Don't Mess With Taxes

Attention Amazon customers in Maryland a Minnesota. You might want to get your orders in now.

On Oct. 1, those two states will bring to 23 the number in which the online retail giant collects sales taxes.

Photo by MikeBlogs via Flickr Creative Commons

Currently, Amazon is tacking state sales tax amounts on invoices of products delivered to:

Arizona, California, Connecticut, Florida, Georgia, Indiana, Kansas, Kentucky, Massachusetts, Nevada, New Jersey, New York, North Carolina, North Dakota, Pennsylvania, Tennessee, Texas, Virginia, Washington, West Virginia and Wisconsin.

South Carolina Amazon taxes are on the calendar for Jan. 1, 2016.

Getting around useless use taxes: While shoppers in those jurisdictions aren't or won't be happy, it's mmm-mmm good for tax collectors.

State officials have complained for years that their residents are ignoring the use tax, the companion levy to state sales taxes. Use tax laws say that if you buy a product in one place, you must pay sales tax on it in your home state where you plan to use it.

Yeah, right.

Tax collectors have tried various ways to get use tax money, from education efforts to including use tax lines on state income tax forms. For the most part it's been a waste of time.

So now they are going after online sellers to collect.

Expanding nexus: When an Internet retailer also has a physical presence in a state, that counts as nexus.

This legal concept is the basis of the 1992 U.S. Supreme Court ruling in Quill v. North Dakota that allows collection of taxes on remote sales. Back then, the primary out-of-state seller was the mail order catalog industry.

In many states, Amazon has physically branched out, building distribution centers that count as the brick and mortar connection necessary to collect taxes from the states' buying residents.

That's the deal in Maryland. Amazon reportedly is moving ahead with construction of a distribution center next to its massive warehouse in a southeast Baltimore industrial park.

Such distribution centers are typically the Amazon structures that are popping up all across the country as the company looks to speed up its delivery times.

In addition to giving the states the ability to eventually collect sales taxes from the buying public, the buildings provide jobs in both the construction and completion phases.

Minnesota location unknown: That's expected to be the case in Minnesota, although right now the location of tangible Amazon property is a mystery.

"They could have one right now being built, and we wouldn't know about it, as crazy as that sounds," Gene Munster, an analyst with Piper Jaffray & Co. in Minneapolis, told the StarTribune. "But that could be hard to keep quiet."

Or, added Munster, the Seattle-based company could be opening a corporate office or have a warehouse filled with servers for its cloud computing operations.

The last time Amazon and Minnesota were mentioned in the same breath, it was during a fight over whether affiliates who got commissions for sales in the North Star State constituted nexus. Amazon dropped those small business operators on July 1, 2013, rather than begin collecting sales tax back then.

It's a safe bet that the company now has something bigger that some bloggers with Amazon ads on their sites somewhere in Minnesota.

You also might find these items of interest:

• Get ready online shoppers, sales taxes on Internet purchases are on the way
• States could get more money by modernizing sales tax laws
• House panel finally looking at Internet sales tax legislation