Why Doesn’t Amazon Collect Sales Tax? The Constitution, That’s Why

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Why doesn’t Amazon.com collect sales tax from the majority of Americans who buy from the company? Because, according to CEO Jeff Bezos, it would be unconstitutional to do so – although the company does support a proposed change in the law that would allow everyone to pay taxes on their purchases through Amazon.

The subject came up in a conversation Bezos had with Consumer Reports, where he explained why Amazon doesn’t currently collect sales tax from customers in states where it has no employees or warehouses:

[I]n the U.S., the Constitution prohibits states from interfering in interstate commerce. And there was a Supreme Court case decades ago that clarified that businesses — it was mail-order at that time because the Internet did not exist — that mail-order companies could not be required to collect sales tax in states where they didn’t have what’s called “nexus.” And that’s a very clear decision.

The topic has been pushed lately, with Amazon closing warehouses in Texas and South Carolina when the states have raised the tax issue, as well as canceling thousands of affiliate accounts in Colorado and Illinois after those states demanded taxes. But, Bezos says, it’s not that Amazon is tax-phobic:

Our point of view on this is that we should simplify the sales tax system, and we’ve been consistent on this for about 10 years. It’s called the Streamlined Sales Tax Initiative. I think 22 or 23 states have signed onto it. Because the right way to fix this is with federal legislation. That’s where it can be fixed properly.

Sales tax collection is very complicated. And, you know, we’re no different from big chains of retailers — they don’t collect sales taxes in states where they don’t have nexus, either. So everybody is following the same rules.

He went on to add, “I don’t think our customers would say, ‘Why don’t you just optionally collect the tax? I know you’re not required to do it, but aw, go ahead.’” Well, sure. If you’re going to start appealing to people’s inherent cheapness, then go right ahead.

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