Amazon will start collecting Sales Tax in all US states from the 1st of April, according to a report by CNBC. There will be just five US states where you’ll be able to buy tax free from Amazon Retail – Alaska, Delaware, Oregon, Montana and New Hampshire don’t levy a Sales Tax.
In the US, Sales Tax is roughly equivalent to VAT in the UK. Online retailers such as Amazon are generally only required to collect Sales Tax on behalf of the State where the buyer is located, if the company has physical premises in that State. As Amazon have expanded their FBA program, opened offices and sited server farms in different States, in reality there were only four States (Hawaii, Idaho, Maine and New Mexico) in which they weren’t already collecting Sales Tax.
Consumers in theory won’t pay a different price for goods, even through they’ll be paying Sales Tax. Most US States levy a ‘Use Tax’ at the same rate as Sales Tax. Consumers are supposed to declare their Use Tax and remit payment to the State, but in reality hardly anyone bothers. This in effect has given online retailers an advantage over their offline competitors and left the State authorities short changed on their tax revenues as internet purchasing has expanded.
Of course there is one way that US consumers can still avoid paying Sales Tax on their purchases, the US increased the de minimus threshold on imports to a generous $800 per day, so consumers can import goods to that value on a daily basis without paying import taxes.