Effective February 1, 2017, retail giant Amazon will collect state sales tax from Missouri-based customers, the company announced on January 23, 2017. The company currently charges sales tax in dozens of other states already, and along with Missouri will begin collecting sales tax in Vermont, Mississippi, Rhode Island, and South Dakota on February 1, 2017.
The current Missouri state sales tax rate is 4.225%. The fact that Amazon can avoid collecting sales tax in many states has been a frequent complaint of brick-and-mortar stores. It’s unclear what effect this announcement will have on Missouri shoppers’ buying habits, but a 2014 Ohio State University study indicated that when Amazon began collecting sales tax in a state, its sales dropped 9.5% in that state. That would indicate a potential revenue increase for both traditional retail stores and on-line retailers that are already required to collect sales tax in those states.
The unusual thing about this announcement is that under current Missouri law, an online retailer needs to have a physical presence in the state to be required to collect and remit sales tax on purchases shipped to Missouri. At this time, there doesn’t appear to be any legal rationale for Amazon to begin collecting sales tax in Missouri. The company has announced a plan to hire 100,000 new employees nationwide over the next eighteen months. This sales tax announcement could be an indication of something the company has planned for the state, such as a new distribution center. The company is also trying out a new concept called Amazon Go that made headlines recently (the grocery store with no lines). Perhaps one of the state’s metro areas will be the next test market for that program. In this writer’s opinion, I think this announcement can only mean one thing: Those often-rumored Amazon drones are going to start making deliveries, and Amazon plans to build a futuristic “drone hub” right here in the Show-Me State.
With Amazon shoppers paying a little more for their online purchases, this ultimately appears to be a good sign for residents and business owners of the state of Missouri. A more level-playing field for traditional retail stores, more tax revenue for state needs, and potentially more local jobs as the company sets up a physical presence in the state.