Amazon to Collect Sales Tax in California and Beyond

For as long as eReaders have been around, it seems at times, people have complained that they aren’t available for under $100.  They’re finally getting there, with the Kindle available for as little as $114 new.  We might even see a $99 Kindle by the end of the year.  An important question to ask the people who came up with this number might soon be “Is that before or after tax?”

There is obvious competition between online retailers and the brick & mortar set over taxes.  While it is technically true that somebody buying a Kindle on Amazon.com should be paying the same taxes as somebody grabbing the same product from the local Best Buy, it isn’t surprising that most customers somehow forget to file the forms to pay those taxes at the end of the year.  These stores aren’t the only ones affected, of course.

Most states have begun to take notice of the problem, with some targeting Amazon directly due to its prominent status and high sales figures.  It’s a matter of hundreds of millions of dollars per year in revenue that the state governments rightly feel they should have access to.  Amazon’s response, which is either due to the inconvenience of keeping up with unendingly complex local sales tax interactions and iterations or due to the fact that it makes their store more appealing to customers to be able to avoid sales tax (depending on your current level of cynicism and trust of a major corporation’s word on the matter), has been to withdraw their physical presence from nearly any state that has tried to enforce collection requirements on them.

Now, in an arrangement with the California government, not only will Amazon not be pulling their presence from the state, they will be working openly to resolve the issue of sales tax on inter-state commerce due to the rise of the internet.  There’s a bit of back story to the arrangement, with both the state government and Amazon making threats over the issue, but essentially it seems that a compromise was reached.  Amazon, and online companies in general, will be given until July of 2012 to persuade Congress to adopt some form of nationwide measure for the collection of internet sales tax.  Should this not come to pass, there are fallbacks to allow for California to collect beginning in 2013.

While it would seem at first glance to be not in the company’s best interest to cooperate, they have simply gotten too large to avoid notice at this point.  Increasingly, Amazon will be singled out as iconic of the problem with online retailers.  The only safe path for them will be to seek a system that can catch their competition on all levels in the same net, to keep anybody from getting a major advantage.

The knowledge that this was coming could be one pressure that has pushed Amazon to focus on digital media distribution recently, giving them products that cannot be conveniently purchased locally.  Whether or not that is the case, however, it seems a safe bet that Amazon won’t be driven out of business by the inconvenience of it all or the price bump that customers should be paying for already anyway.