June 3, 2011, 3:04 PM

Amazon nears a tax and warehouse deal with South Carolina

State legislators approve a 5-year exemption on Amazon collecting sales tax.

Paul Demery

Managing Editor, B2B E-commerce

Lead Photo

South Carolina legislators, reversing an earlier decision by the state House of Representatives, have approved a deal with Amazon.com Inc. that grants the world’s largest online retailer a 5-year exemption from collecting sales tax on purchases by South Carolina residents. As part of the deal, Amazon has agreed to bring about 2,000 jobs to the state and invest at least $125 million in its planned distribution facilities by the end of 2013, according to a spokeswoman for the South Carolina Department of Revenue.

The House this week voted 90-14 to approve the deal, following amendments to the agreement worked out by both the House and Senate. The matter is now before Gov. Nikki Healey, a Republican, who has said she personally opposes granting Amazon and other retailers special exceptions to sales tax collection but that she wouldn’t block the Legislature’s action so as not to break Amazon’s original agreement with the state.

The agreement also requires Amazon to notify South Carolina customers about their responsibility to pay use tax on purchases for which the retailer doesn’t collect sales tax. Amazon will include in e-mailed order confirmations to South Carolina customers a message saying that they could owe taxes to the state; the e-mails will also include direct links to the state’s Department of Revenue’s web site.

In addition, Amazon will send South Carolina customers, either via e-mail or postal mail, a yearly summary of their purchases with a note that they may owe tax on them.

Amazon strenuously objected last year when Colorado passed a law aimed at requiring e-retailers to report to the state all purchases made by Colorado residents, in an effort to force more consumers to pay the sales tax they owe on web purchases. Amazon said at the time the law was “clearly intended to increase the compliance burden to a point where online retailers will be induced to ‘voluntarily’ collect Colorado sales tax—a course we won’t take.” A federal judge subsequently blocked Colorado from enforcing the law in response to a lawsuit by the Direct Marketing Association, a trade group.

Amazon, No. 1 in the Internet Retailer Top 500 Guide, did not immediately return a call for comment. The retailer said earlier this year that it would abandon its plans for distribution facilities in South Carolina when the House of Representatives voted to block its agreement for an exemption from sales tax that Amazon had signed with former Gov. Mark Stanford, also a Republican.

George Isaacson, a partner at Brann & Isaacson, and Steve DelBianco, executive director at NetChoice, will speak at the Internet Retailer Conference & Exhibition 2011 about online taxes in a session entitled "How to be prepared when the sales tax officers call."

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