Amazon Removes Itself from Connecticut and Arkansas in order to Avoid Paying Sales Tax

Amazon US Sales Tax Map

Amazon removes itself from states like Connecticut and Arkansas due to new legislation in both of those states that would require amazon to pay sales taxes within the state. Online companies like Amazon have been able to avoid paying state sales taxes, by being physically located in another state. A 1992 Supreme Court case, Quill Corp v. North Dakota, set the precedent that sales taxes can only be levied if the store was physically in the state and online stores like Amazon have used this ruling to avoid having to pay taxes.

Connecticut stated that the state could collect roughly $9.4 million in what they are calling the Amazon Tax” that would apply the normal 6% sales tax to the online retailer. Connecticut is saying that Amazon should pay the normal sales tax, because while it doesn’t have any physical stores in the state, it advertises its services and uses servers that are physically located in Connecticut. After this bill past Amazon removed its servers from these states.

This is not the first time legislation like this has passed in other states. States such as Colorado, Rhode Island, Illinois and New York have all passed similar laws and Amazon has since moved out of all of these states, except New York, in order to pay any money in state taxes. Texas’s Governor, Rick Perry, vetoed a similar bill after Amazon withdrew a large distribution center located in Texas.

Amazon’s removal from these states isn’t affecting consumers as they are still able to purchase from Amazon’s site, but it is worrying the great lengths Amazon is going through in order to avoid paying taxes that ultimately gives them an unfair advantage over local stores that have to charge their customers state taxes.

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About The Author

President of NSI, Tom has been helping small and medium businesses succeed in Connecticut for over 25 years.