Amazon Taxes New Jersey

Is Amazon (NASDAQ:AMZN) giving up on tax planning? A recent article in the Guardian mentions that the online retailer collects taxes only from five states in the U.S., and gets away with it under cover of a 1992 court ruling that says U.S. firms need not collect sales tax in a state where they have no physical presence, such as a shop or warehouse.

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That appears to be changing, at least in New Jersey, where Gov. Chris Christie announced that Amazon plans to build two large-sized distribution centers, according to a report in www.nj.com.

The centers would create about 1,500 full-time jobs, and this also means that Amazon would start collecting 7 percent sales tax from July 2013. “We will now in the state of New Jersey begin collecting sales tax at least from a fraction of the market we otherwise would not have gotten,” Christie said at a Statehouse news conference, adding the deal would also lead to “thousands” of part-time, seasonal and construction jobs. The State’s take of sales tax could be a ‘safe estimate’ of $30 million to $40 million.

However, Amazon is reported to be planning to seek tax incentives from the state Economic Development Authority: “Certainly we’re going to have to work out the economic development arrangements,” said Paul Misener, Amazon’s vice president for global public policy, who attended the news conference.

Amazon may get its way judging from a comment by Assemblyman Al Coutinho (D-Essex), who said, “We need jobs, economic growth and a level playing field, and we get all three with this agreement.”

In-state retailers, groaning under Amazon’s price competitiveness, welcomed the move. John Holub, president of the New Jersey Retail Merchants Association, called the agreement “great news” because “there’s been no bigger issue facing retailers than sales tax fairness and we now have a definitive date at which Amazon can no longer exploit this loophole.”

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