SALT LAKE CITY — Amazon.com will keep 1.31 percent of the sales taxes it will begin collecting from its Utah customers in January.
The deal that the state negotiated for Amazon to start collecting such taxes does not include an incentive available in state law that would have allowed the online retailer to keep 18 percent of the revenue.
"Amazon was entitled to the 18 percent vendor discount under one reading of the statute," Utah State Tax Commission Chairman John Valentine said Friday, after obtaining a waiver from the company to discuss that portion of the confidential deal.
But Valentine said the state was "able to negotiate with Amazon for the standard 1.31 percent vendor discount that all the vendors in Utah get. So they got no more and no less than any other state vendor. They were treated the same."
It's not clear why Amazon.com agreed to pass on the higher rate available under a 2013 law intended to provide an incentive for out-of-state companies like Amazon that haven't been collecting Utah sales taxes to start charging their customers.
"It was a sticking point in the negotiations," Valentine said. "There was an ongoing negotiation about their status and that ongoing negotiation resolved into their status being at 1.31 percent just like the other vendors that are in the state."
The chairman said he could not disclose any other details regarding those negotiations.
Amazon.com has not returned repeated requests for comment.
What's known as a vendor discount permits companies to retain 1.31 percent of their sales tax collections "for the cost of serving as a collection arm for the state," as long as they are current on their filings, Valentine said.
The sponsor of the legislation creating the 18 percent incentive, Rep. Steve Eliason, R-Sandy, said it was meant to be extended to any company that agrees to voluntarily comply with sales tax laws in Utah.
Companies like Amazon have not collected sales taxes in Utah because they have no physical presence in the state. States are seeking the authority to force such collections, either through the courts or Congress.
Utahns owe state and local tax on online purchases, whether it is collected by the retailer or not, and are supposed to remit it as part of their state income tax filings. But few Utahns actually comply.
Eliason said the Amazon deal, "in light of recent facts that have been revealed, has nothing to do with my bill. My bill has been functioning just fine since it was implemented and has helped taxpayers comply with the law."
He said companies that choose to take advantage of the incentive and start collecting taxes receive "some degree of assurance that they're not going to later be assessed taxes" because it's determined they have had a nexus with the state.
The lawmaker said he has not read the Amazon deal and could not say whether that concern was behind it.
"I can't speak to a voluntary compliance outside of my bill, but it's just plain common sense that you mitigate a risk that you're going to later be assessed for sales taxes that you should have collected," he said. "That subjects you to potentially years worth of sales tax audits."
Amazon is the first online company to sign a voluntary compliance agreement, the tax commission's spokesman, Charlie Roberts, said. Amazon will begin collecting sales taxes from Utahns on Jan. 1 on purchases made directly from the company.
Gov. Gary Herbert, who announced the deal with Amazon during a discussion of his new budget on Wednesday, has called for the state to "aggressively" pursue the estimated $200 million in state sales taxes not being paid on online purchases.
There is also some $100 million in local sales taxes going uncollected.
Herbert's GOP primary opponent, Overstock.com Chairman Jonathan Johnson, said he is "suspicious" of Amazon's agreement with the state and suggested it may signal the company is about to make a move into Utah.
"It wouldn't surprise me if the reason Amazon is doing this is because they're about to establish a nexus through a warehouse or a call center," Johnson said. "They're getting a little PR to do something voluntarily that they would have to do anyway."
He said Amazon would expect some type of assistance from the government if they are building a facility in Utah because "they usually cut a pretty good deal when they go into a state."
But Aimee Edwards, spokeswoman for the Governor's Office of Economic Development, said no one has heard from Amazon.com, even though companies interested in coming to the state may contact the office for an incentive.
"We are not aware of any negotiations or conversations with Amazon," Edwards said. "Most of the time we try to see what’s out there and have a pulse on the business community."
Valentine said he did not know of any involvement with Amazon by other state entities.
"I don't know of any other incentives that may or may not have been offered to them," the tax commission chairman said. "I only dealt with the issue of the voluntary collection agreement."