In a deal with Utah's state government, Amazon would be allowed to keep 18 percent of all sales taxes collected instead of the standard 1.31 percent.
Because Amazon has no physical presence in Utah, it and other online retail companies are not required to collect sales taxes in Utah. However, this new deal is meant to act as an incentive for the company to collect sales tax from residents, according to KSL. Unpaid sales taxes from all online purchases made by Utah residents add up to almost $200 million annually.
Amazon said it would not keep the full 18 percent and would instead keep only the 1.31 percent other companies keep.
Amazon sold nearly $428 million worth of retail goods in Utah in 2015, but did not have to pay the $28.6 million owed in sales taxes. As of Jan. 1, Amazon will begin collecting sales taxes on all items it sells to residents of Utah as part of a voluntary compliance agreement with the state.
Companies that operate within Utah are able to retain 1.31 percent of sales taxes if they file their returns on time with the Utah State Tax Commission.
Utah residents are supposed to pay sales taxes on online purchases and self-report how much they owe when they file their income tax returns. Few residents do this. The agreement with Amazon and other compliant online retailers would make it easier for tax collectors to get what they are owed.
"This is not a new tax and it's not a tax increase," said Utah State Tax Commission Chairman John Valentine. "It is simply a method to collect taxes that are owed by taxpayers. We're not raising the sales tax rate. We're not changing what's taxable."
The Salt Lake Tribune reports that the sales tax on Amazon purchases will vary depending on where the customer lives. Some residents will have to pay up to 8.35 percent, the same rate for in-store purchases.
The sponsor of the legislation responsible for the incentive, Republican state Rep. Steve Eliason, said the agreement has led to the collection of a large amount of missing sales taxes from companies that had already signed the agreement.
"To my knowledge, we're the only state in the nation that does this. I'm quite proud of it," he said, according to KSL.