Calling B.S. On Amazon's Taxation Arguments

theodp writes "Over at the Center on Budget and Policy Priorities, Michael Mazerov carefully picks apart Amazon's arguments against collecting sales taxes, arguing that they simply do not withstand scrutiny. While Amazon officials say collecting sales tax in every state would be excessively burdensome, Mazerov notes the e-tailer already collects sales tax in virtually every state for numerous other companies that sell on its website. Mazerov also finds it disingenuous for Amazon to argue that it should not have to help support public services in states in which it has no physical presence when the company fails to support public services in most of the states in which it does have a physical presence. Finally, Mazerov isn't buying Amazon's argument that its opposition to collecting sales tax is not driven by a desire to gain a price advantage over competitors, which he finds at odds with the company's own actions and SEC filings. By claiming sales-tax immunity, says Mazerov, Amazon has enjoyed an unfair 5%-10% price advantage over local retailers, while also depriving states and localities of hundreds of millions of dollars of legally due revenue each year."

Comments

Use Tax

[FredFredrickson]

It's already the law in some states to report purchases that you have not paid sales tax on, called a Use Tax. If you purchase something and Amazon does not collect sales tax, you are supposed to report this directly and pay it directly to the government.

I think the real problem is that since nobody does this, they expect Amazon to do the legwork.

Realistically, it is a businesses' job to collect tax for the state it currently resides in. It would be an undue burden for just about any business to get the workings of every other state's tax just to do business, say, like a phone order!

Sure, amazon is big enough, but that still crushes the little guys with a hefty start-up capital requirement, and a full time tax guy to figure this out.

What they need is a disclaimer telling customers that they may need to report the use-tax, and give a hyperlink to more info on that.

Re:Use Tax

[DoofusOfDeath]

I think the real problem is that since nobody does this, they expect Amazon to do the legwork.

I actually do pay use tax, and the fact that no one else does really makes me feel like a chump.

Re:Use Tax

[plague3106]

So do you imdemnify customers if they collect the wrong amount of tax? I don't see any pricing on your site, so I'm going to go with "it's fucking expensive." Or, an undue burden.

Re:Use Tax

[clarkkent09]

Why should a private company be forced to act as an unpaid tax collecting agent of the government? It is the IRS's job to collect taxes, not Amazon's. What people like you obviously don't realize is that most of the bureaucratic, safety related, tax related etc etc requirements that the government imposes on businesses actually benefit large corporations, who sometimes actively lobby for them, because they provide a barrier to entry for the small competitors. You put a finger on it exactly. It's no big deal at all for Amazon to meet these requirements. It IS a big deal for a small company trying to compete with Amazon, and your argument that "if you don't like it don't start a business at all" is music to the ears of large corporations. Some people don't in fact start a business due to already excessive red tape required and we are all worse off for it

Re:Use Tax

[kalirion]

You forgot to mention the most important bit of info - what state do you live in?

Re:Use Tax

[Chosen Reject]

According to here there are 500 cities/towns in NJ. California has over 1000 cities. North Dakota only has a few large towns/cities, but over 180 smaller ones. That's a lot of cities.

But wait, there's more. Each county will sometimes have it's own tax rate to add. Here we find that there are over 3,000 counties in the US.

But wait, there's more. Sometimes sales taxes can come from other places. For example "service authorities, and various special districts (such as the Bay Area Rapid Transit district)."

But wait, there's more. Each one of those sales tax codes isn't just a number, it can also include certain items that are exempt, or have different rates.

You're one phone call is now several, and each time they have to tell the tax guy what you are buying so they can determine the rate.

Or just ignore it, and when you get a tax bill, just pay the damned thing.

This is exactly what they are doing. However, no one is sending them a bill, because they don't know what is being purchased by whom, for the which I am glad. They don't need to know. Unless you are advocating that Amazon should be sending each tax district an itemized list of everything you bought.

Keep in mind, that Amazon might be able to afford to keep up with all of this, but there are lots of people who sell online who can't.

Legally due

[j00r0m4nc3r]

If it was legally due then states would sue and win. It's not legally due. Yet.

alternative

[kimvette]

I'd like to propose an alternate solution

I know, most politicians won't go with it, but here it is: How about cutting spending, not only making the additional revenue unnecessary, but enabling the cutting or even elimination of many taxes and "user fees?"

Amazon vs. Pirate Bay

[mi]

while also depriving states and localities of hundreds of millions of dollars of legally due revenue each year

Paying sales-tax is the buyer's responsibility. The seller is merely charged with helping the State collect. I find it worryingly hypocritical of kdawson — and people like him — to accuse retailers like Amazon of "depriving" States of sales taxes, while defending pirate bays and napsters against charges of piracy, in which the end-users engage.

Maybe, this is because Amazon's stand harms the Government, while the napsters harm private enterprise?

Taxes, taxes, taxes

[CopaceticOpus]

To look at this another way, perhaps Amazon's 5-10% price advantage will pressure the states to drop their sales tax for the sake of local businesses. This is completely feasible - Alaska, Delaware, Montana, New Hampshire and Oregon already have no sales tax.

The money that consumers use to purchase goods was already taxed, twice. First the government taxes their income, then the state takes a slice too. Do we really need to tax people's money as it goes into the wallet AND as it goes out?

Re:Taxes, taxes, taxes

[the eric conspiracy]

Taxes pay for very important things.

