Starting this week, Amazon begins collecting sales tax in California. This is the result of a long fought, bitter battle between the state and Amazon.
Through agreement, September 15 was set as the date that tax collection begins.
As many of you know, sales tax is due on goods sold in the state, but the commerce cause of the US Constitution prohibited the state from forcing Amazon to collect and remit the tax. The voluntary system was not working. Less than one half of a percent of sales tax revenue was being remitted voluntarily.
As this next domino in the California “Amazon Law” saga falls, it triggers a series of events. Amazon, which avoided nexus in California to avoid collecting tax, now has no reason to avoid nexus. So, as part of the September 15 negotiations, Amazon received incentives for development and construction of a 1 million sq. foot warehouse. The warehouse will provide next day delivery for most Amazon goods.
That warehouse is now part of a multi-billion dollar, multi-state drive to expand distribution and decrease delivery time.
That new delivery capability puts online competitors at a disadvantage, so led by Overstock.com, they are fighting to have the law overturned. Big box retailers, feeling the heat of Amazon’s low cost/quick delivery push, are scrambling to make their offers more affordable and more attractive. (Have you noticed the increase of “Site-to-store” delivery?)
This law, that Amazon dreaded so much, might turn out to be a blessing in disguise. It could bring new meaning to the term "Amazon Law". "Amazon Law" may come to mean a law that was seen as a disadvantage, but is really the source of competitive advantage in disguise.
The other effect of the law is that smaller online retailers that once did not have ecommerce tax solutions will need to develop a solution.
At SureTax®, with provide ecommerce tax solutions. We provide a real time tax calculation engine that covers over 10,000 jurisdictions. Plus, the tax data is powered by CCH – data so accurate that even the IRS uses it. So, if you need a solution, contact us.