My Shocking Email From Amazon About Sales Tax – Pay Up!

amazon sales tax

I received a shocking email from Amazon on Sunday morning. Here it is in it’s entirety:

[box type=”shadow”] Hello from Amazon.com,

As you may or may not be aware Amazon.com LLC is not required to collect sales or use taxes in all states, including the state of South Carolina. The South Carolina Department of Revenue requires us to provide the following notice to you: You may owe South Carolina use tax on purchases you made from Amazon.com LLC during the previous calendar year. The amount of tax you may owe is based on the total sales price of the items you purchased during the previous calendar year.

The total sales price of only purchases you had shipped to South Carolina in 2011 was $###.##.

This is the amount that you may include on your South Carolina income tax return to calculate the appropriate use tax owed unless you have already paid the tax. While Amazon.com LLC does not report this information directly to the state of South Carolina we are required to provide this information to you based on South Carolina law Section 12-36-2691(E)(3). As purchases from Amazon.com LLC can be made through various sales channels, we have included directly below your breakdown of purchases from the various channels.

Total sales from www.amazon.com $###.## Please note the following: The total sales represent all orders that were shipped to South Carolina during 2011.

Your purchases are subject to use tax unless an exemption exists under state law or you have already paid the tax. A sale is not exempt under state law because it is made through the internet. This information should not be used for any federal income tax reporting purposes. We are required to provide this notice in accordance with South Carolina law Section 12-36-2691(E)(3). Notifications were sent to customers that had purchases delivered to South Carolina. If you are not a resident of South Carolina, the most common reason for receiving this notification is that you may have sent a gift to a recipient in the state.

Sincerely, Customer Service Amazon.com[/box]

As a South Carolina resident, our state law requires us to pay state sales tax on ALL online purchases. The vast majority of tax payers do not realize this which begs the question, who collects this sales tax? All large retailers who have physical locations in our state (Barnes and Noble, Wal-Mart, Home Depot, Lowes) must collect sales tax at the point of sale in the store. Online retailers who do not have a physical presence in our state however, are not required to collect this sales tax (ie. Amazon), even though the tax is still owed.

Here is the problem: Amazon announced in 2011 that it is building a 1 million square foot distribution facility in our state. This means that Amazon will have a physical location, and they will have to collect sales tax at the point of sale for all online sales. Since it will take years to get this facility up and running, Amazon and the South Carolina state legislature agreed that Amazon has a 5 year exemption from collecting sales tax at the point of sale. The agreement did require Amazon to inform all South Carolina residents of our total spending through Amazon for the tax year 2011, and to inform us of our duty to pay this tax (thus the emails!)

The South Carolina Budget and Control Board estimates that roughly only $1 million of the $112 million due in sales tax is actually paid to the state for online purchases. As Amazon is one of the nation’s largest online retailers, the goal of this email is to prod more South Carolina tax payers to pay up on their “Use Tax” when they file their state tax returns.

This is all news to me, but I am glad that I know. I don’t like paying taxes any more than the next guy, but I also want to follow the laws. South Carolina residents cannot claim ignorance on our duty to pay this sales tax if we read this email. Hopefully this will funnel some much needed tax dollars that can be reinvested back into our struggling state economy!

What has been your experience with Amazon and sales tax?

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7 thoughts on “My Shocking Email From Amazon About Sales Tax – Pay Up!

  1. rene@personal loans

    Wow, I never realised how complicated the purchase taxes are for America. Here in Australia we pretty much pay tax on everything, it’s called GST. It’s added to the cost of the item so we pay it once and never have to think about it again. I can’t imagine having to keep all sorts of receipts for tax purposes. It’s hard enough holding onto them all for warranties. Unlucky for us her though, Amazon won’t ship to Australia. 🙁
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    1. Penny

      That’s generally how it works in the U.S. You pay taxes at the point of sale (in the store) without even noticing. The problem with online retailers is that your tax varies based not just on what state you live in, but often on what county or city as well. I don’t think it’s realistic to expect online retailers to keep track of all of those different tax rates themselves, so there needs to be some sort of database for them to tap into. As far as I know, that doesn’t exist yet so most online retailers don’t charge sales tax until they’re forced to.
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