A small business lobbying group on Thursday (Aug. 4) used a Wall Street Journal report to fire back at Amazon for withdrawing affiliates and operations from states that require Internet retailers to abide by the same tax collection laws as bricks-and-mortar businesses.
SB 738, carried in the Arkansas Senate by Sen. Jake Files, R-Fort Smith, was designed to close a loophole in tax law that puts Arkansas small businesses — those that collect sales taxes locally — at a competitive disadvantage.
With the bill now law, Arkansas joins other states seeking to level the playing field between local retailers and large online retailers. Discount online retail giants like Amazon.com or Overstock.com don't currently collect sales tax on items sold. They contend that customers are obligated to make the payments voluntarily.
“This bill doesn’t create any new taxes," Files said when he filed the bill. "It ensures that sales taxes already due are collected in a more efficient way. This will give consumers the peace of mind that they aren’t going to be liable for paying sales taxes after making online purchases, as they are now."
In early April, Overstock.com pulled out of Arkansas, saying the law is unconstitutional because it forces out-of-state retailers to collect sales tax merely for using in-state ad services. The company canceled all ad contracts in Arkansas and will end relationships with affiliate sellers in the state. Overstock has taken similar actions in Illinois, New York, North Carolina and Rhode Island.
Amazon also pulled out of Arkansas.
Files and other supporters of the law have taken heat from Tea Party activists and some Republicans who say the law was nothing more than a veiled tax hike. They also say the Arkansas law and similar laws in other states represent state governments trying to greedily extend their tax code to the Internet.
The “Stand With Main Street” group now say the Wall Street Journal Report shows that Amazon and other online retailers were really focused on finding ways to skip paying taxes. The group provided two excerpts from the WSJ story.
• “In the 2000s, Amazon documented the restrictions in a U.S. map that shaded each state red, yellow or green and was given to new employees, said three people who saw it. It couldn't be determined precisely which staffers received it and to what extent the practice is followed today.”
• “Other employees received a spreadsheet with two columns: ‘bad states’ and ‘safe states,’ said a person who saw the document within the past year. One copy of the spreadsheet, reviewed by The Wall Street Journal, listed nine ‘safe states,’ including the four states where Amazon declares retail operations. The spreadsheet listed 19 "bad" states, including Arkansas, Connecticut, Illinois and Texas, which have sought to expand taxation of online sales.”
Files said Thursday the WSJ report shows the extent to which online companies will to go to avoid paying taxes.
“It bothers me that companies such as Amazon would make business decisions, not on factors that they can control like labor availability, environment, and quality and cost of living, but on their ability to avoid sales tax collections,” Files said. “On the contrary, I am thankful that we have many small businesses, and large ones for that matter, who operate and comply with the law every single day and work to make Arkansas a better place, provide jobs, and make a positive contribution to our communities and economy.”
Robert Coon, spokesman for the Little Rock-based Alliance for Main Street Fairness in Arkansas, says what is happening in Arkansas points to the need for comprehensive federal reform of sales tax laws. “Sales tax avoidance seems to be priority number one for this Internet company and anyone who jeopardizes their ability to skirt the law gets thrown by the wayside, including our in-state affiliates. It is clear that now is the time for Congress to address the issue and give states the authority they need to close this tax loophole once and for all,” Coon said in a statement.