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Mass. prods Amazon to collect sales taxes

Governor Deval Patrick said he is encouraged by the state’s talks with Amazon. But “I’m just not sure that we’re going to have an agreement in place in time for the holidays.”Aram Boghosian for the Boston Globe

The Patrick administration is pressing Amazon.com Inc. to begin collecting sales taxes from Massachusetts customers as early as next year, arguing it is no longer exempt under federal law from charging the tax.

Under federal law, online retailers do not have to collect sales taxes from Massachusetts buyers unless the company has a physical presence, such as an office or store, in the state. But officials in the administration of Governor Deval Patrick contend that Amazon’s purchase of a North Reading technology firm, Kiva Systems, earlier this year, as well as its ongoing efforts to recruit engineers for a new office in Cambridge, establish the kind of physical presence necessary to collect the 6.25 percent sales tax.

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The state government lost out on an estimated $387 million in 2011 from Massachusetts residents buying products tax-free from online retailers, according to the Massachusetts Main Street Fairness Coalition, an association of retailers, unions and local officials.

The group has been pressuring the Patrick administration to compel Amazon to collect and remit state taxes.

Patrick officials said they have meet with Amazon executives at least a half dozen times over the past six months to discuss how the retailer would undertake the complex process of programming its system to charge the Massachusetts tax on qualified purchases.

Patrick said he was encouraged by the progress.

“The conversation with Amazon here is different than the conversation Amazon had in other states,” the governor said recently. “They have had and reached agreements in states where they actually have a presence, where they have a distribution facility . . . they don’t have that here.”

Even if Amazon and the state do come to terms on tax collections, Patrick said, “I’m just not sure that we’re going to have an agreement in place in time for the holidays.”

Amazon would not comment on its talks with Massachusetts.

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Amazon now collects taxes in eight states, and six others have set deadlines for the retailing giant to begin collecting their local levies because the company now has a facility of some kind in their jurisdictions.

Much of the progress states have made in capturing those taxes has come from Amazon’s success, as the firm rapidly expands its brick-and-mortar facilities.

In New Jersey, for example, Amazon agreed to begin collecting that state’s 7 percent sales tax on local buyers, beginning July 2013, after deciding to build two 1 million-square-feet shipping centers there. The company is building out its network of these massive fulfillment centers in order to increase its already fast delivery services.

Patrick officials said they would like Massachusetts to get in on Amazon’s expansion plans, such as having the company add a distribution facility here, too.

In October, the company announced it would open 19 new facilities around the world to handle the expected holiday shopping rush — but declined to name the locations.

In recent months, Amazon has started construction on sprawling warehouses in California, where it already collects local taxes, and in Indiana, where it soon will.

“The additions are made to support the growth we are seeing and to support our selection and in-stock goals,” said Kelly Cheeseman, an Amazon spokeswoman.

In total, it operates 40 such warehouse and shipping facilities in the United States and employs more than 20,000 people at the centers.

The tax status of Amazon and other Web retailers has ballooned into a major debate at the federal level, as financially pressed states, backed by local retailers and other businesses, push Congress to allow them to tax online sales regardless of the seller’s location.

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“This is not simply a revenue issue . . . it is a matter of fairness and equity to Main Street businesses,” Massachusetts Treasurer Steven Grossman wrote in a letter to US Senator Max Baucus, head of the Senate’s Finance Committee, pushing for online tax legislation.

“Local retailers and other merchants should not have to compete with online sales giants that do not have to collect state and local sales taxes,” he said. “It is simply contrary to sound public policy to penalize companies that actually invest in a brick-and-mortar presence in a community.”


Michael B. Farrell can be reached at michael.farrell@globe.com.