Online taxes impact buyers, stores and state

Arizona retailers could learn next year if they have become giant killers.

Amazon.com — the most popular online retailer — announced an agreement with the state government Friday to begin collecting Arizona sales tax on purchases of products from it beginning in February, with digital purchases like music and e-books to follow in July.

It will be a major new wrinkle for the state's consumers who have become accustomed over the years to getting a “tax break” from many online retailers, although those with a store presence in the state had already been required to add the tax on purchases.

That provision in the end become the genesis of the Amazon agreement. While it does not have physical retail stores in Arizona, it does have distribution and shipping centers here which send products to state residents and others.

The online retailer resisted defining their distribution centers in the same way as retail stores, but the state filed a $53 million lawsuit seeking reimbursement for unpaid sales taxes. To settle that dispute, Amazon offered what it called an “immaterial” payment and agreed to start collecting state taxes, which was the real goal of state officials.

“Brick and mortal” store owners in the state have long said that Amazon had an unfair tax advantage that was hurting their businesses. Now they will have an opportunity to see if this change indeed will benefit them to the extent they hope.

However, there still may be something of an advantage for Amazon since for now it will only collect state sales taxes and not local ones. That can be a significant difference in taxes. We wonder how long it will be before localities demand their taxes be collected too?

In our view the greater advantage for retailers in the state is the immediacy for consumers to get the product by walking into the store and the ability to provide personal service to customers. But there is no doubt the tax advantage is a benefit to online businesses.

The ultimate winners could be state residents who will likely see a big increase in revenue to pay for state programs. We hope a big portion of that will go to improve our schools which need much more support than they have been given by the state.