The e-commerce giant has a physical presence in some of those states, but the others, including Utah, are ignoring the 1992 Supreme Court decision that exempts wholly out-of-state businesses from collecting taxes for states they merely sell into.
That Court also made clear that the Congress, not the individual states, has the authority to regulate interstate commerce.
But since all the king’s lobbyists and all the king’s men haven’t been able to pass federal legislation allowing the expanded taxing, many states have acted (likely unconstitutionally) on their own.
For example, Illinois has expanded the definition of what qualifies as nexus to include affiliates in order to trigger sales tax obligations. Colorado gives out of state retailers the unpleasant choice of collecting tax or dealing with more red tape and a requirement to remind residents that they owe the tax.
Utah distinguishes itself by not having actually passed state legislation to expand sales taxes. To the contrary, a bill to do just that failed to move out of committee in the Utah state house and died in early 2016 for lack of support.
So how is it that Amazon is collecting sales tax in Utah?
The unelected members of the Utah State Tax Commission struck a deal with Amazon to collect Utah’s 4.7% local option sales tax. Amazon, like other retailers, will keep 1.31% of the sales tax it collects from Utah.
Beyond that, the Utah State Tax Commission refuses to make public the details of the deal reached with Amazon due to what’s been reported as a “confidentiality agreement.” Taxpayers are on the hook, but they aren’t privy to the terms of the deal? That is very nearly the opposite of government transparency.
Thankfully, a Utah-based group, the Libertas Institute, has requested the deal be made public and is currently appealing the denial of their request.
So we’re up to unconstitutional, undemocratic, and shrouded in secrecy. Gentle reader, I think we can all agree that something is rotten in the state of Utah.