Amazon to collect sales tax in Hawaii, Idaho, Maine and New Mexico on April 1

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Amazon Go
The sign for the Amazon Go brick-and-mortar grocery store without lines or checkout counters, is pictured in Seattle Washington, U.S. December 5, 2016. Reuters/Jason Redmond

Mega-online retailer Amazon will collect sales tax from all states starting April 1. That means tax-free online shopping is no longer happening in Hawaii, Idaho, Maine and New Mexico, the remaining holdouts.

The last four states mentioned are the last to be added to the list of jurisdictions subject to sales tax. The list of 45 states where the online merchandise giant will collect sales tax is now complete.

George Gervais, commissioner of the Maine Department of Economic and Community Development, explained the company’s decision to collect and remit sales tax to the state of Maine. He said the resolution is a significant initial step in levelling the playing field. "Maine businesses can go toe-to-toe with the very best out -of-state companies, provided they are competing on an equal playing field," he said in a statement.

CNBC reports that after April, the only states in which the online retailer will not collect taxes are Alaska, Delaware, Oregon, Montana and New Hampshire. All these states do not have sales levies. The manner in which states treat sales taxes for internet and catalogue purchases is linked to a 1992 Supreme Court case, Quill Corp v North Dakota.

The court ruling indicates that states cannot require retailers to collect sales taxes, except if there has been a physical presence in the same location where the buyer is situated. Online retailers, Amazon included, fall under the rule as they build data centres, warehouses and other facilities in several locations.

Richard C Auxier, a research associate at the Tax Policy Center, explained that even if online retailers do not assess a sales tax, states may require use taxes for purchases. He added that the responsibility of reporting use taxes falls to the consumer. Amazon is headquartered in Seattle, Washington.

Auxier also stressed that everyone owes taxes on online purchases, regardless if it is from Amazon or other websites. "I'm not going to look down upon or congratulate anyone, but there's something to be said about being a good resident and paying the use tax," he concluded.

However, some are not aware that paying use taxes is their responsibility. A 2015 poll by the International Council of Shopping Centers (ICSC) found that 62 percent of registered voters did not know that use taxes were payable. The majority of respondents felt that the best way to collect sales tax was at the point the sale instead of self-report and pay. 

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