Thanks to a series of state-to-state agreements, Amazon has imposed sales tax in every state in the last few years. But these agreements do not always cover taxes that are assessed by local governments.
When Amazon agreed last year to charge sales tax in New Mexico, state officials said what they said could be tens of millions of dollars in annual tax revenues. 19659003] But they do not rejoice in the Town Hall of Albuquerque. One year after this announcement, New Mexico's largest city has not seen a penny from Amazon. Because the deal of the online shopping giant was only for the statewide tax of 5.125 percent, not for the 2.375 percent tax of the city of Albuquerque.
"The losers in this arrangement are cities," said Mayor Tim Keller. "Cities are really left to their own devices."
Amazon has raised sales tax in every state in the past few years through a series of state-to-state agreements. But these agreements do not always cover taxes levied by local governments. The company still does not levy sales taxes in dozens of cities, including Philadelphia, Pittsburgh and Cedar Rapids, Iowa, according to a new report from the Institute for Taxation and Economic Policy, a leftist think tank. These cities are located in seven states: Alabama, Alaska, Idaho, Iowa, Mississippi, New Mexico and Pennsylvania.
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Carl Davis, author of the report, Local governments missed out on millions of tax revenues when other income streams also come under pressure. And local retailers, many of whom are already struggling with online retailers, need to effectively spend more on their products than online sellers who do not have to charge local taxes.
"It's just a direct price advantage that shows up at the customer." Revenues, "Davis said," you never want to end up in the situation that the companies you make better offers are the ones that do not even have roots in your community. "
Amazon says that there are taxes in every jurisdiction Gathers where it is needed to do, and Davis' report found that the company collects local taxes in most states, but a hodgepodge of state laws governs tax collection, meaning that there is no easy solution for communities
Davis said his findings are less the fault of Amazon than of state tax systems that are not and in some cases, online traders are unable to raise local taxes States have rushed to sign treaties with Amazon without always ensuring that local governments would benefit as well.
"It has just come from the state issue overshadowed, "said Davis. "Smaller dollars are involved, but dollars are important to these communities."
Amazon sometimes collects taxes where other online retailers do not. In Chicago, for example, Amazon collects local taxes because it has warehouses and other facilities in Illinois; Online merchants who have no physical presence in the state generally do not have to raise taxes there.
Usually, states – not cities or districts – decide who has to charge local sales taxes. In most states, taxes are based on the buyer's location and retailers must levy local sales taxes in addition to state taxes. But in some states, including New Mexico, taxes are based on the seller's location, meaning that there is no mechanism for collecting taxes from sellers who have no physical presence in the area. Other states have other legal quirks that affect local tax collections.
These loopholes have existed for years, but their importance has grown significantly with the rise of online retail, said Scott Peterson, vice president for government relations in Seattle-based Avalara, a company that helps retailers calculate and collect sales taxes.
"This huge hole that exists in the VAT structure has been known for a long time," said Peterson. "Your laws are not valid."
A pending case of the US Supreme Court, South Dakota v. Wayfair Inc., could change but not necessarily simplify the legal landscape. Depending on the outcome, the case could pave the way for states to require companies to charge sales taxes, even if they have no location in that state. But local governments in Pennsylvania, New Mexico and other states still would not be able to collect taxes without the help of their legislators.
Local government officials in many parts of the country say the increase in tax-free online shopping had a big impact on their budgets. Albuquerque, for example, relies on sales tax – or what is known in New Mexico as gross revenue tax – for nearly two-thirds of its revenue from the general fund, which was about $ 500 million last year. City Treasury estimates that it lost $ 5 million in tax revenue from Amazon's purchases in 2016, although calculations are difficult due to the lack of available data. Lost revenue from other online merchants brings millions of dollars more.
Keller, the mayor, said Amazon benefited from urban services, such as the streets of vans with its parcels and the cops who make sure packages are not stolen. But unlike local retailers, the company does not come into play.
"This is the fundamental way we finance American society, and thanks to technology, they have found a way to decide against it," Keller said. "You get a free ride."