JLF Research | Spotlights

The Amazon Tax That Was Not: North Carolina’s Attempt to Expand Sales Taxation Beyond Its Borders

Fergus Hodgson
Aug. 27th, 2012
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•  To overcome a Supreme Court ruling that state legislators do not have jurisdiction to tax out-of-state firms, North Carolina and eight other states have an Amazon tax. This categorizes out-of-state firms as in-state and responsible for sales tax collection if they have in-state affiliates.

•  Despite the introduction of the Amazon Tax, online trade with out-of-state retailers, including Amazon.com, still enables North Carolinians to avoid sales tax, as retailers are able to circumvent the law. The National Conference of State Legislatures (NCSL) estimates North Carolina’s forgone sales tax revenue at $436.5 million for 2012.

•  The North Carolina Department of Revenue has presented no evidence to indicate revenues have increased under the Amazon tax. In fact, the year following its implementation saw a decline of 28 percent in sales tax revenue collected out of state.

•  Amazon taxes do not level the taxation playing field. Rather, they create three different levels of sales tax treatment, and they impose a heavy regulatory burden on those affected.

•  The Performance Marketing Association estimates that approximately 1,000 online advertisers terminated their North Carolina affiliates when the law passed in 2009, and one third of the harmed affiliates moved out of the state.

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