In February, I wrote a blog titled 50 Tax Men.  Thanks to a recent ruling in Texas, I want to address that issue again.

It’s all about Amazon, a company known for dodging the sales tax bullet.  The issue is should Amazon charge sales tax on all its sales whether or not it has a physical location (a warehouse, sales office, etc) in the state?  Amazon has four warehouses and does collect sales tax in those states.  However, that leaves 46 states that are not getting a piece of Amazon’s very large pie.  Most states, some near bankruptcy, desperately need revenue.  Amazon sales seem like a great place to get it.

Enter Texas.  It assessed Amazon $269 million in sales taxes owed.  Amazon, in its SEC filings, lists the potential for additional taxes owed as a possible investment risk.  Flash - this is not confined to the United States.  European countries are also interested in obtaining taxes from Amazon sales.  (Get more detail here: http://online.wsj.com/article/SB10001424052702304354104575568512331020710.html and here: http://www.publishersweekly.com/pw/by-topic/industry-news/bookselling/article/44933-texas-says-amazon-owes-269-million-in-taxes.html )

I bring this to your attention because there is more to the issue than money for the state coffers.  By avoiding sales tax, Amazon is selling its product for substantially less than local retailers.  For example, a purchase made at an independent bookstore in Chicago is automatically 9.75 percent more than the same purchase made on Amazon due to sales tax.  This is an unfair advantage and has given rise to a number of states considering e-fairness laws, Illinois among them.

This matter will not go away.  Eventually, Amazon will lose this battle.  If you currently act as an online retailer and ship your work to your readers in other states, be prepared to collect and remit sales tax or consider using a distributor who will handle the taxes for you.  Involving a third party may reduce your profit but keeping the tax man happy is a key part of running your business.

Does all this affect you or the way you manage your business?  Before you make any decisions, discuss this with your tax professional.  Taxation on the state level is complicated by fifty different sets of rules.  Do not try to navigate this alone.