“Amazon Tax” Begins in Alabama, But Here’s Why Millions of Products Are Still Tax-Free

The “Amazon tax” may have begun here in Alabama, but shoppers are still escaping the checkout screen without paying tax here in Alabama.

Is something broken?

Nope. Everything with the new “Amazon tax” in Alabama is working as it should.

Here’s the secret, folks. The 8% sales tax in Alabama, which we have reported on numerous times over the past month, only applies to items shipped and sold by Amazon. 

There are millions and millions of items for sale on Amazon.com that come from third-party retailers, including Prime-eligible products. The purchase is still handled by Amazon, which acts as a modest “middle man” in these transactions, but the sales tax doesn’t apply because Amazon isn’t the official seller.

Under the Simplified Sellers Use Tax, which is the official name of the “Amazon tax” in Alabama, News 5 is told Amazon only collects the 8% tax on items sold directly by them as a retailer.

That means if you want to save some dollars at checkout, look closely at the product listing for the “sold by” section.  If it’s listed as Amazon, look for the “other sellers” area of the page.  Often times, you can find the same exact item from a third-party retailer and not pay the 8% tax.

There is a warning, however.

As the Alabama Department of Revenue has pointed out repeatedly, if you don’t remit the tax for an online purchase on your annual tax return, you’re breaking the law.

We feel compelled to tell you, it’s a law that’s seen virtually zero enforcement over the last two decades. Think of it as the online version of jaywalking.  Just about everyone does it, but few, if any, ever get fined.

We have a hard time seeing the Alabama Department of Revenue going after a mother who buys a Christmas gift for her son, but fails to remit the tax.  Or a teacher who buys a present for his recently-promoted colleague, but loses the receipt and forgets it on his tax return. You get the point.

As is stands, most people will continue shopping on Amazon as they always do: find what they want, add to cart, and check out. In fact, some might not even notice the new tax.

But for those paying a little more attention to the final total, it appears there is a gaping loophole in Alabama’s latest form of taxation.



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