is Coming to Maryland

Amazon is coming to Baltimore. By the end of 2014, the Seattle based company is expected to open a 1 million square foot distribution center on the old site of the General Motors Assembly plant in Southeast Baltimore.

According to the Amazon’s News Release it will bring with more than 1000 new jobs that pay 30% more than the average retail job, including health care, benefits and 401(k) contributions. Given Maryland’s 10.8 percent unemployment rate, Baltimore Mayor Stephanie Rawlings-Blake welcomes the development, calling it a “great day for Baltimore.”

So, what does this mean for you? To begin, it means that your future Amazon purchase—be it books, electronics or toys—will no longer avoid Maryland’s 6% sales tax. The reason behind this is not what you might think.

You will not pay the 6% sales tax because you will be buying an item that now ships from Maryland. You are paying the 6% sales tax because Amazon has established a physical presence in the state. Even if you buy an item that will ship from California, because the company has a physical presence in Maryland it is required by law to collect sales tax from Maryland shoppers.

Competing companies such as Ebay or Overstock are not required to collect sales tax in Maryland because they have no presence. The effects can add up. According to the state comptroller’s office, Maryland loses upwards of $200 million annually from this loophole in sales tax collection. On the other hand, the fact that Amazon purchases are now a bit more expensive could tempt Marylanders to buy on foot, as opposed to click of the mouse, which could be a boon to local retailers.

The tax loophole is a national debate as well, and a bill by the name of the Marketplace Fairness Act (2013) has passed the senate, but not the house. Currently, it is before committee. In essence, what the Marketplace Fairness Act will do is require remote sellers, regardless of their location, to collect sales tax with each transaction, just as local retailers do on a daily basis. However, as many have noted, this bill is likely to meet serious opposition. In any event, while the new facility may take a bit more out of your pocketbook, it is surely a good thing for Maryland business.

Prepared by, Andrew Bareham, CPA, MST, Chair of KatzAbosch SALT Group.

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