This Cyber Monday, Amazon is Collecting Sales Tax in Wisconsin
Today is Cyber Monday, the first day back in the office after Thanksgiving – and one of the biggest days of the year for online shopping. One thing that will be different this shopping season is that for the first time, Amazon will be collecting sales tax on purchases made by Wisconsin residents. Amazon’s move is expected to increase state revenue by $30 million in the first year.
Wisconsin residents always owed sales tax on purchases made online, but until recently, the state could not compel Amazon and other online-only retailers to actually collect the tax. Instead, Wisconsin residents were supposed to report their purchases and pay the sales tax on their income tax forms, something few people did. The fact that online-only retailers did not charge consumers sales tax – even though sales tax is owed on the purchases – gave online-only retailers a competitive advantage over retailers with “bricks and mortar” presences in the states.
The number of states in which online-only retailer are collecting sales tax is expanding, for two reasons. First, some states have enacted legislation that redefines the type of physical presence that requires retailers to collect sales tax. Second, on-line retailers have continued to grow, opening warehouses and other facilities in new states, and thereby establishing physical presences that require them to collect sales tax.
Amazon has announced that it is building a warehouse in Kenosha, giving it a physical presence in Wisconsin. As part of its physical expansion into Wisconsin, Amazon began collecting sales tax on purchases from Wisconsin residents back in October. Wisconsin was the 14th state for which Amazon collects sales tax.
Amazon collecting sales tax will raise new revenue, but that amount will be reduced by the tax credits and other financial support that the state and local governments have offered Amazon for building the warehouse. The Wisconsin Economic Development Corporation has offered Amazon up to $7 million in tax credits if it hits certain hiring goals, and the city of Kenosha has agreed to $17 million in tax incremental financing for the project.
Federal legislation, which is stalled in Congress, would require all on-line retailers to collect the sales tax. This Forbes article, with the great title “Cyber Monday: It’s the Most Wonderful Tax Evasion Day of the Year!” explains more about how a federal solution is not in sight:
For years, Congress and the states have struggled with how to resolve the inequities between the collection of taxes from “brick and mortar” retailers and internet retailers. Legislation was introduced in 2011 – the Main Street Fairness Act and the Marketplace Equity Act – in an effort to assist states in streamlining collections. While both have received significant press, neither of the bills have crept close to becoming law.
Now that Amazon is collecting sales tax in Wisconsin, we have taken a step towards leveling the playing field between online retailers and Main Street businesses. We should continue to work to make sure that our tax system does not allow some businesses to gain an advantage by not collecting sales tax.