Internet Buyer Beware: Amazon, Other Online Stores To Collect Sales Tax Starting Thursday

LANSING (AP) — Michigan shoppers may want to order quickly, before Amazon.com and other online stores start collecting the 6 percent state sales tax this week under laws designed to make sure the state receives previously unpaid money.

The laws, which take effect Thursday, are designed to bring Internet retailers with a business "nexus," or connection, to the state in line with traditional businesses that must collect and pay sales taxes.

Michigan is the 26th state in which customers of e-commerce giant Amazon will be assessed a sales tax, known as a use tax because it is owed on purchases made from out-of-state sellers. Shoppers were supposed to have been voluntarily paying the tax on remote sales when filing their Michigan tax returns, but very few comply.

"It's a victory for the home team and allows everybody to compete on an equal footing," said Jim Hallan, president and CEO of the Michigan Retailers Association. He stressed that it is not a new tax and said stores have unfairly lost business because of the enforcement discrepancy, particularly on big-ticket items like appliances, furniture and jewelry.

Online stores without a presence in the state — with no employees, office or repair services, for instance — will still be able to sell goods to Michigan residents without collecting and paying the sales tax.

Michigan could gain $60 million annually under the laws, primarily for the school aid fund.

The state Treasury Department has estimated $445 million in sales and use tax revenue from remote purchase could go uncollected this fiscal year. Michigan and other states cannot get at much of it, though, without the approval of federal legislation.

Just 2.5 percent of the state's 4.5 million individual income tax returns include voluntary payment of Internet and other use taxes — which equal $6.7 million a year.

Treasury spokesman Terry Stanton said the agency mailed letters to hundreds of businesses that may have to comply with the change.

"If you're a seller in Florida that sells trinkets and you have no presence here, no agent, no repair man ... you have no nexus and then you don't have to collect and remit the tax," he said.

Seattle-based Amazon, which already has hundreds of workers across Michigan, unveiled a new corporate office in Detroit on Monday and said it is being expanded into a hub for technology-focused jobs.

Spokesman Tom Cook confirmed Amazon will begin collecting the sales tax on Thursday.

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