Key Arizona lawmakers consider taxing online sales, cutting taxes elsewhere

By Howard Fischer | Capitol Media Services via Arizona Daily Star

ey Arizona lawmakers want to take advantage of a new U.S. Supreme Court ruling that lets states collect online sales taxes. But they don’t want it to be a new burden on taxpayers here — and that means cutting taxes somewhere else.

The ideas they are discussing range from lowering the state’s 5.6 percent sales tax rate, to trimming income taxes for corporations or individuals.

House Speaker J.D. Mesnard told Capitol Media Services he sees no reason why purchases made by Arizonans on the internet should be exempt from the state’s current sales tax while local brick-and-mortar retailers are forced to collect the levy.

“We haven’t had the authority before now,” the Chandler Republican said.

That changed on June 21 when the nation’s high court ruled that South Dakota could enforce its law requiring many out-of-state businesses to collect taxes on sales to local residents.

Before that, courts had said sales taxes could apply only to businesses with a physical “nexus” to a state, whether that meant having local retailers, offices or warehouses.

That’s why Amazon in 2012 agreed to begin collecting sales taxes in Arizona after state revenue officials began proceedings against the company based on the fact it has “fulfillment centers” in the state. That deal settled the $53 million assessment against the company that had been made by the state Department of Revenue.

Similarly, it’s because of the physical presence of stores in the state for companies such as Walmart and Target that Arizonans purchasing from their websites end up paying the same state sales taxes as they do in the stores.

Amazon does not, however, collect Arizona’s sales tax on behalf of its network of third-party retailers.

Purchases from other online retailers with no clear links to the state have gone untaxed because of that “nexus” rule — the one the Supreme Court threw out.


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