Amazon's Texas customers to start paying sales tax

Amazon.com will start collecting sales taxes on all online purchases made in Texas beginning July 1 under an agreement that settles a dispute with the state.

Comptroller Susan Combs said the terms address a long-standing complaint by businesses that the online leviathan gets an unfair advantage by not having to assess the tax. She said Texas loses perhaps $600 million a year in potential revenue to Internet sales from all sources.

The deal announced Friday, Combs said, will "level the playing field" with the Web's biggest retailer.

Seattle-based Amazon agreed not only to start collecting sales taxes but also to create at least 2,500 new jobs in Texas over the next four years and make at least $200 million in capital investments in the state.

It was seventh voluntary tax-collection agreement Amazon has reached with a state. The others go into effect between this year and 2016.

In addition, Combs said her office has been working with the Texas congressional delegation about a possible national solution. She predicted federal legislation to address the sales-tax issue for online retailers is forthcoming.

"I think there is a momentum growing for this," she said.

Federal legislation next

Amazon said it hopes to work with Combs "to advance federal legislation."

"We strongly support the creation of a simplified and equitable federal framework, because Congressional action will protect states' rights, level the playing field for all sellers, and give states like Texas the ability to obtain all the sales tax revenue that is already due," Amazon Vice President of Global Public Policy Paul Misener said in a joint statement.

More than a year ago, Combs demanded Amazon pay $269 million in back sales taxes because a subsidiary operated a warehouse near Dallas. Companies with a physical presence in the state are legally required to collect and remit the taxes.

Amazon responded by closing the warehouse. In a Friday filing with the U.S. Securities and Exchange Commission, the company said it still does not believe it is liable for uncollected Texas sales taxes between 2005 and 2009.

Regardless, this agreement settles the dispute.

The agreement was welcomed by the Alliance For Main Street Fairness.

"For too long, Amazon has exploited a loophole that has hurt brick-and-mortar employers in the Lone Star State," the business group said in a statement, "but with this agreement, a level playing field has finally been established."

Combs said other retailers, such as Barnes & Noble and Cabela's, that have both a Web and physical presence in Texas already collect sales taxes. She said she is not aware of any other companies currently being targeted for uncollected taxes.

Desirable state

The comptroller said Amazon representatives contacted her office a few weeks ago and asked for a meeting, which took place about 10 days ago. Final details were completed Thursday night, she said, adding that Amazon's willingness to seek a deal shows the company finds Texas a good place to do business.

An Amazon representative did not say where the new jobs would be added.

But Combs said the Port of Houston should put this area among those under consideration for, say, a distribution center.

Combs also said consumers who will start paying more for Amazon products come July 1 should keep in mind that this change was designed to help their "friends and neighbors" who own businesses and "show up at the football games on Friday night."

Besides, Combs noted, customers already are technically required to report and pay the sales tax on Internet purchases - a widely disregarded and difficult-to-enforce law.

"They've always owed it," she said.

ronnie.crocker@chron.compurva.patel@chron.com