Massachusetts Gov. Deval Patrick was crowing yesterday about the deal he cut with online retailing giant Amazon. Claiming victory in a long-fought battle, Patrick said that Amazon next year will begin collecting sales tax on purchases by Bay State customers.
Small, brick-and-mortar retailers have a legitimate gripe that Amazon’s avoidance of the sales tax gives it a competitive advantages. These retailers have been backing the Patrick administration in its effort to collect from Amazon.
“We are thankful Amazon was willing to come to the table and we will continue our conversations with them about creating jobs here. This agreement is a win for all sides, and I am pleased it promises to generate millions in long-term revenue for the commonwealth,” Patrick said in a statement.
It’s a win for all sides — all sides, that is, except for the taxpayers of Massachusetts.
Patrick would like us to believe that he brought a big, bad corporation to its knees and forced it to pay its fair share of taxes to Massachusetts. But Amazon isn’t paying anything. The company will merely collect the tax from its Bay State customers beginning Nov. 1, 2013, and pass it on to the state treasury.
Meanwhile, Massachusetts residents have lost one more means of escaping the state’s onerous 6.25 percent sales tax. That tax drives many Merrimack Valley residents across the border to New Hampshire, where their purchases are tax-free. And it was also driving purchasers to online retailers like Amazon.
Such behavior irked Bay State tax officials, who tried to counter it with the futile effort to get residents to pay voluntarily a “use tax” on their tax forms and the ridiculous attempt to intimidate a New Hampshire tire retailer into ratting out its Massachusetts customers.
In truth, Massachusetts won little. Amazon largely conceded the fight.
For years, Amazon avoided setting up facilities in high-tax states like Massachusetts, New York and California. Without a physical presence in those states, Amazon could avoid collecting their sales taxes.
Earlier this year, Amazon opened a software development facility in Cambridge, and its avoidance of the Massachusetts sales tax became problematic. But the retailer is giving up the fight against the sales tax nationwide as its business strategy changes. According to several published reports, Amazon plans to shift from large, centralized distribution centers in a few states to smaller centers in many states. This will allow the company to offer same-day delivery of purchases to its customers.
Amazon also agreed to support Massachusetts in its effort to promote a federal solution to the issue of online retailers collecting sales tax on purchases from individual states. A number of states, including New Jersey, have reached similar agreements with Amazon.
So, Massachusetts shoppers may have lost more than just tax-free purchases from Amazon. Soon, there may be no online escape from the Bay State’s tax collectors.
The real problem was never Amazon’s tax-free status. The problem is the sales tax, which plucks a few extra dollars from buyers’ wallets whenever they make a purchase.
Our political leaders would rather pat themselves on the back for “solving” a non-problem like Amazon’s tax status instead of taking on the real problem — the state’s insatiable desire for more of our money to spend.