- Associated Press - Sunday, October 9, 2011

HARTFORD, CONN. (AP) - Connecticut officials are not giving up on requiring Internet sellers to collect state sales taxes, despite signs from online retailer Amazon.com that it has no immediate plans to abide by the state’s new Internet tax law.

State officials confirmed to The Associated Press that Amazon wrote the Department of Revenue Services this month, saying the company is not obligated to abide by the law because it does not have a physical presence in Connecticut. Amazon contends that by not having a physical presence, it does not have to collect and remit taxes to the state, a protection of the U.S. Constitution.

Connecticut plans to press Amazon for the taxes the state believes it should have collected at least during the month or so when the new law was in effect and Amazon still had affiliations with websites in Connecticut through its Amazon Associates Program. Amazon severed those ties in June.

The state could expect up to $9.4 million a year in additional revenue if remote sellers, including Amazon, complied with the new law, according to an estimate by the General Assembly’s Office of Fiscal Analysis. That estimate was based on data from a comparable New York law.

Connecticut officials believe Amazon is obligated in other ways, as well.

“All we have to do is get in the door. Once we get in the door, there are some more opportunities that come,” DRS Commissioner Kevin Sullivan said. Connecticut plans to evaluate some other connections Amazon has with people in the state and start building a case that Sullivan predicted will ultimately be decided in court. He said he didn’t know how much money the state could expect to collect from the month or so that’s in question.

“They’re not fighting against a burden on their ability to do business in the state of Connecticut,” Sullivan said. “They’re fighting to protect an advantage against everybody else who’s doing business in the state of Connecticut.”

Cash-strapped states across the country are grappling with how to capture the sales tax revenues that go uncollected from online purchases, with at least six states enacting laws similar to Connecticut’s as of June, according to the National Conference of State Legislatures. NCSL estimates that all states are losing $23 billion each year, a figure that climbs annually as more people shop on the Internet instead of in their local stores, said Neil Osten, director of NCSL’s Washington, D.C., office.

Connecticut, he said, is estimated to lose $152 million a year from uncollected sales taxes from Internet retailers that don’t currently collect the tax.

Gov. Dannel P. Malloy, who pushed for the Internet tax law as part of his budget plan to fill a $3.3 billion deficit, said he’s committed to the cause for the long haul and believes Connecticut and other states will eventually win the battle.

“This is our initial request, their initial response. This has got miles to go before we sleep,” Malloy said in an interview. “I also believe there are trends at play in the United States that are going to move in the right direction to dissipate the unfair advantage that these kinds of retailers have over job-producers in our state.”

Multiple messages seeking comment from representatives from Seattle-based Amazon were not answered.

The Department of Revenue Services denied a Freedom of Information request made by the AP for copies of correspondence between the department and Amazon regarding the state’s new tax law, claiming the letter falls under the state’s confidentiality statutes and therefore cannot be released to the public.

Sullivan said DRS also sent a letter informing the Utah-based O.co, also known as Overstock.com, another large online retailer, that it must comply with the state’s new law. The company’s general counsel, however, told the AP that he does not believe O.co needs to comply after ending business relationships with Connecticut-based online advertising affiliates once the law was passed.

“By severing those ties, we effectively severed any sort of obligation,” said Mark Griffin, Overstock’s general counsel. “We don’t have boots on the ground in Connecticut and trying to say that we do because we advertise through Connecticut affiliates _ in order to avoid that argument, we’ll simply terminate those opportunities in Connecticut.”

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