Amazon nears a sales-tax deal in New Jersey

March 19, 2012 12:17 PM Inc. is getting closer to another sales tax exemption deal, this one in New Jersey, in exchange for the retailer’s promise to build warehouses and create full-time jobs.

The New Jersey Assembly voted last week to exempt Amazon, No. 1 in the Internet Retailer Top 500 Guide, from sales tax collection until July 1, 2013, as long as Amazon proceeds with its plans to invest $130 million to develop distribution facilities in the state and create 1,500 full-time jobs. The bill, A-2608, which was introduced and sponsored by four Democratic legislators, has been sent to the New Jersey Senate.

Amazon has similar deals in other states including Virginia, Indiana and Tennessee.

Amazon declined to comment on the Assembly’s action.

Under existing federal law, states cannot require online or catalog retailers to collect sales tax unless the retailers have in-state physical facilities—or nexus in legal terms—such as stores or distribution centers.

The New Jersey Assembly also passed two other sales tax measures and sent them to the state Senate. Bill No. A-2003 would establish that an online retailer has a nexus in the state if it got online sales through another entity based in New Jersey, such as a blog or other type of affiliate web site that refers customers to the retailer. Bill No. AR-69 urges the U.S. Congress to enact federal legislation that would allow states to mandate sales tax collection by online and catalog retailers regardless of whether they had nexus in a state. Amazon is on record as saying it will actively lobby federal officials to pass such federal legislation.

The bill providing Amazon with the temporary exemption from sales tax is intended to apply to any online or catalog retailer, though in practical terms few if any e-retailers other than Amazon are likely to benefit from it because of the requirement to generate jobs. “A-2608 grants a company such as Amazon an exemption from the requirements to collect the sales tax on its sales to New Jersey customers until July 1, 2013, so long as it makes a $130 million capital investment in the state and creates 1,500 jobs with benefits for state residents,” the Assembly said in announcing the bill’s passage last week.

The announcement also clarified that the new jobs must be full-time, and that Amazon would be required to pay the state the equivalent of uncollected sales tax on purchases by New Jersey customers if the retailer’s plans for staffing levels ever falls below 1,500 during the exemption period.

The exemption bill, A-2608, also requires that:

● If the retailer locates its new facilities within a quarter-mile of public transportation, it must encourage employees to use public transportation. If the retailer locates its facilities further than a quarter-mile from public transportation, it must work with New Jersey transportation officials to provide an alternative plan for “viable” commuting options for employees who rely on public transportation.

● All workers employed in the construction of the new facilities be paid at least the prevailing wage for their positions.

● The retailer commit to continue operating its new facilities in New Jersey for at least five years following the sales-tax exemption period.

"With job creation a top priority, we're certainly interested in any plan that brings 1,500 sustainable and accessible jobs to New Jersey and protects taxpayers and retailers," says Albert Coutinho, the Democratic chairman of the Assembly committee on commerce and economic development.

Jonnell Quarrie, tax director for,will discuss sales tax strategies for online retailers at the Internet Retailer Conference & Exhibition in June in a session titled “The new urgency for developing a state sales tax strategy.”

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