Amazon CEO Calls State Tax Demands Unconstitutional

Amazon has been fighting tax-related battles for some time now, and as pressure to collect in some U.S. states grows stronger, Amazon refuses to back down. In fact, Amazon’s CEO sees their demands as unconstitutional. 

Amazon is the largest online retailer in the United States with over 90 million registered buyers. It was founded in 1994 and went live in 1995. It started out as an online bookstore, but soon began selling CDs, computers, software, DVDs, video games, electronics, toys, apparel, furniture, and food. 

In recent years, certain U.S. states have demanded that Amazon collect sales taxes because the retailer’s affiliates operate within these particular states, and to offset huge budget deficits. For instance, Amazon filed a lawsuit against the state of New York because the state tried to collect taxes from out-of-state transactions through the online retailer. In another instance, Texas State Comptroller Susan Combs charged Amazon $269 million in unpaid sales taxes, which pushed Amazon to close a local distribution center and cancel plans to expand operations in the state of Texas. Amazon has also cancelled tens of thousands of affiliate accounts in Illinois and Colorado because of tax-related demands.

In addition, brick-and-mortar competitors like Best Buy, Wal-Mart and Sears are complaining that Amazon has an unfair advantage in the retail industry because of its refusal to charge taxes in certain states. 

Now, Amazon CEO Jeff Bezos is saying that some U.S. states’ tax demands are violating the U.S. Constitution. 

According to Bezos, a 1992 Supreme Court decision excuses Amazon and other remote sellers from having to collect taxes in U.S. states that do not have the company’s employees or warehouses operating within its borders.

“First of all, most of where we do business – Europe, Japan, some of the states here in the United States – we collect sales tax. More than half our business,” said Bezos. “We do collect sales taxes, the European equivalent of value-added tax. And in 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 the 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. 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.”

The Streamlined Sales Tax Initiative promotes simplified sales and use tax collection and administration by retailers and states by minimizing costs and administrative burdens on retailers that operate in multiple states and collect sales taxes.

As of right now, Amazon collects tax in Kansas, Kentucky, New York, North Dakota and Washington. Another 40 U.S. states have sales taxes, but are supposed to document and pay tax on out-of-state untaxed sales, but rarely do either because they’re unaware of this or just don’t want to. Amazon has made it clear that it would comply with state tax collection if Congress mandated it more clearly. 

Just this month, Amazon praised states like Arizona and Indiana, whose governor’s do not demand the collection of taxes. Amazon plans to promote growth in these areas, and even announced plans to expand three warehouses.