It’s not exactly a Christmas holiday- level deluge, but the U.S. Postal Service is seeing a significant boost in the number of Amazon packages shipped to Hawaii in advance of the giant online retailer collecting the state’s general excise tax here starting Saturday.
Over the past seven days, the Postal Service in the islands has seen a 10 to 20 percent increase in the volume of incoming Amazon packages, said Duke Gonzales, spokesman for the Postal Service in Honolulu.
Amazon earlier this month announced it would begin charging online customers the state’s general excise tax on items bought by Hawaii residents starting Saturday.
Hawaii’s GET tax is 4 percent, with a half-percent surcharge added for Oahu only.
Hawaii on Saturday joins Idaho, Maine and New Mexico as the latest states where Amazon will be paying the tax. They are, in fact, the last four of 45 states with a statewide sales-related tax where it wasn’t doing so.
While regular Amazon customers are certain to be disappointed, many of Hawaii’s brick-and-mortar retailers welcome the news.
“It helps level the playing field,” said Tina Yamaki, president of the Retail Merchants of Hawaii.
Stores are struggling, and some are going out of business, in part because of the revenue lost to online sales that don’t have to pay the tax, Yamaki said.
“People may not know that when they buy online, they are not supporting the local businesses. When you order online, your money goes out of the state,” she said.
Yamaki said the move by Amazon is a step in the right direction — but it’s only a step.
“There are so many other online retailers like QVC, Overstock.com, Kohls, HSN, to name a few that are not collecting taxes,” she said.
Tom Yamachika, president of the Tax Foundation of Hawaii, said hopefully more online sellers will follow Amazon’s lead.
How much Hawaii taxpayers benefit from Amazon’s apparently voluntary decision to collect the tax is uncertain. Estimates vary.
Seattle-based Amazon.com LLC, which recently obtained a Hawaii GET license, could not be reached for comment.
But Yamachika said a 2012 study found that total online sales in the islands could generate $110 million for the state, with Amazon’s contribution estimated at about $11 million.
However, Eugene Tian, chief economist for the state Department of Business, Economic Development and Tourism, said a 2014 consumer survey of household online spending found that taxing online sales would result in only $15 million in GET revenue.
Peter Fritz, a former rules specialist with the state Department of Taxation and an attorney who has been involved in drafting bills relating to taxation of internet purchases, said Amazon has been reported to be responsible for 50 percent of all internet sales.
That would mean Amazon’s agreement to comply with Hawaii’s general excise tax law could result in additional revenues of approximately $7.5 million, Fritz said.
Amazon has been facing increasing pressure across the country from state and local officials trying to grab a piece of online sales.
In Hawaii the state Legislature is considering Senate Bill 620, which would expand the scope of “engaging in business” to include retailers with in-state gross receipts of $100,000 or more for the purposes of a general excise tax.
Randy Perreira, executive director of the Hawaii Government Employees Association, told the House Committee on Consumer Protection and Commerce that revenues gained through SB 620 could fund public education and other important state priorities.
“Hawaii has already lost millions of dollars in uncollected internet-based sales, and the losses will likely increase as internet commerce continues to grow,” Perreira said, adding that it’s “a problem that will get worse over time unless we take appropriate action.”
However, Maria E. Zielinski, director of the Department of Taxation, testified that her department has concerns about the legality of the bill.
If passed and enforced, she said, the measure will likely lead to lawsuits, with taxpayers claiming relief under the Commerce Clause of the U.S. Constitution, in which only Congress has the authority to regulate interstate commerce.
Fritz urged the committee to advance the bill, saying courts have held that companies that do substantial business in a state can be held to have an economic nexus to the state creating an obligation to pay taxes to a state.
“Without such a law, companies may refuse to pay taxes on the sale of goods to Hawaii consumers,” he said.