Online sales tax headache for Amazon

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Internet Retailer magazine reports that the Texas Comptroller’s Office has billed Amazon.com Inc. for $269 million in uncollected sales tax. The tax bill is to account for the sales to Texas residents from December 2005 to December 2009. And this tax is applicable because Amazon runs a distribution center in Irving, TX.

All of that because according the the law, sales tax (in 45 US states) is imposed on the buyer and collected by the seller when “nexus” or sufficient contact exists between the locations of buyer and seller. Here are the details — (via ecommerce-digest.com)

  1. If buyer and seller are located in the same state: seller collects the sale tax for the buyer and remits to the state.
  2. If buyer and seller are in different states but the seller has a presence (office, warehouse, employee, or representative) in the buyer’s state: seller again collects sales tax on behalf of the buyer and remits to the buyer’s state.
  3. If buyer and seller in different states where the seller does not have a presence in the buyer’s state: buyer has the responsibility of paying sales tax to his state.

So, now the question is, since the Irving, TX distribution center is operated by Amazon.com Kydc LLC, an entity separate from the Amazon retail organization, are they still liable to the tax bill. More news on this here, and here.