Despite signs that Amazon has no intention of complying with the state’s new Internet tax law, Connecticut officials are not giving up. It remains to be seen whether prolonged litigation, which would be costly for both sides, will be necessary.
At issue is the requirement that Internet sellers collect state sales taxes on goods and services sold through their websites. The legislation would allow Connecticut to collect sales tax from these Internet transactions to raise money to eliminate budget gaps caused by cuts in federal aid.
Amazon has stated that the company is not obligated to abide by the law because it does not have a physical presence in Connecticut. According to the Amazon, by not having a physical presence, it does not have to collect and remit taxes to the state.
If Amazon complied with the new legislation, Connecticut could expect additional revenue totaling $9.4 million a year or more. The value of the additional revenue was estimated by the General Assembly’s Office of Fiscal Analysis, which used forecasting data from a comparable New York law in its analysis.
Department of Revenue Services Commissioner Kevin Sullivan said, “They’re not fighting against a burden on their ability to do business in the state of Connecticut. They’re fighting to protect an advantage against everybody else who’s doing business in the state of Connecticut.”
At least six states have enacted laws similar to the new law in Connecticut as of June, according to the National Conference of State Legislatures. These laws are intended to capture the $23 billion lost each year in sales tax revenues that go uncollected from online purchases.
Connecticut’s Internet tax law was created as part of the state’s budget plan to eliminate a $3.3 billion deficit. Connecticut is estimated to lose $152 million annually from uncollected sales taxes from Internet retailers.
The Governor of the state, Dannel P. Malloy, has said that he’s committed to the cause for the long haul and believes Connecticut will eventually triumph. In an interview, Mallory stated, “I also believe there are trends at play in the United States that are going to move in the right direction to dissipate the unfair advantage that these kinds of retailers have over job-producers in our state.”