(WXYZ) - The Michigan Retailers Association (MRA) has called on the State Treasurer to bill giant online retailer Amazon for sales taxes owed to the state and to close an Internet sales tax loophole that they say threatens Michigan’s economy.
The MRA says that Amazon is able to offer lower prices to consumers than local businesses by ignoring the State of Michigan’s six percent sales tax.
Amazon is a multinational electronic commerce company headquartered in Seattle, but the MRA says it should be collecting sales taxes because of its physical presence in Michigan.
“There is a lot of ambiguity on whether a company that separately incorporates an office from its retail arm has to collect online taxes or not,” said Michael Mazerov, a member of a policy think tank in Washington, D.C. “It’s kind of a gray area and Amazon has been aggressive at exploiting that gray area.”
With warehouse and distribution centers in numerous states, Amazon is able to quickly deliver products to consumers while charging cheaper prices than local businesses.
Amazon operates Brilliance Audio, a wholly owned subsidiary in Grand Haven, Mich. Yet, the company has been able to give its customers a break in prices by setting up its subsidiaries as independent entities.
The MRA says this presence must force the corporation to operate as local businesses.
“Because Amazon has a physical presence in Michigan it has sufficient nexus with the state and should be collecting sales tax for Michigan-based online purchases on its website,” said MRA president James P. Hallan in a letter to State Treasurer Andy Dillon. “We urge Treasury…to send a bill to Amazon for sales tax owed.”
Amazon has stated through social media sites that it plans to soon open a second subsidiary in Detroit.
“While we are excited that Amazon plans to increase its investment in Michigan by opening a second Michigan location, the time has come for them to start playing by the same rules as every other Michigan job maker,” said Hallan.
The Michigan sales tax says that purchases made outside the state are to be charged a “use tax” of six percent on all purchases. However, the rapid growth of Internet sales has caused substantial revenue loss because online companies refuse to report the use tax.
“Amazon has avoided collecting taxes on its Michigan sales for years,” Hallan commented. “That harms Michigan’s economy, is unfair to Michigan-based job providers and must stop. Other states have compelled Amazon to start paying taxes, and Michigan must do the same.”
Mazerov said that sales tax revenues account for a third of a state’s total revenues, so these online retailing practices have limited the sales tax revenues of states.
The Michigan Treasury Department estimates that the state may lose $1.6 billion in e-commerce sales from fiscal years 2005-13 because these sales taxes are ignored.
While Michigan has yet to take action on this issue, 25 other states have passed e-fairness legislation or agreed with Amazon to begin collecting state sales taxes.
If Michigan fails to take action, the Treasury Department reports it will miss out on about $242 million in tax revenue from online retailers like Amazon.
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