Amazon plans Minnesota expansion, will charge state sales tax

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Online retail giant Amazon says it will begin collecting state sales taxes on purchases delivered to Minnesota, according to several news outlets.

The company's announcement of the October 1 change has retail experts speculating that a Minnesota warehouse may also be in Amazon's plans.

Dave Brennan, co-director of the University of St. Thomas' Institute on Retailing Excellence, tells the Business Journal "it probably means they're going to open a distribution center here."

Without offering specifics, an Amazon spokesman told the Journal, "We're considering various opportunities and plan to expand to Minnesota."

Not obligated to charge state tax

As a company with no physical presence in Minnesota, Amazon is not required to collect the state sales tax of 6 7/8 percent. When a new Minnesota law took effect last year, Amazon cut ties with online reviewers and bloggers in the state, in a move that allowed it to steer clear of the state tax.

But the Wall Street Journal reported at the start of this year that Amazon's fierce fights against having to pay state sales taxes seem to be fading, perhaps in response to legal disputes and the company's moves to add warehouses in more states.

The Star Tribune says Amazon collects state sales taxes from customers in 21 states. A Piper Jaffray analyst tells the newspaper a Minnesota expansion would not necessarily mean a distribution center is on the way, mentioning a corporate office or an expansion of Amazon's cloud computing service as other options.

Same-day delivery?

But Brennan tells the Business Journal a warehouse in the state may give Amazon the capacity to offer same-day delivery to Minnesota customers – which he says might be worth the additional cost of charging a state sales tax. He doubts collecting the sales tax would cost Amazon many Minnesota customers.

"...(P)eople are conditioned to using Amazon because it's fast and easy," Brennan says. "If it can get same-day delivery, then it gets faster and easier."

The Business Journal says some of Amazon's distribution centers cover more than one million square feet.

As MPR News reports, Minnesota's Revenue Department has estimated the state loses out on $400 million in tax collections when residents purchase from online and catalog retailers outside of Minnesota.

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