AMAZON STOPS WORK ON DISTRIBUTION CENTER IN SC OVER TAX LEGISLATION; 1250 JOBS GO AWAY

Amazon.com has been on a hiring binge, and its need to open more fulfillment centers across the U.S. has been a big factor. But the Seattle ecommerce giant also has been in protracted disputes over uncollected sales taxes in numerous states, from Illinois to Texas to South Carolina.
Those two realities have collided in South Carolina, with potentially devastating results for a community seeking jobs there.

On the heels of a legislative vote in South Carolina that rejected Amazon’s plea for a sales tax collection exemption, Amazon said it won’t open a distribution center in the state, a project that included a one-million-square-foot building already under construction and 1,249 jobs.
“As a result of today’s unfortunate House vote, we’ve canceled $52 million in procurement contracts and removed all South Carolina fulfillment center job postings from our (Web) site,” said Paul Misener, Amazon vice president for global public policy, according to a report on The State newspaper website.

Lexington County Economic Development Director Chuck Whipple has estimated all those jobs would have resulted in an annual payroll of $60 million, according to the Charleston Regional Business Journal.

Amazon’s “our way or the highway” strategy suggests Amazon thinks it will easily find other alternatives to fulfil the company’s needs to open more distribution centers to keep those boxes of goods flowing. Maybe so. But it remains to be seen if this is a sustainable strategy, given the fact that Amazon currently doesn’t collect sales taxes in half the U.S. states.
Amazon this week said it plans to open 11 distribution centers, maybe more, as the company tries to keep up with demand from consumers who have flocked to its website looking for deals on books, music and other merchandise.

But Amazon also has played hardball in states where Amazon does not collect sales taxes from those sales. In March Amazon announced it was closing its affiliate program in Illinois, a day after the governor signed a law requiring Amazon and other online retailers to collect sales taxes on goods sold in the state.

AMAZON ENDS AFFILIATE PROGRAM IN ILLINOIS

On Thursday, Illinois Governor Pat Quinn signed into law the Mainstreet Fairness Bill which would require any online retailer with affiliates in the state to collect state sales tax on purchases from Illinois residents. As a result of the bill being signed into law, Amazon notified affiliates in the state that it would end its affiliate program on April 15th. Overstock.com has also threatened to take a similar move and end its affiliates program in Illinois as well.

The state is taking advantage of a 1992 Supreme Court decision which said that retailers don’t have to collect state sales tax on out-of-state shipments unless it has offices within the state. Clearly, Illinois believes that an affiliate of a retailer is equivalent to having such an office.

Many states have been frustrated with the loss of sales tax revenue associated with items purchased online since most online retailers don’t collect it. States typically have a section on income tax forms which asks citizens to voluntarily admit to any online purchases in order to pay the associated sales tax, but few people actually report such purchases. The Illinois Department of Revenue estimates the state loses between $153 million and $170 million a year as a result.

Illinois is in the midst of correcting what some say is the state’s worst financial crisis resulting in $6 billion in unpaid bills and $4 billion in payments the state has missed to fund state pensions. In January, the state began addressing the crisis by passing legislation to increase the state income tax by 67%, the largest such increase in the state’s history. In addition to receiving bi-partisan support from both houses of the Illinois General Assembly, the Mainstreet Fairness Bill also received the support of the Illinois Retail Merchants Association whose business members believe it is unfair that out-of-state businesses have an advantage simply because they are not required to collect a sales tax.

Amazon did leave the door open so that should the current law be changed or modified it would consider resuming the program.

Walmart on the other hand has taking advantage of the crisis faced by Amazon and Overstock.com affiliates by inviting affiliates of those companies to join the Walmart affiliate program instead. Since Walmart maintains retail locations within Illinois it already collects sales tax on purchases sold through its website.