In the course of these clashes, Amazon’s approach to dealing with states seemed to change. Rather than threatening to shut down distribution centers or cut ties with online affiliates, the retail giant started cutting deals with state governments, analysts said. Amazon will begin charging sales taxes for customers in eight states, including Virginia, over the next four years. It currently collects sales taxes in six others.
The shift probably had to do with its ambitious expansion plans, said French, the National Retail Federation vice president.
“Amazon’s business model is changing,” French said. “It wants to be moving towards more rapid delivery.”
To do that, it needs to open more distribution centers around the country.
Amazon has complained that collecting state sales taxes is too complicated and has long backed federal legislation to make the practice more straightforward. The latest federal proposal — the Marketplace Equity Act — has strong bipartisan support and appears to be moving forward.
“We strongly support passage of the Marketplace Fairness Act because it’s time to resolve the sales tax issue,” said Scott Stanzel, a spokesman for Amazon.
The bill proposes that a state can decide whether to enforce collection of its sales tax. If the state chooses to, then it should simplify its tax system according to conditions outlined in the bill.
Sales tax rates generally range from 5 to 10 percent, depending on the type of product as well as the jurisdiction (cities and counties can impose their own taxes on top of state rates). In Maryland and the District, many items are taxed at 6 percent, while in Virginia, the sales tax generally hovers around 5 percent.
Traditional retailers with an online presence, such as Barnes & Noble, Wal-Mart and Target, also support the bill, as do groups such as the National Retail Federation and the Retail Industry Leaders Association.
On the other side is NetChoice, the trade association of e-commerce companies. NetChoice has opposed sales tax collection and overturning the physical-presence ruling by the Supreme Court. Its argument, which Amazon has used in the past, is that tax calculation for thousands of jurisdictions countrywide is an impossibly complicated task.
“The burden falls disproportionately on a small business,” said Steve DelBianco, executive director of NetChoice. “It has no accounting or IT staff to keep track of tax rules and holidays.”
The new bill exempts online businesses making less than $500,000 a year from collecting sales tax. NetChoice says that threshold is too low. It also notes that the amount states will gain from online sales taxes is less than 1 percent of total state tax revenue.
The measure, sponsored by Sens. Mike Enzi (R-Wyo.), Richard J. Durbin (D-Ill.) and 12 others, was introduced in November. The House Judiciary Committee is set to hold a hearing on it July 24.
Amazon said that even with the tax, it expects a minimal impact on its sales.
“They’re still winning on price for the most part, even as they collect taxes,” said Mark Miller, an equity research analyst at William Blair & Co.
Still, local retailers hope the sales tax measures will give them a chance to compete.
“I’ve got to file a form every month, and I’m only one tiny business,” said Val Morgan, owner of Idle Time Books, a 30-year old bookstore in Adams Morgan. “If I can do it, surely Amazon can.”