Wisconsin will become the 14th state in November to collect a sales tax on Amazon purchases made by Wisconsin residents.
Amazon, which will open a new distribution center in Kenosha next year, now has the physical presence necessary to allow Wisconsin to compel it to collect taxes on its sales. Wisconsin will collect a 5 percent state sales tax on Amazon purchases.
The tax will add about $30 million a year to state revenue, according to the Wisconsin Department of Revenue, coming in conjunction with Gov. Scott Walker’s recent plan to reduce property tax by $100 million over the next two years.
Many students turn to Amazon as a cheaper alternative to purchasing textbooks at traditional bookstores. The new tax will influence the cost for Marquette students who originate from Wisconsin.
“This new tax is just another obstacle for students looking to buy affordable books,” said Joelle Pietrezak, a junior in the College of Health Sciences.
Professor of economics Brian Brush said Amazon and other online retailers have a cost advantage over brick-and-mortar retailers.
“Since much of the 5 percent sales tax is likely passed on to consumers, the cost advantage has resulted in a significant price advantage for Amazon over those in-state competitors,” Brush said.
Felicity Harl, a junior in the College of Nursing and a Milwaukee native said she thinks there will be a winner and loser from this tax.
“There are both good and bad aspects to this tax,” Harl said. “It’s role in Walker’s plan to lower property tax is promising, but may adversely affect Amazon’s business.”
In 1992, the Supreme Court ruled in Quill Corp. v. North Dakota that states cannot compel out-of-state retailers to collect taxes without the company having a physical presence in the state. Before November, Amazon purchases by Wisconsin residents were not taxable because Amazon did not have a physical presence in Wisconsin.
Brush explained that the enforcement of a sales tax takes away Amazon’s advantage over in-state retailers.
“Now that Amazon will begin collecting the Wisconsin sales tax on Nov. 1 due to its new physical presence in Kenosha, it will lose that price advantage, and I would expect that its sales to Wisconsin residents would decline somewhat, although it may be more to the benefit of other out-of-state online retailers than it is to brick-and-mortar stores.” Brush said.
Amazon’s move to open the distribution center comes during a battle in Congress to implement a nationwide sales tax on online purchases. Amazon came out in support of the nationwide sales tax, though it battled in the past with states because their tax rates vary, changing customer demand in those states.
The Senate passed the Marketplace Fairness Act in June, which would allow states to compel out-of-state vendors to report taxes to a national agency. The bill was presented to the House Judiciary Committee, where it was stalled by opposition from the committee’s chairman, Rep. Bob Goodlatte (R-Va).