Amazon to start collecting sales tax from Maryland shoppers

  • Amazon will start collecting the 6 percent sales tax in Maryland next week, now that the 1 million-square-foot fulfillment center on Broening Highway is nearing completion.
Amazon will start collecting the 6 percent sales tax in Maryland… (Jerry Jackson, Baltimore…)
September 28, 2014|Lorraine Mirabella | The Baltimore Sun

Maryland consumers who shop online at Amazon.com after Tuesday will be paying more — 6 percent of the sale.

Yet most shoppers will click "place your order" anyway.

The world's largest online retailer will begin collecting Maryland's sales tax as it prepares to start operations of a massive new distribution center next spring in Southeast Baltimore, where it expects to hire more than 1,000 workers. It has already hired part-time and seasonal workers to staff a smaller "sortation" center nearby that will open this fall.

The new warehouses on the site of the former General Motors plant on Broening Highway will be Amazon's first physical presence in the state. And it's that presence that requires the Seattle-based retailer to collect sales tax from shoppers in Maryland, regardless of where the shipment originates.

The new taxes are expected to boost the state's total collection of sales taxes by $50 million in the current fiscal year, according to the state Board of Revenue Estimates. Overall sales taxes are expected to rise 5.2 percent to $4.15 billion.

But consumers and experts agree that little will change in the way people shop with the online giant.

Some said the convenience, savings and comfort level they have with Amazon outweigh the additional charge.

Kofi Jamal Simmons, a 37-year-old Mount Vernon resident and educational and treatment assistant at Sheppard and Enoch Pratt Hospital, visits Amazon about twice a month to buy books, video games, movies and music. His Amazon Prime membership, which he's had for about five years, gives him free shipping on items in two days or less.

"I get a lot of great deals there," Simmons said. "My thing is this gives me convenience — and I still shop locally. If it gives me great convenience, the 6 percent is not going to stop that, especially when things are 20 percent less than elsewhere."

He said he would switch to another online retailer only if "I can find a deal that's better … But ultimately for the quality of service I've gotten from Amazon, I'm pretty much OK with paying that tax."

Purely online retailers such as eBay and Overstock.com are not required to collect the tax, a loophole that some retail groups say creates an unfair advantage.

Shoppers who buy products from online sellers or from retailers in other states are supposed to pay the Maryland sales tax voluntarily, but most never do. The state comptroller's office has estimated that Maryland ends up losing about $200 million a year.

Still, consumers have become accustomed to paying state sales tax with online purchases from those sellers that do collect it, said John Talbott, associate director at the Center for Education and Research in Retailing at Indiana University.

"Today it's not as big of a deal," he said. "There was a time when Amazon competed with a lot of online players … The biggest competitors (now) are Target, Kohl's, grocers, others that have a physical presence."

Studies have shown that online retailers as a group will see a dent in sales only if all online sales are taxed equally across the board, Talbott said.

But Amazon already has tremendous traction with people in the Baltimore area, who use Amazon Prime or have credit cards set up and are comfortable purchasing from the online retailer, he said. For the small incremental costs, most people are not willing to find another site they like and give another company their credit card information.

"It makes sense that people are pretty price sensitive and prefer a cheaper price, but a company like Amazon does a good job of making it easy" to shop, Talbott said.

Samantha Perouty, 30, a Rosedale resident who works as a bank credit analyst, said she may be inclined to shop more often at Amazon now that it has a nearby warehouse and shipping should be even faster.

"Prices are always pretty good, and the shipping, normally it's free," for spending over a certain amount, she said.

Others, though, said they object to a sales tax being collected based on the location of a warehouse in Maryland.

"Since not all Amazon products will be shipped from the warehouse being built here, that policy seems a bit of an overreach," said Stanley Modjeski, a 67-year-old musician from Gwynn Oak who previously owned a used book store. "Not that this is anything new for our state government."

Regardless, he still won't change his buying habits, he said.

"When deciding between an online purchase or one from a brick-and-mortar merchant, I always consider my total cost," he said. "Some online merchants charge so much for shipping that it's cheaper to buy locally, sales tax or not."

Amazon's 1 million-square-foot Baltimore warehouse is one of 96 fulfillment centers the company runs worldwide and one of six new ones, part of the retailer's effort to speed up delivery by locating closer to customers, said Kelly Cheeseman, an Amazon spokeswoman.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.