Texas May Be Next in Collecting Sales Tax From Amazon

Texans shopping on Amazon.com may have to pay sales tax in the near future. The state of Texas is currently looking into whether Amazon can be held responsible for collecting sales tax, including four years worth of back taxes.

Following in the footsteps of New York, officials in Texas claim Amazon may owe millions in sales taxes on purchases made by residents in Texas over the past few years. The officials claim the local government was not aware Amazon had a distribution center in Irving, Texas until now. Having a physical presence in the state would require retailers, online, or mail-order companies to collect tax on all sales within the state. Amazon, on the other hand, argues the company is in compliance with tax regulations.

“We’ve been in the state of Texas since 2000, and we’ve interacted with a number of state and local tax officials,” said Patty Smith, Amazon spokesperson. “We remain in compliance with all Texas laws governing sales tax collection.” Amazon added state law does not require it to collect taxes on its Texas facility, which is operated by a subsidiary called Amazon.com.kydc. Smith added Amazon’s distribution center has been paying other Texas taxes, including state and local property taxes, state franchise tax, and local business licenses.

Texas estimates the state lost an estimated $541 million in sales tax in 2006 from Amazon and other online sales. Final figures from back taxes have not been finalized yet. However, the IRS already technically expects residents in tax paying states to keep track of out-of-state purchases and report all necessary items when filing their annual income tax return.

Last month, Amazon sued New York state over a new law requiring sales tax collection by out-of-state retailers selling to instate residents. Amazon argues the new law is illegal and unconstitutional. Amazon currently collects sales taxes on items shipped to Kansas, Kentucky, North Dakota, and Washington.