Tax Breaks For Online Shoppers Starts To Wind Down

Posted Jul 16, 2012

Democratic and Republican politicians have dropped their opposition to impose sales taxes on online purchases.  In return, online giants like will be offered incentives to locate distribution facilities in additional cities.  New Jersey Governor Chris Christie said that the taxation of online sales is “an important issue to all the nation’s governors.”

Christie endorsed federal legislation that gives all states taxing authority.  As starts building new facilities, they will be inching closer towards same-day shipping.  The advantage for states that will be receiving taxes from online sales is additional revenue will be generated in an economy where they are dealing with budget crises.

“It gets down to a basic issue?of simple fairness for small businesses that create jobs and opportunities all across America. And with the sales taxes they collect, they provide for local police and firemen, for the sewers and streets,” stated Senator Dick Durbin (D.-Illinois), one of the co-sponsors of the bill.

Amazon, eBay, and other online sellers relied in a 1992 Supreme Court ruling that companies selling online did not have to collect sales taxes if they lacked a physical presence in a state where the customer lives. Online shopping has grown into a $200 billion industry since then.

Deal Cut In New Jersey

When Amazon was looking for distribution center (DC) sites across New Jersey, they were ready to spend $200 million.  The new DCs would help Amazon cut down on their delivery time in the area, but they did not want to start collecting sales taxes for a couple of years.  Christie wanted Amazon to create full-time jobs and wanted to collect sales-tax revenues to his struggling state.

On May 30, Christie said that Amazon would not charge the 7% sales tax until July 2013 in exchanging from bringing around 1,500 full time jobs to New Jersey along with thousands of season, part-time, and construction jobs.  Amazon also received standard economic-development tax incentives.

Governors in Virginia, Texas, and Nevada announced similar deals with Amazon.


Florida refused to cut a deal with Amazon to locate facilities and around 3,000 jobs to the state in exchanging for deferring sales-tax collection until January 2014.

“Amazon knows its days are numbered before a federal law is passed and came down here to make a fast deal,” stated Florida Retail Federation president Rick McAllister. “Amazon’s Holy Grail is to do same-day delivery to compete with our brick-and-mortar stores, but we let the governor’s staff know the unfairness for it to avoid sales taxes for two Christmas seasons.”

Since the Florida government is resistant to Amazon, it is likely that thousands of jobs will be created in a neighboring state.