Lawmakers: Time to close Amazon sales tax loophole

Proposed change would level the playing field between local businesses and online retailer

PITTSBURGH, JULY 20 – With small businesses struggling to survive the coronavirus crisis, two Pennsylvania state representatives are proposing a change to the state’s online sales tax law to level the playing field between local businesses and online retailers like Amazon.

“What we are proposing is a commonsense adjustment that would ensure that giant online corporations like Amazon have to play by the same rules as local mom-and-pop retailers and contribute to local communities just like they do,” said state Rep. Sara Innamorato, D-Allegheny, one of the authors of the proposed legislation. “While companies like Amazon can be helpful for price-conscious shoppers, we cannot neglect the hard-working citizens who depend on their communities in order to make a living.”

Specifically, the legislation proposed by Innamorato and state Rep. Malcolm Kenyatta, D-Phila., would ensure that online retailers such as Amazon collect and remit sales taxes on sales at the point of sale or the location where a customer executes the payment for goods. Currently, Amazon calculates its taxes based on "location of fulfillment" meaning that, wherever Amazon has a warehouse, the sales tax of that area is included, a practice that excludes two Pennsylvania counties – Philadelphia and Allegheny – which also happen to be the only counties in Pennsylvania that levy a local sales tax on top of the statewide tax.

“Purchases from online retailers that do not collect or remit local sales tax are detrimental to companies in our areas that employ our local employees, pay our local taxes, and ultimately fuel our local economies,” Kenyatta said. “This tax loophole comes at the peril of our commonwealth’s most populous counties.”

Both legislators said that as Pennsylvania begins to recover from the global pandemic, and its accompanying economic impacts, it is imperative that the legislature work together to create a fairer system to collect state and local taxes, one which does not give large out-of-state corporations an unfair advantage over local retailers. The two lawmakers are currently seeking co-sponsors for their legislation, which they hope to introduce for consideration in the near future.