Amazon Tax: Massachusetts Residents Will Pay Sales Tax But Gain Convenience

For those of us who partake in the thrifty maneuver of purchasing products through online retailers in an attempt to avoid the nuisance of paying sales tax, our days may be numbered.

The widely popular online retailer Amazon, in conjunction with Massachusetts' Governor Deval Patrick, announced Tuesday that they would begin collecting sales tax in Massachusetts, commencing in the fall of 2013. This decision will most likely set the trend for similar online retailers and, in turn, could wield a major convenience advantage for consumers that outweigh the negatives.

Currently, online retailers are only required to collect sales tax when they retain a physical presence within a state, such as a warehouse, office, or storefront. In Amazon's case, Governor Patrick made the argument that Amazon's purchase of Kiva earlier this year — which is located in North Reading, MA — was presence and reason enough to request Amazon's compliance with the law.

Amazon, which spent over $5 million fighting and ultimately losing a similar proposition in California, seems to have found peace with the idea of charging sales tax on internet commerce. This is an idea that proponents claim is based more on creating fair competition between online retailers and in-state businesses, and less on revenue.

Massachusetts Treasurer Steven Grossman, who penned a letter to Senator Max Baucus over the issue, stating that, "This is not simply a revenue issue... it's a matter of fairness and equity to Main Street businesses." However, considering that Grossman's state ranks number 44 (out of 50) in outstanding debt, his true motive behind the issue seems to be of the ulterior persuasion. This seems especially true when considering that Massachusetts stands to rake in an additional $45 million in revenue from Amazon alone.

In response to states longing to collect sales tax on e-commerce, Congress has started to take notice of the issue and has introduced bills, like the Marketplace Equity Act, in order to ease these proceedings for states. Despite the heightened attention, such bills seem to be symbolic at best. One has yet to be passed, or even posed a threat of doing so.

Consumers, despite having to now pay sales tax on internet purchases, stand a chance of really benefitting from such measures — at least as far as convenience is concerned. Amazon, which has been particularly choosy with the placement of its warehouses, is looking at expanding its operations nationwide in order to meet higher demands for next day shipping.

Basically, they've given up the sales tax fight and instead, altered their business model in a way that is both beneficial to their bottom line and coveted by their customers.

As it currently appears, within the next few years, tax-free purchases via e-commerce may very well become a practice of the past. However, if consumers stand to benefit from added convenience via faster shipping times, and then the question arises; Is a few extra dollars worth the added service? Assuming that the majority of online consumers weigh convenience equally to cost, I'd go with big yes on that.