Budget & Finance

Is Amazon.com’s Refusal to Collect Sales Taxes Hurting K-12?

May 11, 2010 1 min read

The next time you buy your 10-year-old nephew that sweet Albert Pujols jersey on Amazon.com, you might want to think about whether that purchase, sans state sales tax, might be depriving public schools of much-needed revenue.

Of course, one of the best things about shopping on Amazon, other than the free prime shipping which gets your goodies delivered within two days, is avoiding that pesky sales tax you’d have to spring for in a bricks-and-mortar store. And Amazon clearly knows how appealing that is, which might be why it is fighting states that are trying to collect sales taxes that residents owe on their Internet purchases.

According to the Center on Budget and Policy Priorities, states have been jilted out of $8.6 billion in sales tax revenues from online retail. With nearly every state grappling with slow-to-recover economies and big budget shortfalls, several are stepping up efforts to collect that revenue. And school districts, many of which are reeling from deep cuts to instructional programs and teacher layoffs, would certainly benefit from any new sources of revenue.

Critics like Michael Mazerov at the Center on Budget and Policy Priorities argue that Amazon.com’s efforts are hurting the public interest because states are being deprived of revenues for critical services such as schools, roads, and health care.

In North Carolina, the online retail giant is waging a First Amendment campaign against state tax officials who are seeking customer purchase information in an attempt to collect sales taxes. The American Civil Liberties Union has joined Amazon.com in its lawsuit against North Carolina.

And in Colorado, the online retailer dropped all of its local web-based affiliates after the state passed a law two months ago requiring online retailers to notify purchasers how much money they owe from Colorado’s 2.9 percent state sales tax when their purchase originates from a business based in the state. Retailers are also supposed to pass that information onto the state so it can collect the revenue.

UPDATE: Check out this very cool interactive map from the National Conference of State Legislatures that shows the projected revenues that states will lose without ability to collect sales tax on e-commerce.

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A version of this news article first appeared in the State EdWatch blog.

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