GRAND HAVEN, Mich. — Michigan will lose about $242 million in tax revenue next year from online retailers like Amazon.com, according to the Michigan Department of Treasury. That's up from $106 million in 2005 and parallels the growth of online retailing.
States have trouble collecting sales taxes from sellers that lack a physical presence within their borders. And while Amazon owns Grand-Haven-based audiobook publisher Brilliance Audio, state Treasury spokesman Terry Stanton says Michigan considers it a separate entity.
Amazon has repeatedly said that it wants Congress, not individual states, to resolve the issue.
"We are working with members of Congress, retailers and the states to get federal legislation passed this year," Amazon spokesman Scott Stanzel said in a statement.
Job listings suggest Amazon is planning a software development center in Detroit, according to the Detroit Free Press, and a physical presence would give Michigan greater ability to collect its 6 percent sales tax on Amazon sales to Michigan residents.
Currently, Amazon collects sales taxes for sales to residents of Kentucky, Nebraska, New York, North Dakota, Texas and Washington. Laws requiring the collection of online sales taxes will take effect in California, Indiana, Nevada and New Jersey. Similar legislation is under consideration in the Michigan Legislature.
Amazon has managed to avoid the tax-collection requirement in a number of locations where it operates warehouses, distribution centers and other facilities by setting up these facilities as separate companies.
"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 senior fellow at the Washington-based Center on Budget and Policy Priorities. "It's kind of a gray area, and Amazon has been aggressive at exploiting that gray area."
Texas has aggressively pursued the lost revenue, going after Amazon for $269 million in sales taxes because it had operated a warehouse north of Dallas. After a lengthy battle, Amazon agreed to start charging sales taxes to its Texas customers this month.
In Michigan, legislation introduced last fall would require online-only retailers to collect the state's sales tax as physical stores do. It would apply to companies that have affiliated businesses or subsidiaries in a state, which would close the loophole that currently exists.
"The days when Amazon could expect a definite exemption are gone," said Jason Brewer, spokesman for the Retail Industry Leaders Association, a trade group. "States have grown wise to the trick."