Will Ohio be getting a tax cut thanks to John Kasich and... Amazon?

Online shoppers in Ohio may have noticed a change in their electronic receipts this month, at least if they’re doing their shopping at Amazon. The online retailer has now made the Buckeye State the 25th location where they have begun charging residents a sales tax for purchases.

At the start of this month, Amazon.com started collecting sales tax from its customers in Ohio. Moody’s Investors Service judged this “credit positive” for the state in a June 8 research note. Sales tax makes up nearly 40% of Ohio’s tax revenues.

Ohio is the 25th state to strike such an agreement with Amazon to start collecting sales tax. But states still have trouble gathering sales tax from most online stores.

This stems from the Supreme Court ruling which said that such taxes do not have to be collected unless the retailer has a “physical presence” in the state. Amazon has completed a deal with Ohio which includes opening three data centers (and more than a thousand jobs) on their turf, but it brings with it the reality of paying that extra tax. So what will the government do with the new revenue? According to their governor (and prospective presidential candidate) the money should be given back to the taxpayers.

[Amazon Vice President of global public policy Paul] Misener stressed that the agreement was voluntary on Amazon’s part. He supports efforts in Congress to establish a uniform tax collection system for online sales nationally. Such a federal law, he said, could mean $150 million to $300 million a year in taxes for Ohio from all online merchants.

“If we’re going to get more revenue, we should cut people’s taxes with it,” Gov. John Kasich said Friday…

The announcement plays into Mr. Kasich’s depiction of an Ohio economy that is diversifying beyond its manufacturing and agricultural image and comes as he is traveling to early presidential primary states to hold Ohio up as an example of the direction the nation should go.

“Tax cuts matter, and the kind of taxes that you have in a state really matters as well,” the Republican governor said.

It’s not a bad theory, at least in principle, but there’s a bit of a road between what a candidate thinks should happen and what actually winds up taking place. The legislature is responsible for initiating such an action and they may not all be in favor. Plus, if you look at the total revenue each year for the state of Ohio and then compare it to what they’re likely to get from Amazon, how much of a tax cut are we talking? Officials are tossing around some impressive figures for the total of all online sales in the state, but right now it’s apparently just Amazon.

That leads to another interesting question. The tax collection agreement was described by the Amazon executive as being voluntary on their part. Since when do companies start voluntarily charging more to customers? That’s a tad bit counterintuitive to say the least. But if Amazon is going to be moving into the state and setting up shop I suppose the government had to get something out of the deal.

In the end, though, we’re seeing something of a microcosm of the Marketplace Fairness Act movement. Does this turn out to be a win for the consumer or a boondoggle? I suppose we’ll have to wait to find out if the tax cut actually happens and how significant it is before we can say for sure. In the meantime, the jobs are surely a good thing at least.