Amazon and its founder Jeff Bezos have been frequent targets of President Donald Trump, who calls the online retail giant a “no-tax monopoly.” On Aug. 16, Trump criticized Amazon again on Twitter, claiming the company is hurting retailers and killing jobs.
“Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt—many jobs being lost!” Trump wrote in a tweet.
The company has expanded its sales tax collection from customers dramatically over the last few years. But Trump still has a legitimate claim: The retail giant is collecting tax only on its direct sales and not on sales that third-party merchants make through the Amazon website.
More than half of items sold on Amazon are coming through third-party retailers, according to a CNBC report. These retailers can benefit from Amazon’s facilities or payment system, but they are not required to collect sales tax.
It is still a pending issue and a meaningful revenue loss for states, said Carl Davis, research director at the Institute on Taxation and Economic Policy (ITEP), a nonprofit research organization.
Some states have already started to figure out ways to solve this problem.
Minnesota and Washington are the first states to enact laws requiring online retailers to collect tax on third-party transactions. Other states, like South Carolina, have also started challenging Amazon.
This issue is going to be a battleground in the coming months and years, Davis said.
Online retailers can legitimately avoid collecting state sales tax if they don’t have a facility in that state. Combined local and state sales tax rates range between 5 percent and 10 percent, depending on the state.
Tax Loophole and State Subsidies
