ROBBINSVILLE — The giant online retailer Amazon.com will begin collecting sales tax from its New Jersey customers in six months, bringing a windfall for the state treasury and, some hope, for the state's brick-and-mortar retailers.

Amazon said earlier this month that it will open a 1-million-square-foot warehouse in Robbinsville in March 2014, creating 1,400 jobs. Even before the company announced where it would site its first New Jersey facility, it agreed to start collecting sales tax on customers from the state on July 1. It already collects sales taxes in eight other states, including Pennsylvania and New York.

Gov. Chris Christie has said those new sales taxes could add $30 million to $40 million a year to the state treasury, and some researchers say the number is probably much higher. But for people who operate local stores that compete with Amazon, the real benefit of the deal is a long-sought opportunity to match the prices the company offers online.

John Holub, president of the New Jersey Retail Merchants Association, said his members have been suffering for years because they are required to charge their customers the state’s 7 percent sales tax, while Amazon and other online companies are exempt under federal law.

“Retailers have never been asking for special treatment. All we want is a level playing field,” Holub said. “My members are ready, willing and able to compete on price, but when somebody already has a 7 percent advantage over you — before anybody even steps foot in your store — clearly policy makers need to take action.”

The tip of the iceberg

Figures calculated by economists at Rutgers University’s Edward J. Bloustein School of Planning and Public Policy illustrate the scale of the online companies’ tax advantage.

The Amazon agreement alone could add an additional $100 million in annual sales tax revenue from residents, said Nancy Mantell, director of the Rutgers Economic Advisory Services and a professor at the Bloustein school. In 2011 she and three colleagues conducted a study on internet sales taxes for Holub’s organization.

The study estimated the state was losing as much as $171 million a year in uncollected sales taxes because residents were not paying the tax when they purchased goods and services from out-of-state vendors. Amazon accounts for a major chunk of that figure, Mantell said.

“About half of e-commerce in the state is from Amazon,” she said last week. “It has more revenue than the next two largest ‘e-tailers’ combined.”

The federal Internet Tax Freedom Act of 1998 only requires retailers with a physical presence in a state to collect its sales tax, which is at the root of Amazon’s change. In 2007, the law was extended to Nov. 1, 2014.

State residents are supposed to pay use taxes on purchases in place of uncollected sales taxes, but few do.

The prospect of seeing that $100 million added to the prices of products bought annually from Amazon by New Jersey residents pleased Holub and the members of his association — which is not to say that they are satisfied.

Holub said there are still plenty of “worst offenders” online, such as Overstock.com, which, unlike Amazon, currently has no physical presence outside its home state of Utah, and does not collect state sales taxes elsewhere.

“They are the largest online-only retailer, but they’re just the tip of the iceberg,” he said of Amazon. “There are still countless other online-only retailers that continue to exploit this loophole and place local brick-and-mortar retailers at a competitive disadvantage.”

A legal battle

The New Jersey Retail Merchants Association has pushed for passage of a state bill that would force all online retailers to collect the sales tax. The bill got “lost in the shuffle” when the state focused on providing Amazon with incentives to set up local facilities, Holub said, but the association continues to advocate for a federal law allowing states to collect the tax from online retailers and catalog companies.

Absent such a law, it is unclear if other companies will follow Amazon’s lead.

When asked what Overstock’s policy was on collecting sales taxes, Mark Griffin, an attorney for the retailer, said, “Our policy is that we obey the law.”

For now, that means collecting sales tax in Utah alone.

“We’re a pure-play internet retailer,” Griffin said. “The law says that if you don’t have physical presence to the state in question, the state cannot conscript you to collect taxes.”

Besides the Internet Tax Freedom Act, online retailers also cite Supreme Court rulings in two cases, one dating to long before the internet, that said states cannot force businesses to collect sales tax in states where they do not have a “nexus,” or physical presence.

In 1967, the court ruled that Illinois customers of the Missouri mail-order catalog National Bellas Hess, many of whom placed orders by phone, didn’t constitute a nexus. The justices upheld the ruling in 1992, when North Dakota tried to impose a use tax on Quill Corp., a Delaware office supply retailer that provided customers with software allowing them to order directly from the company, a precursor to today’s online purchases.

“Our laws need to be updated to reflect the 21st century marketplace,” Holub said. “We’re following legislation that dealt with mail-order catalogs.”

Seeking federal action

Without a change in federal law, local efforts to get around the current rules have run into problems. When New York passed a law in 2008 requiring online companies to collect taxes on sales to customers in the state, Overstock cut off its New York affiliates, including advertisers and smaller retailers who sell products on the site.

“It’s an easy business decision for us. We don’t want to be implicated as having nexus in a state,” Griffin said. “We’ve had instances where major affiliates are located in states where they passed these laws, and they moved their business out of state.”

He criticized such efforts, saying that as far as Overstock was concerned, each instance “was a net loss to the state.”

Griffin noted that, like Amazon, Overstock has experimented with opening warehouses outside Utah, and has accordingly collected sales taxes as required. It leased a warehouse in Indiana from 2005 to 2007 in order to deliver products quickly, and collected taxes, just as it would in any other state, he said.

“We look at our speed to customers all the time and explore the possibilities,” Griffin said. “Having a warehouse (in Utah) is our business model, but it evolves. The important thing, from our point of view, is that we know what the status of the law is. If we want to expand into a new state, we will.”

The New Jersey Retail Merchants Association has turned its efforts toward supporting the proposed federal Marketplace Fairness Act, which would give states the authority to require the collection of sales tax.

The proposed legislation would also require states to simplify the sales tax structure, which is currently based on a system of 9,600 different tax districts nationwide. Online retailers have argue that dealing with tax rates for so many different destinations would constitute a heavy burden, though supporters of the proposed federal law have noted that such calculations have become relatively easy, pointing to shipping costs that are calculated based on ZIP codes.

New Jersey has signed on in support of the Marketplace Fairness Act and Gov. Chris Christie has supported the concept behind it.

“We are trying to expand the definition of ‘nexus’ so it takes into account not only Amazon, but also Overstock and all the other online retailers,” Holub said. “That is what ultimately has to be done. It’s not just a matter of if, it’s a matter of when.”

Contact Mike Davis at (609) 989-5708 or mdavis@njtimes.com.

Follow @TimesofTrenton