Starting Nov. 1, Connecticut residents who make purchases from online retailer Amazon.com will be required to pay 6.35 percent in state sales tax on each transaction, thus generating much-needed additional tax revenue for the state.
What's more, Amazon.com will be building a new distribution center in Connecticut and will create up to 300 jobs over the next two years under a deal announced Monday by Gov. Dannel P. Malloy.
The deal is expected to generate more than $15 million a year for the state, according to a press release from the governor's office. Amazon is yet to select a site for the new distribution center.
“All in all, this is a win for our state’s taxpayers, our main street retailers, and our workforce,” Malloy stated in the release. “Amazon’s multi-million dollar investment and the hundreds of jobs that will come with both the construction and operation of their future facility will unquestionably boost our local economy."
Under current federal law, out-of-state retailers are not required to collect tax on sales to Connecticut. Residents are required to pay sales tax on items they buy from online retailers, but in reality, most ignore the law. Currently Congress is considering legislation that would require online merchants to collect and remit taxes in the states where they do not have a brick and mortar presence, or "nexus."
Malloy said although Amazon's agreement with Connecticut to collect and remit sales tax only partially addresses the problem (i.e. not all online retailers are willing to make such deals with the state, and Amazon is one of the first), it is "a great step," and will have a secondary effect of allowing state merchants to compete more fairly against Amazon.
"We… look forward to working with Governor Malloy toward passage of the legislation now being considered by Congress that would finally resolve the sales tax issue, level the playing field for all retailers, protect states’ rights and allow states to collect the revenue owed," said Paul Misener, Amazon vice president, global public policy.
“With strong support from Governor Malloy, this has been one of our top priorities for over a year now,” said Department of Revenue Services (DRS) Commissioner Kevin Sullivan. “It’s a great result for our consumers and businesses, state and local revenue, new investment and new jobs. Amazon is a great company. Good tax policy can be good business policy too.”