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Internet retailing: Tax in cyberspace

May 2, 2013

AMAZON, which became America?s biggest internet retailer by selling things more cheaply than anyone else, used to go to great lengths to avoid collecting sales tax from its customers. It issued a map showing employees which states to avoid lest they give the authorities a target for enforcement (some of the biggest states were coded red). In 2011 it shut down a warehouse in Texas after the state?s government demanded $270m in back taxes.The taxmen are now catching up. On May 6th the Senate is expected to approve a bill requiring internet merchants to collect sales tax due in other states. The House of Representatives may follow. Politicians are heeding howls from bricks-and-mortar retailers that current law gives Amazon and its kind an unfair advantage. State governments reckon that tax avoidance by online retailers costs them roughly $11 billion a year. If the Marketplace Fairness Act passes, states will get some extra cash. Yet Amazon is unruffled.The Seattle-based super-merchant is already collecting tax in some big states, including California, Pennsylvania and Texas, and is no longer fighting a national regime. Best Buy, an electronics retailer that has suffered much from Amazon?s onslaught, says its sales rose by 4-6% in states where Amazon started collecting tax. But there will be no let-up for old-school retailers. ?Closing the loophole won?t level the playing field...

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