The Patrick administration may require Amazon.com to start collecting sales tax on purchases made in Massachusetts, a move that would raise prices for online shoppers, but generate as much as $45 million in annual revenue for the state, according to several people briefed on the matter.
The Massachusetts Main Street Fairness Coalition, a group of retailers, elected officials, and labor unions, recently escalated pressure on state officials to impose the 6.25 percent tax on Amazon sales after the company bought a local technology firm and opened an office in Cambridge. Merchants are supposed to collect the tax if they have a physical presence in a state.
Traditional shop owners say Amazon’s exemption has put them at a competitive disadvantage by providing online customers with a built-in discount.
In addition to negotiating with Amazon on the sales tax issue, the Patrick administration wants to talk about the company’s business plans and opportunities for job creation in Massachusetts, according to people briefed on the matter who requested anonymity because it is early in the process. No timeline for implementing sales tax collection has been set, they said.
Other states grappling with deficits have looked to Amazon, the world’s largest Internet retailer, as a source of additional revenue. Last week, the Seattle-based company said it would begin collecting and paying state sales tax in New Jersey, and the merchant recently struck deals to do the same in Indiana, Nevada, South Carolina, Tennessee, and Virginia. Amazon - which for years resisted such efforts - has offices, distribution centers, or other operations in all of those states.
Jay Gonzalez, Massachusetts secretary of administration and finance, said he could not comment on Amazon’s tax liability.
“We’re certainly aware of the fact that Amazon has entered into [tax collection] agreements with other states,’’ Gonzalez said. “I’m sure there will be further discussions with Amazon on a variety of issues, including this.’’
The company declined to discuss the possibility of collecting taxes in Massachusetts. According to state records, Amazon has hired a Boston lobbying firm, Kearney, Donovan & McGee, but representatives there did not respond to requests for comment.
Currently, Massachusetts residents who buy products from online companies that don’t collect sales tax are supposed to pay it to the state Department of Revenue. Few do, however, and there is little enforcement.
Online retailers have been protected by a 1992 Supreme Court ruling that said they had to collect sales tax only in states where they have a physical presence. Since then, Internet shopping has exploded in popularity and the issue of how to tax it has received increasingly more attention. According to the National Conference of State Legislatures, states missed out on an estimated $8.6 billion in 2010 from failing to collect sales tax for online and catalog purchases.
The loss for all online sales in Massachusetts is projected to be $335 million this year. The Main Street Fairness Coalition estimates that forcing Amazon to collect the state’s sales tax could net $25 million to $45 million.
Efforts to streamline online tax collection at the federal level have languished in Congress, so some states have been taking action on their own. In 2010, the Texas comptroller sent Amazon a $269 million assessment for taxes it didn’t collect and remit between 2005 and 2009. During that time, Amazon had a warehouse in Irving, Texas, which was owned by a subsidiary. Amazon closed the facility after getting the bill, but recently agreed to collect taxes starting in July, create at least 2,500 jobs, and make $200 million in capital investments. In return, Texas is dropping the demand for back taxes.
Last week, Amazon said it would invest $130 million in New Jersey, build two warehouses, and bring 1,500 full-time jobs to the state, contingent on receiving tax incentives to finance the construction. As part of the deal, it agreed to collect the state’s 7 percent sales tax from New Jersey residents who buy online starting in July 2013.
“States are now beginning to realize they have to find every dollar that is legitimately out there for taxes owed and not being collected,’’ said Neal Osten, of the National Conference of State Legislatures. “And Amazon is realizing that they have to be in more states with [distribution] centers so they can get those products delivered the next day.’’
In Massachusetts, area businesses said the rapid growth in mobile commerce has made it difficult for shop owners to compete against online companies that offer free shipping and do not charge taxes. The Main Street Fairness Coalition sent a letter on Thursday to the Department of Revenue calling on the agency to force Amazon to collect sales tax at the start of the fiscal year in July, and on Monday the Retailers Association of Massachusetts sent a letter to 200 lawmakers asking them to take action on the issue.
“Our message is to either extend the tax collection requirement to them now - or take it off of us until they do collect it,’’ said Jon Hurst, president of the retailers association. “We want to operate under the same rules as Amazon now that they have a presence here just as we do.’’
Requiring Amazon to collect sales tax could discourage some price-conscious consumers from buying merchandise on its site.
“Having no sales tax to contend with makes [Amazon’s] prices even more appealing,’’ said Steve Smith, an Amazon customer who lives in Avon. “If they instituted a Mass. sales tax, I would probably look at other sites to see if avoiding the tax were possible.’’
But other shoppers said they will continue to buy from Amazon no matter what, citing its ease of use and convenience.
“I’m a guy and do not like shopping, so I do most of my shopping online,’’ said Danny Fitzgibbon of Brookline. “If Amazon added a sales tax, I’d still use them. I’ve bought from other sites - not many - which did charge Massachusetts’ sales tax. It didn’t stop me.’’