
“We cannot wait any longer as out-of-state, online-only retailers continue to exploit a sales tax loophole that hurts our Main Street retailers,” said Del. Sheila E. Hixson, D-Montgomery, the chairwoman of the powerful House Ways and Means Committee.
Carl Szabo, policy counsel for NetChoice, an industry group that has lobbied against online sales tax efforts in Maryland, called California “a unique situation.”
Amazon has cut ties with affiliate websites in states that have tried to force the retailer to collect sales tax and has promised to do the same elsewhere.
“I know that many other states are thinking ‘well, if California cut this deal with Amazon, then Amazon will cut a deal with our state,’” he said. “It’s dangerous for other states to compare themselves to California.”
Amazon had threatened to lead a petition drive to overturn California’s law requiring the company to collect sales tax there. The two sides agreed last week the law would not go into effect until at least September 2012 and Amazon would lobby Congress to pass Internet sales tax legislation. If Congress doesn’t act, the California law would be implemented in September 2013.
California’s population gives it more leverage than its peers, Szabo said, and that state’s law included a provision that would have established a nexus there for Amazon even without the affiliates because the company’s e-reader lab is in the state.
Asked if the company’s California deal would set a precedent for others across the country, an Amazon spokeswoman said: “We believe this needs to be solved at the federal level and we’re working with the states, retailers and Congress to get federal legislation passed as soon as possible.”
The Maryland retailers group, Hixson and others in the state have also joined a national coalition, Stand with Main Street, to press for a federal bill that would force online retailers to collect sales tax.
“The real solution lies in Congress,” said Donoho. “Congress has to act.”