Amazon is reporting more sales than ever this holiday season as online retailers enter 2017 — the first year they could be federally forced to collect state sales tax.
The online retail king said it shipped more than 1 billion items globally in 2016, a record for the company that saw a rise in its share price Tuesday, Reuters reports. Amazon Echo and Echo Dot home assistants were among the company’s top-sellers, concluding a year that included Amazon’s most profitable quarter to date.
Amazon’s year-over-year increases across the board have also included another category — the amount of state sales tax collected. The number of states where Amazon collects taxes ticked up to 29 this year, with select cities in Colorado and Alabama most recently joining the fold in December and November. That’s despite the fact Amazon has no physical facilities in the state — the only federal legal requirement for collecting such tax.
That requirement, the result of Supreme Court case Quill v. North Dakota that found retailers without a physical presence in a state aren’t required to collect sales tax, could finally change this year. Renewed Republican majorities in the House and Senate, a Republican president on unfriendly terms with Amazon CEO Jeff Bezos, and a new mandate from congressional leaders could finally spell action on the issue lawmakers have spent a decade arguing.
In recent years that argument has boiled down to two major camps. In one, led by Virginia Republican and House Judiciary Chairman Bob Goodlatte, legislators want to tax buyers based on the location of the seller, the revenue from which would be divided up by a multi-state clearinghouse.
The other led by Utah Republican and House Oversight Chairman Jason Chaffetz wants taxation based on where the buyer lives, codified in legislation known as the Remote Transactions Parity Act. The Senate adopted a similar method in 2013 known as the Marketplace Fairness Act, passed under then pro-online sales tax Democratic Majority Leader Harry Reid.
A third bill, the No Regulation Without Representation Act, would codify the Quill Supreme Court ruling as law.
Lawmakers opposed to Goodlatte’s position say he’s used his powerful chairmanship to block any proposals countering his own. House Speaker Paul Ryan ordered an end to the stalemate in September, telling Goodlatte, Chaffetz and Arkansas Republican Rep. Steve Womack, sponsor of the latest version of the Marketplace Fairness Act, to compromise on a 2017 solution — an effort Ryan is reportedly following up on.
Ryan said he supports the concept of online sales tax in 2013 while chairman of the House Ways and Means Committee, making a vote in the House more likely than under anti-tax former Speaker John Boehner.
Senate Majority Leader Mitch McConnell promised a vote on online sales tax before the end of 2016, meaning another effort in 2017 is likely. With more states than ever adopting their own legislation to tax outside sales, there could be little incentive for Congress not to act.
Sixteen states introduced such bills this year, with Louisiana, Oklahoma, Vermont and South Dakota passing legislation. Governors including Virginia Gov. Terry McAuliffe joined Ohio Gov. John Kasich and Wisconsin Gov. Scott Walker in calling for online sales tax solutions to recoup millions in lost tax revenue.
Online retailers oppose the Marketplace Fairness Act, which they say will burden retailers with compliance costs and add confusion to a thriving marketplace.
“Forcing small and mid-sized internet and catalog retailers to navigate the vagaries of thousands of arcane tax jurisdictions, including varying definitions and sales tax holidays, could lead many to stop selling in some states. That would reduce consumer choice and competition,” Steve DelBianco, executive director of NetChoice, a trade association that represents online retailers, wrote in November.
DelBianco and other retailers have expressed support for a hybrid approach from Goodlatte dubbed the Online Sales Simplification Act. The act, so far only released in draft form, makes online retailers subject to tax rules and audits only in states where they have a physical presence.
