Amazon's Expansion Into Ohio Triggers Tax on Online Purchases

In a May 29, 2015, joint press release, Amazon.com Inc. and JobsOhio confirmed Amazon’s commitment to significant business development in Ohio. JobsOhio is a private, non-profit organization designed to drive job creation and new capital investment in the state. The group was involved in selling Amazon on there being “no better place” to expand than Ohio.

Cleveland’s WJW characterized the plan as a “good news/bad news” situation—good news because of the expected 1,000-plus “well-paying jobs” Ohio can look forward to over the next several years; bad news because the deal also includes Amazon’s voluntary agreement to begin collecting Ohio sales tax from online customers.

Ohio Gov. John Kasich is pleased with the deal. Bloomberg quoted him as saying “[t]his is just a huge deal for us…[i]t’s going to attract a lot of people.”

Bloomberg detailed Amazon’s plan, which is to invest several hundred million dollars in Ohio in the form of data centers that will handle cloud computing and storage. The data centers are planned for three Columbus suburbs—Hilliard, Dublin, and New Albany. Amazon may also build one or more fulfillment centers in Ohio.

Additionally, Amazon’s $1.1 billion capital investment encompasses 120 full-time jobs and an annual payroll of $9.6 million over the next three years. In return, the Ohio Tax Credit Authority approved a $77 million sales tax exemption on equipment purchases at the data centers and a $4 million tax credit for new payroll. Both of these figures reflect a 15-year projection.

Some wonder whether Ohio needed to give Amazon so much in light of the fact that the state is already an attractive expansion site.Bloomberg noted that the executive director of Good Jobs First, a non-profit that tracks subsidies and promotes accountability in economic development, contends that “Ohio shouldn’t offer tax breaks to Amazon because the company needs warehouses close to customers in the state and is likely attracted by affordable electricity for data centers.” Good Jobs First’s subsidy tracker ranks the Amazon/Ohio $81 million “megadeal” second for state and local awards, behind only Texas, where total subsidies are valued at $269 million.

After Texas and Ohio, the subsidy tracker ranks Kentucky, Wisconsin, and Indiana as the next three states that gave the most subsidies to firms:

• Kentucky: 20 subsidies, totaling more than $36 million;
• Wisconsin: One subsidy (to Amazon), totaling over $10 million; and
• Indiana: Eight subsidies, totaling more than $9 million.

On the other hand, Ohio’s brick and mortar businesses are delighted that Amazon will now be on a level sales tax playing field. The Plain Dealer reported that Amazon projects it will collect between $150 million and $300 million annually in Ohio sales taxes, eliminating the pricing advantage that it has enjoyed over the years. It is “great news for Ohio,” said Gordon Gough, president and chief executive of the Ohio Council of Retail Merchants, who is happy with the prospect of Amazon coming to Ohio and playing “by the same rules as all the other retailers.”