major political push to kill the deal. They succeeded at first, as the
Legislature voted down the sales-tax break.
But opposition wilted after Amazon threatened to pull out of the state -- and then sweetened its initial pledge of 1,250 jobs, boosting it to 2,000.
Three weeks after rejecting the deal, the South Carolina Legislature reversed itself, agreeing to give Amazon a five-year sales-tax reprieve, which would go away if Congress passes a national Internet sales-tax law.
As a minor concession, Amazon agreed to place a small notice on the bottom of its South Carolina orders, notifying customers they may be required to calculate and pay the state tax themselves.
Other states have grown reluctant to give in to Amazon, pursuing new legal arguments to redefine what it means for a business to have a physical presence in a state.
In 2008, New York passed a law saying Amazon had to collect sales taxes there because of relationships with thousands of local "affiliate" websites. Those sites are typically run by small businesses, blogs or nonprofits, which earn commissions by linking to products sold on Amazon.com.
Amazon sued to overturn the law but lost, and is collecting the tax.
Over the past four years, many states have sought to follow New York's example.
In February, Arizona hit the company with a $53 million tax bill for unpaid sales taxes over the past five years. The company said it would vigorously oppose the assessment.
A year earlier, Texas' comptroller slapped Amazon with a bill for $269 million in back sales taxes, prompting the company to announce the closure of its Irving warehouse, citing the state's "unfavorable regulatory environment."
But increasingly, Amazon has been conceding its days as a tax-free haven are numbered.
The most telling shift came in California, after the state Legislature approved several measures requiring Internet sales-tax collections by Amazon and similar Internet retailers. Those laws targeted Amazon's Web affiliates in the state, but also said the company's Kindle development facility in Cupertino was enough to establish tax liability.
California Assemblymember Nancy Skinner, D-Berkeley, who sponsored one of the tax bills, said it made no sense to continue giving Amazon an edge over small businesses that give back to their local communities.
"I've never seen an Amazon-sponsored Little League team," Skinner said, echoing a complaint about the company's lack of civic engagement that has been sounded in its hometown of Seattle. At first, Amazon reacted to California's move with typical aggressiveness, immediately severing ties with its 10,000 California Web affiliates. The company then pledged $5 million and paid signature gatherers for a referendum campaign to repeal the laws.
But last summer Amazon abruptly dropped the referendum and announced a deal with California. The company said it would not fight the law in exchange for a one-year delay in collecting the sales tax. Amazon will start collecting California's taxes in September.
Since then, similar deals have been reached in other states where Amazon has warehouses. Amazon will be required to collect Pennsylvania's sales tax starting in September, under an administrative ruling. Indiana and Tennessee will follow in 2014. Internet sales-tax legislation has passed in Virginia and is actively being debated in several other states, including New Jersey, Georgia, Michigan and Florida.
In a statement this week, Amazon said it is "not opposed to sales-tax collection" and pointed out the company collects taxes in "half of the geographies where we do business." That includes Europe, where Amazon collects value-added taxes.
Will Congress act?
In recent months, Amazon has been vocal in its support of bills before Congress that would end the online sales-tax loophole on a national level.
Amazon's pivot has been met with skepticism by some of its Internet rivals.
Executives for eBay and Overstock.com fairly seethed with frustration during a Nov. 30 hearing before the House Judiciary Committee, blaming Amazon's belligerent tactics over the years for poisoning the atmosphere toward online retailing.
"A few large retailers, Amazon for example, have not operated in the spirit of the law and linked sales-tax collection to physical presence," said Todd Cohen, eBay's vice president for public policy, who argued sales-tax collection would prove burdensome to small retailers that sell through eBay.
But Misener told the panel there is no good reason for Congress to exempt eBay or others, which can easily calculate taxes with today's sophisticated software. Amazon is even offering to do those calculations for smaller companies -- for a fee.
"Widespread collection would no longer be an unreasonable burden on interstate commerce," Misener said.
After years of getting beat up as a tax bully, Amazon's new public stance may be a public-relations boon.
At the hearing, U.S. Rep. John Conyers, D-Mich., praised Misener's testimony: "Let the record show that there are corporate good guys in this world."
But some experts view Amazon's support for federal legislation as convenient, given a hyperpartisan atmosphere in Congress that may prevent any agreement on taxing Internet sales.
"Given the current anti-tax atmosphere, there is no way Congress is going to take away from voters what voters mistakenly view as their God-given right to shop sales-tax-free," said Richard Pomp, a state taxation expert at University of Connecticut School of law.
Even if Congress does act, some business analysts say no one should expect Amazon's retail growth to be derailed.
A report by William Blair & Co. found Amazon's prices would remain competitive even when sales taxes are added. After examining 2,400 products, the analysis found Amazon would still beat competitors' prices on identical items 46 percent of the time, even with sales tax.
Customers are drawn to Amazon's convenience, customer reviews and easy product comparisons -- not just the sales-tax advantage, said Mark Miller, the analyst who wrote the report.
"For those who hold out hope that Amazon's momentum will be derailed by collection of sales taxes on a national basis -- they might be sorely mistaken," Miller said.
Seattle Times reporters Amy Martinez and Susan Kelleher contributed to this report.
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