At this rate, could be doing business along the banks of its namesake in South America

In what might best be described as yet another government frenzy, hell-bent on finding more ways of squeezing another nickel out of Americans already overwhelmed by tough economic times, IRS tax lawyers say is fighting in state after state over whether it must collect taxes from internet generated sales.

IRS attorneys say in states like Colorado, Illinois, North Carolina, and Rhode Island, the mega internet-based retailer has already terminated agreements with local affiliated companies in those states due to the passage of legislation requiring it to collect state sales tax because of its relationships with those affiliates. Other states like Hawaii, California, Connecticut and Arkansas are following the trend and presently have similar legislation in various stages of being drafted and/or considered.

Under existing case law, is not required to collect sales taxes in states where it has no “nexus”. According to a number of IRS tax attorneys, several states are trying to use agreements with local affiliates to create such a nexus under state law. Naturally, when terminates its business relations with those local affiliates the states suffer both in terms of a reduced tax-base and increases in unemployment claims. Many IRS tax lawyers feel the strategy is counterproductive and demonstrates a rather short-sighted, quick-fix mentality by politicians desperate to grab money wherever possible rather than make difficult cuts which could affect their reelection.

During a recent Consumer Reports’ interview with Amazon’s CEO, Jeff Bezos, he condemned the push towards collecting sales taxes and asserted that his company was no different than any of the big retail chains which do not collect sales tax in states where they have no presence. Mr. Bezos argues that dealing with a plethora of varying state and local tax regulations and requirements (over 30,000 different jurisdictions) is it too burdensome and costly for his company. So, Mr. Bezos is lobbing for a plan called the Streamlined Sales Tax Initiative. Ms. Bezos has been quoted as saying “the right place to fix this is with federal legislation.”

But states aren’t the ones looking to go after and its ilk, and Mr. Bezos may be getting his wish after all. Now, IRS tax attorney report that U.S. Senate Majority Whip Dick Durbin (a Democrat from Illinois where Amazon has already pulled-out) is proposing federal legislation targeting the mega-retailer. Senator Durbin is calling his proposed legislation the “Main Street Fairness Act” and is seeking to require all businesses to collect sales tax in the state where the consumer lives.

While IRS attorneys point out similar legislation has been rejected over the years, Senator Durbin believes the times are changing and that “this idea is overdue.” So far, Amazon has declined comment on Senator Durbin’s proposed bill.


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