Amazon.com beings collecting sales taxes on California purchases Sept. 15.
Depending on where they live, Californians pay 7.25% to 9.75% in sales taxes, so the savings are substantial — especially on big-ticket items such as electronics. But bargain hunters are also stocking up on inexpensive goods such as food, DVDs and carpet cleaner.
“I’ve ordered nine things in the last two weeks,” said Cheng, 32, whose purchases include a hands-free roaming camera for $199.99, five pounds of protein powder for $53.99 and exercise resistance bands for $26.99. “Any time you can save money, that’s a good thing.”
He’s not the only one looking for a deal.
Abdel Ibrahim, a tech entrepreneur and trader from San Diego, said he would buy a MacBook Air and MacBook Pro with retina display on Amazon before the cutoff, a move that will save him about $270 in sales taxes.
“It makes a huge difference,” the 30-year-old said. “If there’s anything else I can think of where I can fork up some money and save a couple hundred bucks, I probably will.”
More background on this lame change:
One in eight Americans lives in tech-savvy California, a huge base of consumers for online retailers like Amazon.com. For years, Amazon has fought efforts to collect sales taxes from buyers in the Golden State, instead putting the burden on customers to report those sales to the state’s Franchise Tax Board and pay the taxes themselves.
It hasn’t worked out very well. According to the state, less than one half of one percent of Californians have been voluntarily paying sales taxes on internet purchases. While some retailers like Apple and Target have been collecting web taxes in California, Amazon and other large retailers like Ebay and Overstock.com have not.
Resistance is futile, and it ends Saturday. California has a cash deficit topping $20 billion, and the Board of Equalization estimates it’s losing $1.2 billion a year in online sales taxes. So a new law kicks in September 15th forcing large internet merchants with affiliates inside California to collect those taxes. Sales taxes range anywhere from 7.25 percent to 9.25 percent.
There is a loophole, however…kindov…and maybe not for long:
But Amazon will continue to not collect taxes on hundreds of thousands of items that it lists for sale on its Web site, stores in its warehouses, and packages for quick shipment to California residents.
Those orders — called “fulfilled” by Amazon — amount to a tax loophole that has left Sacramento tax collectors a tad unhappy. California sales tax rates are among the highest in the country, topping out at 9.75 percent, meaning the apparent tax savings can add up quickly.
A representative of the State Board of Equalization, which collects California sales taxes, told CNET today that whether Amazon can be required to collect taxes on “fulfilled” orders is a tricky question. “It’s difficult for us to comment on the way Amazon is set up within its family of companies (and) whether there there would be a consignment relation,” the representative said.
Amazon says the law is clearly on its side. Spokesman Scott Stanzel said that for fulfillment sales, “sales tax collection depends on the tax obligations of the seller,” not Amazon itself.
Roughly one-fifth to one-quarter of the items that Amazon offers to ship are “fulfilled by” products. It’s a staggering selection, including everything from Calphalon non-stick pans, iced tea, stereo speakers, video games, and even the PetZoom Pet Park Indoor Pet Potty.
The State Board of Equalization’s maybe-yes-maybe-no approach is a significant departure from its position yesterday, when a representative sent CNET a statement saying that Amazon would have to collect taxes on orders it fulfills. “Since Amazon is handling the merchandise and all aspects of the sale, the Board of Equalization would consider them the retailer, and Amazon would have to collect tax on the transaction,” the initial statement said. Late last night, a few hours after CNET contacted Amazon for a response, the board responded with what it described as “updated” information.
For these orders it fulfills, Amazon acts as a warehouse that stores items on behalf of the seller for a daily fee. Amazon argues that it’s acting as the transaction’s middleman rather than the actual seller. (According to the board’s guidelines, consignment sales are taxable, but broker sales, where the “owner maintains control of the item prior to the sale,” are generally not.)