Amazon Calls for Feds to Decide Online Sales Tax Issue

By Mark Hachman

Amazon executives said Tuesday that the company does and will pay sales taxes for goods purchased online, but that the retailer preferred a federal solution, and not leave it up to the states.

Thomas J. Szkutak, the company's chief financial officer, also declined to comment when asked if Amazon would terminate its agreements with any more of its affiliates, in order to avoid paying online sales taxes. He also declined to comment on whether or not Amazon would manufacture a tablet.

Amazon reported revenue growth of 51 percent for the quarter, in which the largest Web retailer also reported that sales volumes of its Kindle e-reader continued to accelerate. Overall, Amazon's cheapest version of the Kindle, its ad-subsidized version, is now its highest seller. Amazon introduced the Kindle 3G with Special Offers in May at $164; the recent AT&T sponsorship dropped the price to $139.

Szkutak noted that Amazon already pays taxes on more than half of its business around the world.

"I think in terms of the sales tax issue in total, the way you should think about it, we support a federal simplified approach, as we have for more than 10 years," Szkutak told analysts. He reiterated that Amazon thought that the tax issue was a "federal" one and that Amazon continued to work through those issues.

Amazon recently said it would seek a ballot initiative to strike down a new law in California that forces online retailers to collect sales tax, The New York Times reported. The earliest the initiative could be put to voters is February 2012.

Amazon recently cut off relations with its affiliates in California in order to avoid complying with the requirement, since the law affects only businesses with a physical presence in California. The State of California estimates that it loses about $1.2 billion a year in unpaid sales taxes, partly due to online e-tailers like Amazon. Although consumers are technically obligated to pay "use taxes" when they buy from out-of-state retailers, they rarely do, and it's usually up to the retailer to enforce them.

But Szkutak also said that he valued the company's affiliates. "We're incredibly pleased to have affiliates, and we'll continue to work with them," he said.

Szkutak also declined to provide any confirmation of an upcoming tablet, refusing to comment when an analyst asked. Recent rumors say that Amazon plans as many as three tablets, all expected to ship sometime this fall.

Additional reporting by Pete Pachal.