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Amazon buyers can use 3rd-party sellers to avoid tax

Published: Friday, Sep. 14, 2012 - 12:00 am | Page 1A
Last Modified: Friday, Sep. 14, 2012 - 8:10 am

Here's some good news for California bargain hunters annoyed that they'll have to pay sales tax on Amazon.com starting Saturday: Many of their purchases won't be affected.

Amazon doesn't plan to collect tax on anything sold by its vast array of third-party sellers – the thousands of retailers, large and small, that use Amazon's Internet platform to market their goods.

It's no small change. Third-party sellers accounted for about 40 percent of the goods ordered by Amazon buyers worldwide in the second quarter of this year, said Anne Zybowski, an e-commerce analyst with Kantar Retail consulting in Boston.

That's millions of dollars a year in sales in California alone.

The percentage has "really started to creep up," she said. "It's pretty big."

Amazon says its stance is perfectly legal – and consistent with how the company handles third-party sales in the seven other states where it collects sales tax.

California officials have resigned themselves to the situation.

"This has already been accounted for in our revenue estimates," Department of Finance spokesman H.D. Palmer said Thursday. "We knew what the rules of the road were."

The department predicts that Amazon will generate $158 million a year in tax revenue starting Saturday, when a new state law governing e-commerce takes effect.

The law requires online merchants with physical operations in the state to collect sales tax.

After years of fighting the state over sales taxes, Amazon supports the law. The company was willing to yield in order to build a string of warehouses in the state, with the goal of shortening delivery times and in some cases providing same-day service.

Two facilities already are under construction, in Patterson and San Bernardino.

For many of its customers, a key feature of Amazon is its third-party business: an enormous online bazaar featuring everything from used books and CDs to name-brand computers and high-definition TVs. Some of the third-party retailers deliver the products directly to customers, while others pay Amazon to do the shipping.

Amazon says it is merely a go-between on these transactions.

If the third-party sellers have physical operations in the state, they could be required to collect the tax from California customers.

But it won't be Amazon's responsibility, the company says.

"Each of those sellers may have different sales tax obligations," Amazon spokesman Scott Stanzel said Thursday.

"It is up to our sellers to determine those obligations."

Customers are supposed to pay the tax if merchants don't collect it, but the law is rarely enforced.

Amazon's position is a pleasant surprise for Sacramentan Mark Smith, who routinely buys from the third-party retailers.

"I haven't been to a mall in practically a year," he said.

With tax day looming, Smith figured he would stop ordering through Amazon and track down the third-party sellers' individual websites.

Cumbersome, but worth it to avoid the sales tax, he said. Now he can continue ordering as before.

"It's good news for me; that saves me a little bit of a headache," he said.

Not such good news, perhaps, for brick-and-mortar retailers, who have been demanding for years that Amazon collect sales tax in order to eliminate what they say is the online retailer's unfair price advantage.

The fact that Amazon won't collect tax on a slew of orders shows the shortcomings of California's new law, said Bill Dombrowski, president of the California Retailers Association.

"We couldn't attain perfect," he said.

That's why brick-and-mortar retailers are putting much of their focus on a national Internet sales tax bill making its way through Congress.

The bill is expected to bring a lot more Internet retailers into the arms of the tax collectors.

"What we are doing … is a national campaign to get Washington, D.C., to correct this issue," Dombrowski said.

Amazon, which doesn't want to be the only online merchant collecting sales tax, supports the bill.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Dale Kasler



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