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Some fear 'Amazon tax' could hurt Pennsylvania's bid for company's second HQ

Aaron Aupperlee
| Friday, Oct. 6, 2017, 6:33 p.m.
An employee of Amazon PrimeNow stacks shelves for customers making last-minute holiday orders, Wednesday, Dec. 21, 2016, at a distribution hub in New York.
An employee of Amazon PrimeNow stacks shelves for customers making last-minute holiday orders, Wednesday, Dec. 21, 2016, at a distribution hub in New York.
In this April 27, 2017 file photo, construction continues on three large, glass-covered domes as part of an expansion of the Amazon.com campus in downtown Seattle. Amazon said Thursday, Sept. 7, that it will spend more than $5 billion to build another headquarters in North America to house as many as 50,000 employees.
In this April 27, 2017 file photo, construction continues on three large, glass-covered domes as part of an expansion of the Amazon.com campus in downtown Seattle. Amazon said Thursday, Sept. 7, that it will spend more than $5 billion to build another headquarters in North America to house as many as 50,000 employees.

As Pennsylvania lawmakers look for ways to close the state government's budget gap, some are considering a proposal that would turn e-commerce giants such as Amazon into tax collectors.

Some state lawmakers and local officials are worried the proposal, if enacted, could complicate efforts to entice Amazon to build a second headquarters in the state.

Up for consideration is a change that would require online marketplaces to collect Pennsylvania's 6 percent sales tax on items sold through third-party vendors using those websites.

Right now, it's up to purchasers to report to the state all items bought online for which they did not pay the sales tax and then to remit the tax. Few do.

Online retailers and e-commerce sites such as Amazon, Ebay and Etsy have opposed similar proposals elsewhere, said Brian Kennedy, senior vice president of operations and strategic programs for the Pittsburgh Technology Council. Kennedy called it an “Amazon tax.”

Senate Minority Leader Jay Costa, D-Forest Hills, said he doubted the proposal would be part of whatever revenue package is put in place. The proposal was part of a broader revenue package that fell apart this week.

Costa said there was concern about pursuing the option as cities like Pittsburgh and Philadelphia bid for Amazon's second headquarters.

“We were mindful of the conversations with Amazon to make sure we didn't do anything detrimental to our chances with landing their second headquarters and to offer them a level playing field,” Costa said.

Allegheny County Executive Rich Fitzgerald said he contacted people in all four caucuses in Harrisburg to share his opposition to the proposal. He said it would hurt Pennsylvania's competitiveness with other states in luring Amazon's second headquarters and in landing other e-commerce jobs.

“My understanding is it has no legs at all,” Fitzgerald said. “And it shouldn't go anywhere. It's a bad idea.”

Democrats and Republicans in the state House, however, said the proposal is still on the table.

Stephen Miskin, spokesman for House Republicans, said there should be a complete overhaul of the state's tax structure but legislators are looking at pieces one at a time.

“And right now, that seems to be the latest,” Miskin said of the so-called Amazon tax.

Bill Patton, spokesman for Democrats in the House, said all sides are continuing to talk about the proposal.

Patton called it an issue of fairness, noting online retailers should be treated the same as brick and mortar stores. He said the change could bring in an additional $28 million in revenue this fiscal year and about $50 million during the next fiscal year.

“We don't believe that it would negatively affect Amazon or any other retailer,” Patton said.

An Amazon spokeswoman said the company had no comment. Etsy and Ebay didn't respond.

Minnesota passed a similar law that was immediately put on hold and challenged in the courts. A few months after the state of Washington passed a similar law, Amazon publicly announced it was looking for a place to build a second headquarters. The Washington law is scheduled to take effect in 2019.

At issue is a 1992 U.S. Supreme Court ruling that waives sales tax requirements from companies unless they have a physical presence in the state. For years, states have been trying to find a way around this ruling by passing legislation or establishing policies defining what it means to have a presence in the state.

“Departments of revenue are really struggling with this,” said Matt Mincieli, executive director for the TechNet's Northeast region.

TechNet is a trade association that represents more than 70 technology companies. Mincieli said he thought Pennsylvania's proposal “flies in the face” of the 1992 court ruling and would likely end up in court. But not before it created a stir.

“It would be a big deal nationally. It would get a lot of negative attention,” Mincieli said about Pennsylvania's proposal.

Kennedy said there should be a solution for collecting state sales tax money from online retailers. He suggested a federal policy to avoid a patchwork of 50 different policies. But maybe not is not the best time.

“From our perspective, it is a PR issue as much as a policy issue,” Kennedy said. “Do we want to tell the world that we aren't serious about attracting Amazon?”

Aaron Aupperlee is a Tribune-Review staff writer. Reach him at aaupperlee@tribweb.com, 412-336-8448 or via Twitter @tinynotebook.

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