Amazon's 'No Sales Tax' Advantage Could Soon End in Massachusetts

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Massachusetts Governor Deval Patrick (Getty Images)In a move designed to level the playing field for local retailers on the cusp of the make-or-break holiday selling season, Massachusetts is maneuvering to collect state sales tax from e-tailing behemoth Amazon.com (AMZN), according to the Boston Herald.

Gov. Deval Patrick said the state hopes to soon seal a deal with Amazon.com that will have the online giant collect and pass on sales taxes from online purchases made by Bay State residents -- one of many recent efforts to strip Internet merchants' of the unfair price advantage they gain by not charging those sales taxes.

Brick-and-mortar chains have long complained that e-commerce retailers enjoy an extra competitive advantage since they're not obligated to collect sales tax from a state's shoppers unless the companies have a physical presence in a state, which enables them to offer consumers even better deals.

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But with Amazon looking to expand its presence in Massachusetts, Gov. Patrick, pressured by The Massachusetts Main Street Fairness Coalition, is leading the charge to have Amazon collect the state's 6.25% sales tax from its shoppers.

A similar effort is taking place nationally, and is gaining momentum. Congress is considering the passage of the The Marketplace Equity Act, which would require all online retailers with more than $1 million in annual sales to collect sales taxes. If a bill that gives all states the authority to collect sales tax from online retailers becomes law, an advantage enjoyed by sellers such as Amazon.com and Overstock.com, but not merchants with physical stores like Target.com (TGT), would come to an end.

The National Retail Federation is a major advocate of the bill, and launched its own campaign in May to raise awareness of the sales tax fairness issue.

If the bill passes, e-commerce shoppers could see an estimated 5% to 10% increase in the cost of their online purchases, according to reports. But taking away the no-sales-tax perk ultimately might not matter to online shoppers much: The big draws of e-commerce for its fans are the convenience and wide selection it offers -- not the tax free shopping, say some experts.

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