As any frequent online shopper knows, buying from Amazon has its perks — huge selection, convenient delivery, the potential for free shipping options, and, until last week in Maryland, no sales tax.
Thanks to the addition of an Amazon distribution center in Baltimore, residents of Maryland now have to pay 6 percent sales tax on products they purchase on Amazon, just like they would do with any other retail establishment, in person or online, that has a physical presence in the state.
It’s just another 60 cents on a $10 Blu-ray disc movie, or another $6 or so on that Kindle Fire tablet. For many, it’s pocket change. But for some it could make a difference in buying habits.
“When you have a built-in 6 percent, that makes a difference to some consumers,” said Patrick Donoho, president of the Maryland Retailers Association. “To other consumers I think convenience is a driving force.”
Convenience is expected to increase even more as Amazon expands its distribution centers. The company now offers same-day shipping in certain locations for customers who order early enough in the day and pay a little extra.
“You have more and more people that are buying online versus running out to a store. They’re doing it for the convenience. They’re doing it for the efficiency for pricing,” said Steve Albert, CPA and director of the tax department at Glass Jacobson. “With the exception of large purchases I think that changing the sales tax is not going to change people’s buying habits.”
Even if it doesn’t impact these habits greatly, both Albert and Donoho said the change makes for a more equitable marketplace.
“It levels the playing field, that’s for sure,” said Donoho. “Price competition, for example, particularly in the tough economic times that we have right now, is very critical to the retail business.”
The Oct. 1 implementation of Maryland’s sales tax on Amazon isn’t technically a major change. Prior to Oct. 1, consumers were already supposed to be remitting sales taxes back to the state after making a purchase outside of Maryland or on a site that had no physical presence here.
Most Maryland residents don’t even know that, said Donoho. Albert estimates that roughly 10 percent of consumers, including businesses, comply with this rule.
“Even though this is kind of forcing the issue, people were supposed to do it already,” said Albert. “People are going to be more compliant with the tax laws because they’re being forced to.”