Maryland Pressing to Tax Internet Sales

The Maryland Senate jumped on the Amazon tax bandwagon despite disappointing revenues and damaging results for a prior enactor. The bill targets Amazon and select others who states portray as state tax scofflaws.

Because companies such as Amazon lack direct physical presence in Maryland, the U.S. Supreme Court’s 1992 Quill ruling does not permit Maryland to require these Internet-based companies to collect Maryland sales tax. Despite having no physical presence, states can confer physical presence if a state can establish a formal relationship between the company and an in-state agent, representative, or salesperson. Maryland seeks to require Amazon and similar companies to collect Maryland sales tax based upon its relationship to its Maryland “affiliates”.

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California to Slash and Burn Amazon As Well

Taking its cue from New York, California introduced legislation to require online retailers with no physical presence to collect sales tax for sales into the state. The California bill, Assembly Bill 178, resembles a similar New York statute that, thus far, has passed constitutional muster at least with the local judiciary.

States have been seeking to get their claws into Amazon and similar retailers for a decade. States argue that the increased prevalence of Internet merchants and their cannibalization of sales by brick-and-mortar local merchants has reduced sales tax revenues.

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