SALT LAKE CITY — Amazon is now automatically charging Utah customers sales tax if they buy from a third-party seller on the online retailer’s platform.
Amazon has charged residents of the Beehive State both state and local sales tax on items purchased directly from the e-retailer since January 2018, but Amazon will now start charging Utahns sales tax when they purchase from third-party sellers on the platform, too.
Thanks to SB168, which went into effect Tuesday, this should make it easier for Utahns to pay sales taxes they’ve always owed but never paid.
“This is not a new tax,” the sponsor of the bill, Sen. Curtis Bramble, R-Provo, said.
Utahns have always been responsible to pay sales tax on most of the things they buy online, but the vast majority never did, Bramble explained. And it simply wasn’t cost-effective for the Utah State Tax Commission to go out and collect that unpaid tax, he added.
Some third-party sellers already charge Utahns sales tax, but others, like Ogden resident Linda Harrison, decided not to charge her Utah customers the tax for fear that the extra charge would bring down sales. Instead, she would pay that tax out of her own pocket — though Utah State Tax Commission Chairman John Valentine said she was not legally obligated to and was in the minority of sellers.
Now, Amazon will be automatically charging that tax whether Harrison wants the platform to or not. And for a state that has more businesses selling on Amazon than any other state per capita, the new policy could affect a vast majority of small retailers.
Valentine says it’s still hard to tell what that effect will look like, but his “gut reaction” tells him it may cause more competition between sellers at first, but will eventually equalize since all sellers are under the same tax burden.
“It will (also) have a tendency to equalize the tax burden between a brick-and-mortar store in the mall and an online store that has no brick and mortar that’s selling exactly the same product. So, it would make tax transaction the same whether you bought it at the mall or bought it online,” Valentine said.
That was one of the reasons retailers pushed so hard in a case called South Dakota vs. Wayfair, in which the Supreme Court ultimately ruled that online retailers must collect sales tax from shoppers.
“For those people who were buying things on a marketplace such as Amazon or Overstock or Etsy or eBay … they’re now having to pay the same types of sales tax as if they had bought it from a site that was (already) collecting it,” Valentine said.
While Amazon is the “poster child” of this new policy, Bramble said it does affect other companies not previously charging Utahns sales tax.
When asked if she sees the new policy as a positive or negative for business, Harrison said she sees it as “something in the middle.”
“I think that most people are aware of or are getting used to the fact that they will have to pay sales tax when they buy things online,” explained Harrison, who has sold used books on Amazon for about 17 years. “But I think that there is still a number of buyers out there who will look for places where they don’t have to pay it or where they can pay as little as possible.”
There are still 17 states who don’t require customers to pay online sales tax, she added.
“But I do think it’s changing and people are getting used to the idea that they’re going to have to pay it," Harrison said.