Tax chief wary of ‘Amazon Law’

Add the state’s tax chief to the growing list of officials uncertain about how Connecticut should pursue hundreds of millions of dollars in uncollected sales taxes tied to Internet transactions.

Department of Revenue Services Commission Richard Nicholson testified on several tax-related bills today before the legislature’s Finance, Revenue and Bonding Committee, but said nothing regarding the so-called “Amazon Law.”

“There are really mixed messages out there about how successful this has been in other states,” Nicholson said afterward, referring to the 2008 New York statute that Connecticut and other states largely have copied.

All of these measures hinge on the sales affiliates that online retail giants such as rely on to reach the more customers. The bill raised by the finance committee states that if a firm generates more than $2,000 in quarterly sales over one year through its Connecticut affiliates, it effectively has a physical presence here and therefore sales taxes must be collected.

The New York law is tied up in a legal challenge brought by Amazon and the retailer has fired affiliates in Colorado, North Carolina and Rhode Island after similar statutes were enacted, Nicholson said.

But some Connecticut officials have estimated the state stands to lose hundreds of millions of dollars in sales tax revenue if it doesn’t find a way to collect those taxes, and Nicholson said this is a major concern as well. “I think some states regret that they’ve adopted those laws, but we still have a problem,” he said. “It really is a double-edged sword.”

The state’s chief business lobbying entity, the Connecticut Business and Industry Association, also has taken no position on the bill, and finance committee leaders from both parties have said they are uncertain whether to adopt the measure.