Arizona panel to consider online sales tax issue

PHOENIX – The issue of whether Amazon.com should be required to collect
tax on online sales to Arizonans isn’t going away.

State legislators during their 2012 regular session considered but ultimately
shelved proposals to force the Seattle-based online retailer to collect tax on
its sales in Arizona.

But the issue is expected to resurface publicly in coming months when a newly
appointed state task force considers making recommendations for legislative
action on improving Arizona’s sales-tax system.

Gov. Jan Brewer didn’t specify online purchases as a topic for the task force
to consider, but a senior Brewer aide who will lead the panel said the issue
will be taken up under its charge to recommend ways to simplify the state’s
sales-tax system.

“We’re likely to dedicate some significant time and resources to it,” said
Michael Hunter, Brewer’s tax policy adviser and her chief legislative lobbyist.

Because of the simplification mandate and brick-and-mortar retailers’
complaints about no-tax competition from Amazon, “it’s going to have to come
up,” agreed Kevin McCarthy, a task force member and head of a business-backed
taxpayer advocacy group.

Meanwhile, the state apparently still has a $53 million tax assessment pending
against the online retailer in confidential proceedings.

Arizonans are legally supposed to pay sales tax on purchases of goods bought
from retailers that don’t collect tax, but few do.

Amazon contends it doesn’t have to collect sales tax from Arizonans because it
doesn’t have a “physical presence,” such as stores, in the state. The company
contends its so-called “fulfillment centers” _ distribution warehouses that
ship goods to customers _ don’t count because they’re owned by a subsidiary.

The Arizona Senate on March 8 soundly rejected a bill that would have
classified Amazon as an in-state retailer for tax purposes because the
subsidiary has facilities in Arizona.

In some other states, fulfillment centers have led to Amazon agreeing to begin
collecting sales tax. A recently announced agreement calls for Amazon to collect
tax on sales in New Jersey starting next summer, the same time the company plans
to begin building two new centers that will be its first in that state.

Michelle Ahlmer, Arizona Retailers Association executive director, said her
group will push the task force to recommend that legislators pass a law next
year requiring Amazon to collect sales tax by July 2013 at the latest.

“We don’t want a quick glossing over,” Ahlmer said. “There’s no way we can
let this stay the way it is.”

Hunter said Brewer’s office didn’t take a yes-or-no position on the 2012
legislation but questioned whether a $53 million assessment against Amazon by
the state Department of Revenue could be undermined.

Because the department contends Amazon already must collect tax, the task force
needs to consider the impact of changing state law, he said.

It’s too early to discuss what the task force might recommend, Hunter added.
“The message I want to deliver is we need to let the process unfold.”

Citing confidentiality requirements regarding taxpayers, Revenue Department
spokesman Anthony Forschino declined to comment on the assessment.

Amazon representatives did not immediately respond to inquiries about the
assessment. Amazon reports filed with the Securities and Exchange Commission
have disclosed only the assessment’s existence, not a resolution.

In considering the defeated legislation, some Arizona legislators sided with
retailers who argued Amazon’s no-tax status jeopardizes thousands of jobs at
brick-and-mortar businesses.

One senator who opposed the bill said it could make recruiting businesses
difficult if they worry they could be hurt by future changes in tax policy.

Other senators echoed an Amazon lobbyist’s testimony that the legislation would
violate the Arizona Constitution’s prohibition on bills targeting specific
individuals or companies.

After signing the May 11 order creating the tax force, Brewer said the online
sales-tax issue “is probably something we need to look into and determine what
Arizona can do.” But she said it requires a national solution by the federal
government.

“That’s where the buck stops on that issue,” Brewer said.

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