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Amazon prepares for online taxes

Online retail giant is ready for day when Internet retailers will be responsible for collecting sales tax. employees have developed a tax figuration system in the event that the company will have to tax online shoppers internationally and at home, according to U.S. Patent and Trademark Office and European Patent Office documents.

Patent No. 20060036504 is for a tax figuration system that classifies retail items, automatically and dynamically imports the tax code for that classification of item depending on destination, and then assigns taxation to that item being delivered.

While the patent was published Feb. 16, 2006, it was first filed in August of 2004, in accordance with the usual 18-month process for U.S. patents.

The U.S. patent can be found on the European Patent Office Web site, along with a series of claims for a European patent.

"Items are classified so as to select an appropriate import tax code for a destination country and/or to select an appropriate export tax code for an origination country, such as to allow calculation of estimated taxes for the items before the items are delivered," says the patent description.

Amazon currently uses this type of system for calculating the VAT (value added tax) on items shipped from its Web site.

While the patent concentrates on international shipping-tax algorithms, a similar system for state-tax imports is foreseeable.

Proposed legislation in the U.S. seeks to make many American online retailers responsible for remotely collecting taxes at the time of purchase. While some proposed bills have included a small business exemption, or state-by-state opt-in clause, large national retailers like Amazon will most probably be forced to collect taxes should a bill pass.

"We have a policy of not commenting on our patent applications," Patty Smith, director of corporate communications for Amazon, replied in response to a request for comment.