Amazon will collect Utah sales tax and keep only 1.31 percent

In a move that has Utah offi cials giddy, Amazon.com has become the fi rst online retailer to agree to collect sales tax for the State Tax Commission. The mammoth etailer will begin charging sales tax on merchandise sold to Utah consumers in January, and in turn remit its collections to the state.

But, despite media reports to the contrary when the news of the agreement fi rst broke, Amazon will keep only 1.31 percent of the tax revenue it collects as a discount to compensate the company for its collection efforts. Early reports had Amazon keeping as much as 18 percent of its sales tax collections. Although state law allows online companies to keep up to 18 percent of collections as an incentive to act as tax collectors for the state, commission chairman John Valentine said Utah was “able to negotiate with Amazon for the standard 1.31 percent vendor discount that all the vendors in Utah get. So they got no more and no less than any other state vendor. They were treated the same.”

Utah officials say the state loses about $200 million a year from online retailers who don’t collect sales tax from customers and forward them to the state. Commission spokesman Charlie Roberts said Amazon is the first online company to sign a voluntary compliance agreement.

No one seems to know why Amazon.com agreed to pass on the higher rate available under a 2013 law intended to provide an incentive for out-of-state companies like Amazon that haven’t been collecting Utah sales taxes to start charging their customers.

“It was a sticking point in the negotiations,” Valentine said. “There was an ongoing negotiation about their status and that ongoing negotiation resolved into their status being at 1.31 percent ,just like the other vendors that are in the state.” Valentine declined to disclose any other details regarding those negotiations.

Utahns are obligated by law to pay state and local tax on online purchases, whether it is collected by the retailer or not, and are supposed to remit it as part of their state income tax filings. Few consumers comply with that law. Gov. Gary Herbert announced the deal with Amazon during a discussion of his new budget and has called for the state to “aggressively” pursue the estimated $200 million in state sales taxes not being paid on online purchases. He said there is also some $100 million in local sales taxes going uncollected.