Amazon said it estimates it will collect between $150 million and $300 million annually in Ohio sales taxes that are currently the responsibility of consumers to keep track of and pay.
CLEVELAND, Ohio -- Ohio retailers say they're elated by Amazon.com's announcement today that it will collect sales tax from Ohio consumers starting Monday.
Ohio retailers and retail associations have spent years trying to persuade Congress to pass laws requiring online retailers to collect and remit the same state sales taxes that brick-and-mortar stores are required to.
"What great news for Ohio," said Gordon Gough, president and chief executive of the Ohio Council of Retail Merchants, which represents more than 6,400 members. His group is applauding the fact that not only is Amazon making a substantial commitment to the state by creating 1,000 jobs here, but "they're going to come to Ohio and play by the same rules as all the other retailers."
Amazon said it estimates it will collect between $150 million and $300 million annually in Ohio sales taxes that are currently the responsibility of consumers to keep track of and pay. Gough said those figures are significantly higher than what his group had expected from Amazon. "That's a lot of money from one retailer," he said. Ohio will become the 25th state where the online retailer collects sales tax.
Gough said that consumers who are characterizing this as the end of their "tax-free" online purchases are forgetting that they are legally required to pay sales taxes on Internet shopping -- even if most don't.
That's because of a current exception that now allows online sellers such as Amazon and eBay.com to avoid collecting sales tax in states where they don't have a warehouse or other physical presence. That gives them a 7-percent to-8 percent price advantage over brick-and-mortar stores that must charge sales tax, and leads consumers to believe that such purchases are "tax-free."
Cheryl Roche of Avon estimates she buys 60 percent of her online purchases from Amazon.com, because her Amazon Prime membership gives her free shipping in addition to not paying sales tax. "It's my go-to place, and I really do go there first before checking other [retailers'] sites," she said.
She said she never knew she was supposed to be paying sales tax on things such as clothing, toys, vitamins, bikes and inline skates from the Seattle-based retailer, but said she will probably continue to shop there because of the free shipping.
Other consumers may not be so understanding, with some irate online commenters suggesting a boycott of Amazon in order to avoid paying the sales tax.
Proponents of "e-fairness" estimate that the State of Ohio lost tens of millions of dollars in uncollected tax revenue from Ohioans who bought their 2014 holiday gifts from online sellers.
Lawmakers have once again introduced The Marketplace Fairness Act of 2015, almost word-for-word the same as its predecessor bills of introduced in 2011 and 2013, in an attempt to close that tax loophole.
As part of a deal with JobsOhio announced Friday, Amazon said it will create a third data-computing center in New Albany, outside Columbus, in addition to previously announced centers in Dublin and Hilliard, according to the Associated Press. The centers will employ more than 1,000 people over the next several years.
In exchange, the Ohio Tax Credit Authority gave Amazon an exemption on sales taxes for equipment purchases at the data centers and a payroll tax credit for new jobs, according to Bloomberg News. The incentives are valued at about $81 million over 15 years.
"Amazon deserves a lot of credit, not only for bringing all those jobs and investment to Ohio, but also for voluntarily agreeing to collect sales tax," said Ohio Tax Commissioner Joe Testa via email. "It's a great gesture of support for Ohio, and for all the local governments and transit authorities that benefit from sales tax collections."
"Given the prominence of Amazon in the industry, this decision to voluntarily collect sales tax may lead other remote sellers to collect and remit tax as well," he added.
Zach Schiller, research director for Policy Matters Ohio, said the extra revenue from Amazon's sales tax collection will go into the Ohio Income Tax Reduction Fund starting July 1. "We are very glad that the company is locating here and will start collecting taxes," but he said across-the-board tax cuts tend to favor the wealthy.
"Let's put those taxes to use instead providing for some of Ohio's unmet needs, such fighting infant mortality, providing more aid to students so they can attend college, bolstering public transit, or tearing down abandoned homes, among others," he said.
Gough said the news should help lawmakers in Ohio and in Congress better understand the need for comprehensive legislation that expands the requirement beyond Amazon, which still won't collect sales tax where it doesn't have a store or warehouse.
Gough said that his group doesn't oppose online sales, and in fact wants consumers to be able to buy whatever they want however they want to buy it, whether in-store, via catalog or online, as long as the same rules apply to all retailers.
He sees Amazon's decision, on top of the state's realization that its sales tax income is shrinking by $300 million to $400 million a year, as yet another sign that "we're going to get this thing over the finish line."
Michael Ziegenhagen, owner of Playmatters Toys stores in Pepper Pike, Solon, and Cleveland's Shaker Square neighborhood, said: "Amazon's willingness to collect sales tax on purchases made in the state of Ohio goes a long way toward achieving sales tax fairness between Amazon and brick-and-mortar businesses."
"Shopping locally makes a difference: It keeps dollars in our local economies," he said. "Online purchases return nothing to the local economy. Locally owned businesses pay the payroll taxes and the property taxes that sustain towns and cities. Local businesses donate to local causes -- Amazon does not contribute to local charities, schools, and community events."
"Small businesses are the engine that will grow our local economy. It makes our cities a destination. The more interesting and unique we are as a city -- to live in, to visit, and to shop -- the more we will attract new neighbors, visitors, and new investment," Ziegenhagen said.