February 6, 2003 8:46 AM PST

Sales taxes coming to a site near you

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Several large retailers this week began collecting sales tax on Internet purchases.

The move arose from an agreement among about 38 states and the District of Columbia that went into effect this week. The deal was struck last fall after states complained that they've been losing billions of dollars in tax revenue as online sales rise.

In exchange for signing onto the agreement, the retailers will not be held liable for back sales taxes they may owe, according to people familiar with the agreement.

Those involved would not say which retailers agreed to the deal, but retailers including Toys "R" Us, Wal-Mart and Target recently posted new policies on sales taxes. Amazon.com, which has partnerships with Target.com, MarshallFields.com and Mervyns.com to sell items online, notified customers of the change through a posting on its site.

"Effective February 2, 2003, target.direct and marshallfields.direct will be required to charge sales tax in all states other than Alaska, Hawaii, and Vermont. The new collection requirements will apply to all orders shipped and charged on or after February 2, 2003, even if your order was placed prior to this date," the posting said.

Many online retailers have avoided charging customers sales tax because companies are not required to do so unless they have a physical presence in a customer's state. Americans are supposed to pay taxes voluntarily on items they order from Web sites and mail-order companies that are located outside the state in which they live. But very few people do.

Amazon spokesman Bill Curry said complying with the new plan is a challenge. "It's incredibly difficult and incredibly expensive," he said. For example, Amazon is grappling with how to deal with customers in Colorado zip code 80212, where right now the tax schemes range from 4.3 percent to 8 percent depending on where the person lives. "We're trying to do our best," Curry said. "We're not going to overcharge customers."

Brick-and-mortar retailers have argued that the confusing online sales tax policy has put them at a disadvantage because many Web purchases have essentially been tax-free, a problem that could be rectified by the implementation of the new amnesty agreement.

"This is a demonstration of our ongoing belief that stores and online retailers should be treated equally," Target spokesman Doug Kline said.

State representatives cheered implementation of the deal, which they see as particularly necessary in these rocky financial times.

"It is part of a major milestone in state tax consolidation," said Diane Hardt, tax administrator for the Wisconsin Department of Revenue and co-chair of the Streamlined Sales Tax Project, which came up with the plan.

Meanwhile, there's a move afoot in Congress to ban online sales taxes altogether. In January, Rep. Chris Cox, R-Calif., and Sen. Ron Wyden, D-Ore., renewed their efforts to prohibit online sales taxes by introducing a bill that would turn the current moratorium into an outright ban. The moratorium on discriminatory Internet sales taxes--which are taxes that wouldn't be levied on offline sales--expires in November.

 

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