Amazon to begin collecting Mass. sales tax Friday
If you're considering making a big-ticket purchase on Amazon.com, you might want to do it before Friday.
That's when Massachusetts shoppers will start paying the state's 6.25 percent sales tax on items they buy from Amazon.
The state Department of Revenue expects the tax to raise $36.7 million before the fiscal year ends June 30. The tax applies to items purchased from Amazon and not third-party vendors using the site.
Transactions on Amazon and other large Internet retail sites have long been handled tax-free for residents of Massachusetts and most other states. Other retailers that were required by law to collect sales taxes — brick-and-mortar stores, as well as others that sell online but maintain a physical presence in the state — complained they were competing at an unfair disadvantage.
Last year, negotiations between state officials and Amazon, which has an office in Cambridge and a technology firm in North Reading, led to the Massachusetts tax agreement that's about to go into effect. The company's sales are currently taxed in 13 states.
Massachusetts retailers hope the Amazon sales tax collections will help level the playing field and boost their holiday sales.
"There's no question that it will definitely help me," said Ken Loring, president of the furniture retailer Boston Interiors. "But it's not just me. It's everybody on Main Street. I can't applaud the administration enough, except to say it's about time."
Dana Brigham, manager and co-owner of Brookline Booksmith, said that many people come into her store to look at a book but then take a picture of it and shop around for a better price online, which is often on Amazon. In fact, the e-commerce giant promotes the practice with a free smartphone application that finds the lowest Internet price for shoppers.
Brigham hopes that applying the sales tax to Amazon will convince more consumers who are in her store to proceed to the check-out during the holidays, her biggest selling season.
"This so, so, so overdue," Brigham said.
Retailers agree that including the largest e-commerce company in the world is a step in the right direction, but many say it's unfair that all online sellers are not required to collect the sales tax.
Some studies suggest states collectively lose out on more than $8 billion in tax revenue a year by failing to collect taxes for online and catalog purchases. The Massachusetts Main Street Fairness Coalition, a group of retailers, elected officials, and labor unions, estimates the loophole costs businesses in the state more than $280 million in lost sales.
Jon Hurst, president of the Retailers Association of Massachusetts, said it has pushed the government to require online companies to collect sales taxes for the past 15 years.
At first, many argued a sales tax could stifle the growth of the Internet and that it would be hard to collect the tax — points that are no longer relevant in today's digital world, Hurst said.
He and other supporters of online sales tax collections are encouraged by the Marketplace Fairness Act, a federal bill that would require state sales tax collections for all Internet sales.
The bill was passed by the Senate in May but is stalled in the House.
"The consumers who shopped on Amazon to avoid the sales tax are just going to jump over to Overstock or eBay," Hurst said. "We still need Congress to act and tax all online sellers."
Casey Sewall, president of Kahians ApplianceOne & HDTV, is one of those shoppers.
Sewall shops for items like paper towels and toner for his Hanover store on Amazon.com and said that now he will just buy from another e-commerce merchant that offers the next best price, sales tax included or not.
As a retailer, Sewall said, he also lists about 50 big-ticket appliances on eBay at any given time and rarely collects sales tax because few of his Internet buyers live in Massachusetts.
He said the Amazon tax won't have a significant impact on his Hanover store, with the exception of Weber grill sales, because the site does not sell many home appliances.
But he believes his business is hurt tremendously by the lack of a tax on all digital merchants, especially the discount appliance sites ajmadison.com and abt.com.
Sewall said he would happily pay and collect a sales tax on all online goods to recoup sales lost to those competitors.
"If I had to start collecting sales tax on eBay, my Internet sales would disappear," he said. "I would be very much willing to forgo that to have a level playing field for my mom and pop store."