For KOAB’s many Florida readers, I wanted to let you know — if you hadn’t already heard — that beginning May 1st, your Amazon purchases will be subject to sales tax.
The Florida sales tax rate is currently 6%, which means for every $100 order you place from Amazon, you’ll pay an extra $6 in sales tax.
Some Florida readers have already let me know that they’re making large, planned purchases today and tomorrow in order to save a few dollars while they still can.
In addition to giving you the heads up, I also wanted to explain a bit about why some states collect sales tax and others don’t — and what this means for how KOAB operates.
As of May 1st with the inclusion of Florida, Amazon will be collecting sales tax in 21 different states, accounting for 180 million Americas (well more than half of this country’s population).
- New Jersey
- New York
- North Carolina
- North Dakota
- West Virginia
Note: No sales tax is charged when purchasing gift cards; however, purchases paid for with gift cards may be subject to tax.
If you take a good look at that list, you will see that the vast majority of you are probably already paying sales tax on your Amazon purchases — or you will be as of May 1st. In fact, more than 85% of KOAB readers live in these 21 states!
As a consumer, I know how awesome it is not to have to pay sales tax – it’s like a bonus savings of as much as 10% (depending on your state’s effective rate).
But here’s something most Americans probably aren’t aware of: If a retailer doesn’t collect sales tax on site (at the time of your purchase), you are actually legally obligated to report the purchase and submit the sales tax to your state yourself. Of course, tracking these purchases is all but impossible, and so this requirement — which exists, as far as I know, in all 50 states — has never really been enforced.
That “window” is quickly closing.
When online shopping first took off, most states did not require sales tax to be collected unless a company had a physical presence in that state. This gave online retailers a competitive advantage over brick-and-mortar stores. Many budget-savvy consumers would choose to shop online when it meant they could pay up to 10% less for a comparable item at a brick and mortar store.
More and more states, however, are closing this no-sales-tax “loophole” by passing a so-called Nexus Law. Nexus laws state that any affiliation with the state — even online sub-contractors who are residents of the state — triggers the obligation to collect sales tax.
You guys have probably noticed that at the bottom of many posts on KOAB I share a disclaimer that the post contains affiliate links. What that means it that if you click thru a link on that post and make a purchase, I will earn a small commission.
As KOAB has grown over the years, more and more companies have allowed me to work with them as an affiliate, which means I am able to earn a bit of income when I help you to save money. (Win-win.)
Of course, I’m far from the only blogger posting affiliate links for online companies. There are tens of thousands of us! And it’s not just bloggers. Even your kids’ school or your shul may be using such links because it’s a “pain-free” way for them to raise money from their members.
What does all this have to do with sales tax? Affiliation.
Any individual — whether a blogger or a website or a non-profit organization — benefitting from an affiliate link constitutes a “nexus”.
So when Missouri and Minnesota, for example, passed a Nexus Law last year, Amazon customers in those states would have had to pay sales tax.
Amazon didn’t want their customers to have to pay sales tax — they thought they’d lose their competitive advantage. So they decided it was better for them to have customers that didn’t have to pay sales tax than it was for them to have affiliates in those states.
They removed their affiliates; meaning, bloggers in Minnesota and Missouri could no longer work with Amazon.
Kansas, where I live, passed a Nexus Law last summer. As a result, a number of companies stopped working with me as an affiliate. Amazon affiliates, however, didn’t lose their status because there was already an Amazon warehouse in our state — meaning, there was already a nexus.
Large retailers, like Amazon, have been actively lobbying against these Nexus laws. But given that 21 states are already collecting sales tax from Amazon (and other online retailers, for that matter), the trend seems to be clear.
In fact, Amazon and other major e-commerce stores are supporting a nationwide bill to require all online retailers to collect sales tax. They believe this would level the playing field with their competitors who don’t have affiliates (or other forms of a “nexus”).
The bill hasn’t gotten far yet in Congress, but the writing seems to be on the wall: If you live in a state that doesn’t yet collect sales tax for online purchases, count yourself lucky! The era of tax-free online shopping does indeed seem to be coming to a close.