Amazon Sales Tax Loophole? When your purchase will NOT have sales tax withheld

On Saturday, September 15th, pursuant to an agreement reached with the Board of Equalization and State politicians, Amazon.com will begin to collect CA sales tax on items it sells to CA residents. 

But, not every item sold through Amazon.com to a CA resident will have sales tax withheld.  From CNET:

...Amazon will continue to not collect taxes on hundreds of thousands of items that it lists for sale on its Web site, stores in its warehouses, and packages for quick shipment to California residents. Those orders -- called "fulfilled" by Amazon -- amount to a tax loophole that has left Sacramento tax collectors a tad unhappy....


A representative of the State Board of Equalization, which collects California sales taxes, told CNET today that whether Amazon can be required to collect taxes on "fulfilled" orders is a tricky question. "It's difficult for us to comment on the way Amazon is set up within its family of companies (and) whether there there would be a consignment relation," the representative said.


Amazon says the law is clearly on its side. Spokesman Scott Stanzel said that for fulfillment sales, "sales tax collection depends on the tax obligations of the seller," not Amazon itself.


Roughly one-fifth to one-quarter of the items that Amazon offers to ship are "fulfilled by" products. It's a staggering selection, including everything from Calphalon non-stick pans, iced tea, stereo speakers, video games, and even the PetZoom Pet Park Indoor Pet Potty

  Of course, even if Amazon does not withhold sales tax on the purchase, the CA resident is supposed to pay a "use" tax on the item in CA equal to what the sales tax would have been.  In reality, this use tax is often not reported or paid by CA consumers, which can be a significant sum as tax rate can top out at 9.75%.