In February, Connecticut reached a deal with Amazon addressing a long-standing dispute about online state sales tax collection. Connecticut taxpayers were always required to report online purchases and pay sales tax on them, but according to state officials, few ever did. In exchange for waiving its right to pursue back sales taxes, the state received Amazon’s commitment to collect state sales tax on November 1, and to build a $50 million dollar distribution center in Connecticut, plans for which have now been approved by Windsor planning and zoning officials.
The state anticipates the Amazon deal will result in an estimated $15 million yearly in additional sales tax revenue. According to the Hartford Courant, Governor Malloy’s office views the Amazon agreement as a victory for the state’s traditional retailers who “previously had to compete with a major online retailer that didn’t have to charge a sales tax,” as “federal law does not require online retailers without in-state brick-and-mortar operations to collect state and local sales taxes.” The November 1st start date for tax collection is not coincidental because it allows the State to benefit from tax collections during the holiday shopping season.
Now that Amazon will be collecting state sales tax, what about other online retailers? The Governor’s office hopes that agreements like Connecticut’s will encourage efforts to pass a comprehensive online sales tax resolution on a federal level.