Ohio retailers say they’re elated by Amazon.com’s announcement Friday that it will collect sales tax from Ohio consumers starting Monday.
Ohio retailers and retail associations have spent years trying to persuade Congress to pass laws requiring online retailers to collect and remit the same state sales taxes that brick-and-mortar stores are required to.
“What great news for Ohio,” said Gordon Gough, president and chief executive of the Ohio Council of Retail Merchants. His group is applauding the fact that not only is Amazon making a substantial commitment to the state by creating 1,000 jobs here, but “they’re going to come to Ohio and play by the same rules as all the other retailers.”
The Seattle-based retailer said it estimates it will collect between $150 million and $300 million annually in Ohio sales taxes that are currently the responsibility of consumers to keep track of and pay. Gough said those figures are significantly higher than what his group had expected from Amazon. “That’s a lot of money from one retailer,” he said.
Gough said that consumers who are characterizing this as the end of their “tax-free” online purchases are forgetting that they are supposed to pay sales taxes on Internet shopping — even if most don’t.
That’s because of a current legal exception that now allows online sellers such as Amazon and eBay.com to avoid collecting sales tax in states where they don’t have a warehouse or other physical presence. That gives them a 7-percent to-8 percent price advantage over brick-and-mortar stores that must charge sales tax, and leads consumers to believe that such purchases are “tax-free.”
Kirby Garboury, who owns Audio Etc. in Centerville, said now that Ohio online shoppers will be required to pay sales tax for items they purchased on Amazon, it will level the playing field for many local retailers whose businesses “act as a showroom for a lot of online shoppers.”
He said it is common for people to visit his store — where he sells home and commercial audio, video, automation, and home theater systems — look around and then go online to buy the same items to avoid paying the sales tax. He added that he annually pays hundreds of thousands of dollars in sales taxes.
Proponents of “e-fairness” estimate that the State of Ohio lost tens of millions of dollars in uncollected tax revenue from Ohioans who bought their 2014 holiday gifts from online sellers.
Lawmakers have once again introduced The Marketplace Fairness Act of 2015, almost word-for-word the same as its predecessor bills of introduced in 2011 and 2013, in an attempt to close that tax loophole.
As part of a deal with JobsOhio announced Friday, Amazon said it will create a third data-computing center in New Albany, outside Columbus, in addition to previously announced centers in Dublin and Hilliard, according to the Associated Press. The centers will employ more than 1,000 people over the next several years.
The central Ohio data centers will be part of Amazon Web Services, which provides cloud computing, storage, analytics and other services for corporate customers, according to The Columbus Dispatch.
In August, the newspaper reported that Amazon received tax incentives from the state valued at $81 million. In return, Amazon is making $1.1 billion in investments in central Ohio over three years. The 120 data center jobs will have an average pay of $80,000.
“Amazon deserves a lot of credit, not only for bringing all those jobs and investment to Ohio, but also for voluntarily agreeing to collect sales tax,” said Ohio Tax Commissioner Joe Testa via email. “It’s a great gesture of support for Ohio, and for all the local governments and transit authorities that benefit from sales tax collections.”
“Given the prominence of Amazon in the industry, this decision to voluntarily collect sales tax may lead other remote sellers to collect and remit tax as well,” he added.
Gough said the news should help lawmakers in Ohio and in Congress better understand the need for comprehensive legislation that expands the requirement beyond Amazon, which still won’t collect sales tax where it doesn’t have a store or warehouse.
Gov. John Kasich called the deal “an intellectual victory” for Ohio and its high-tech sector, according to AP.
Gough said that his group doesn’t oppose online sales, and in fact wants consumers to be able to buy whatever they want however they want to buy it, whether in-store, via catalog or online, as long as the same rules apply to all retailers.
He sees Amazon’s decision, on top of the state’s realization that its sales tax income is shrinking by $300 million to $400 million a year, as yet another sign that “we’re going to get this thing over the finish line.”
Staff writer Andy Sedlak contributed to this report by Janet H. Cho of the Cleveland Plain Dealer.