Texas soon to join states taxing Amazon.com

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Texas residents are set to begin paying a 6.25 percent sales tax on Amazon.com purchases starting Sunday.

The sales tax drama started when Texas claimed Amazon owed the state $269 million in back taxes from 2005-2009 because the company operated a distribution facility in Irving and was technically present in the state. Amazon said the charge was “without merit,” and sought to make a deal with Texas.

In May 2011, Amazon had promised to invest $300 million and create 6,000 jobs in exchange for a 4 1/2 year sales tax exemption, but Texas rejected the deal.

Amazon and Texas reached an agreement in April, and the online company doesn’t have to repay the back taxes, but instead will make $200 million in capital investments, create 2,500 jobs and charge a 6.25 percent sales tax.

Proponents of forcing Amazon to collect sales tax say the move is meant to put online retailers on an even playing field with traditional brick-and-mortar stores and provide an extra revenue stream for the state.

The Austin-American Statesman reported the lack of an online sales tax shorts Texas $600 million a year.

Amazon, however, said stores like Wal-Mart are behind the push for legislation to tax online retailers in a move to curb their growth.

The trend of states levying sales taxes on online retailers is gaining momentum. Texas joins Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Washington and Wisconsin in mandating an online sales tax, with New Jersey and Virginia soon to follow.