Amazon expands in Pennsylvania

Amazon intends to open a new fulfillment center in Breinigsville, Pa., near Allentown. The center promises hundreds of new jobs at a time when the Allentown unemployment rate stands at 8 percent.

A statement by the online retailer credited Gov. Tom Corbett and the state’s business-friendly environment and commitment to job creation. The strategic decision promises to  save Amazon millions as a result of Pennsylvania’s tax policy. Amazon doesn’t have a brick and mortar store in the state. Instead, it has subsidiaries.

Dan Hayward, spokesman for the state’s Alliance for Main Street Fairness, says the distinction amounts to an unfair advantage. “What we’re saying is we believe Amazon does have a physical presence here in Pennsylvania. What we’re asking, not only our Legislature, but Amazon, is to collect and remit a sales tax at point of sale and level the playing field in Pennsylvania so that a sale is a sale is a sale,” Hayward says.

In states such as California that have imposed a tax on subsidiaries, Amazon has left town.

Robert Strauss, a professor of economics and public policy at Carnegie Mellon, calculates that Pennsylvania could forfeit $300 million in uncollected revenue in 2012 if the policy remains the same.

“It’s not peanuts,” says Strauss. “They want to take over the retail industry by arbitraging on the sales tax exemption which they found a way to legally wiggle around and it comes at a time when virtually all state governments are in financial trouble. And it raises real serious issues of fairness and, I would even go so far as to say, business ethics.”  Strauss says the ethics arise when online retailers tout purchases as “tax free” on their websites when, in reality, consumers are responsible for paying these taxes themselves.

As it stands, it is up to individuals to report untaxed purchases to the state on their returns each year. A spokesman from the state’s Department of Revenue says the amount collected is negligible. But there is one person paying his share, and that’s Strauss.

“To me, it’s an ethical responsibility,” he says. “Let me put it this way, I think everybody should pay the taxes they owe.”