The de facto sales-tax exemption that online retailers received years ago under federal law has long been a sore point for Massachusetts policymakers who pine for foregone dollars, and for bricks-and-mortar retailers who labor under a built-in price disadvantage. Fortunately for Massachusetts, the mega-retailer Amazon.com is making things simple by launching an office in Kendall Square and buying the robot company Kiva Systems in North Reading.
Under federal law, a state can only force e-commerce sites — or mail-order companies, for that matter — to collect its sales taxes if those firms have a physical presence in its borders. Governor Patrick has been coy on the subject; the governor has suggested that, under state and federal laws, his administration is only permitted to ask the retailer to collect Massachusetts taxes voluntarily. But the Commonwealth can fairly demand that Amazon do just as other retailers do — charge sales taxes on the goods that Massachusetts residents buy.
The company has resisted efforts by some individual states to collect taxes, but it has negotiated settlements with some others. And unlike many other e-commerce sites, the company has called upon Congress to resolve the issue. Indeed, federal lawmakers should pass the Marketplace Fairness Act — which Amazon itself supports.
The broad federal exemption from state sales taxes might have made sense in the early days of Internet retail, when sending one’s credit card number off into the ether seemed like a risky act, and even the best known e-commerce sites hemorrhaged money. But at this point, Amazon and other online retailers have proved themselves, and then some. Indeed, Amazon helped drive the once-mighty Borders Books out of business.
Removing the federal exemption will produce some complications. The location of some online transactions is ambiguous; if a Massachusetts resident buys a virtual tractor within the game Farmville while vacationing in Florida, which state, if either, should collect the sales tax? Yet in most cases, the issues involved simply aren’t that complicated.
A vibrant e-commerce sector is a convenience for consumers and a source of efficiency in the economy. But the mainstreaming of Internet commerce cuts both ways; just as bricks-and-mortar stores must accept that they have competitors in cyberspace, e-commerce sites must accept — as civic-minded traditional retailers long ago did — that they have some responsibility to the communities where their customers live.