Unfortunately they also pay for a buttload of useless waste.

Re:Taxes, taxes, taxes

[CopaceticOpus]

If taxes have to be raised, then raise the income taxes or property taxes. Sales taxes are a pain to collect, and they have a dampening effect on retail businesses. Also, they are skewed against the poor, since poorer people typically must spend a higher percentage of their income on retail goods.

Re:Taxes are good...

[Shakrai]

If Amazon wants to use state provided infrastructure and national defense, they should pay their share of the financial burden.

Their employees and shareholders already pay their share. I know that punishing "big business" is politically popular right now but in the end corporate taxes are nothing more than a hidden tax on individuals. The business will just raise prices to compensate for the taxes that are imposed on it. The end result is that individuals wind up paying the taxes but it's politically popular because some jackass politician can say that he's being tough on "big [insert boogieman of the day here]".

The sad thing is that people eat this stuff up hook, line and sinker.

Government on the attack

[MSTCrow5429]

By claiming sales-tax immunity, says Mazerov, Amazon has enjoyed an unfair 5%-10% price advantage over local retailers.

Then stop attacking the local retailers with taxes.

Re:Government on the attack

[gedrin]

But without high taxation to manipulate, how would the government exercise control over local retailers through tax incentives?

Re:Taxes are good...

[iceperson]

I wasn't aware that UPS didn't pay federal, state, and local taxes. The part of the transaction that occurs in the state and utilizes state infrastructure is taxed.

I see you included national defense in there as well. Since there is no national sales tax then Amazon already pays all the taxes that would contribute to national defense through federal corporate and income taxes, just like everyone else.

Taxes: a good thing?

[d34dluk3]

Why does everyone on /. always react with outrage when someone or some corporation does their best to avoid taxes? I personally hate taxes, hate the fact that the government basically steals a third of my paycheck every month. I have nothing but sympathy for someone who's doing their best to avoid them.

Where does the outrage come from?

Misguided moralizing about obedience to government?

Irritation that someone else is avoiding taxes when you're not?

Enlighten me, please.

NO TAXATION, WITHOUT REPRESENTATION

[commodore64_love]

How's that for an argument. I sell a lot of stuff on Ebay (used games, videos, et cetera that I no longer want), and New York State has the gull to tell me I should collect taxes when I sell items to New Yorkers. And then file a tax form with NY and pay the money due. I say:

"No Taxation Without Representation"

I am not a New York citizen and never plan to be. If New York wants to give me and the other ~250 million non-NY Americans representation in their Legislature, then okay tax us. But until that happens, we shall consider ourselves foreigners. We owe neither allegiance nor taxes to any foreign government. The New York Legislature can go get fucked.

Re:NO TAXATION, WITHOUT REPRESENTATION

[mea37]

You think every state's sales tax is a single flat rate? Good luck with that. Now it is true that it's a less-than-overwhelming amount of data, but if you haven't thought the problem through enough to know that it's not just a table of 50 rates, then you shouldn't be trying to estimate the difficulty.

A more serious issue is that any state can change its tax laws without any particular schedule or required notice. Realistically the states would have to be responsible for broadcasting this information in a mutually-agreed-upon form.

A system like that probably would work. Note that in my above quote, I didn't say "it isn't reasonable..."; I said "the supreme court doesn't consider it reasonable". With the modern state of technology, I think that's a bogus argument, but it is the current law.

Re:NO TAXATION, WITHOUT REPRESENTATION

[theaveng]

Of course there is; you can refuse to sell there. But then, why is it any of your business? If the people paying the tax - those being the buyer - think an 8% sales tax is worth what the state provides them , that's none of your business. The fact that you would be called on as an agent to collect said tax does not give you a legitimate voice in deciding how high the tax should be.

You make a valid point but...

The state of New York has no authority to "deputize" some guy in Virginia as their tax collector (or else arrest him). Do they? I cannot think of any legal justification for that. Can you?

Re:NO TAXATION, WITHOUT REPRESENTATION

[ScentCone]

Actually the retailer is getting something in return. It is getting the right to make the sale

Really? So, you don't have the right to sell me something without paying a tax? We can't meet, and mutually agree on the terms by which we'll exchange value for value ... because we don't have the right to do so?

Something you have to buy from the government is not a right. You buy services from the government. Rights exist in and of themselves.

Only a dyed-in-the-wool Nanny Stater thinks that rights come (in exchange for cash!) from the government. It's a shame that there are enough I-Want-A-Nanny voters out there to elect Nanny legislators, Nanny governors, and Nanny presidents, but there you have it.

Out of curiosity, what did your right to free speech cost you? Or did someone else pay for that, for you? Yeah, I thought so.

Re:The simple solution....

[Experiment 626]

If I buy something from a merchant California, you want me to pay sales taxes to California. So, suddenly I'm a taxpayer of California, but what services is the state government providing me? Roads, police, fire department, schools? Seems like it would be difficult to provide those things for people who live far outside the state, but if California is providing me with squat, the social contract rationale for why they are entitled to my money kind of falls apart. Do I at least get to vote in California elections, or is your plan also a call for more taxation without representation?

Re:States should fix this in their own laws

[DaveV1.0]

Sales tax is unfair because it's a regressive tax. It's base on how much you buy, not how much you make, and the poor are taxed more percentage wise than a rich person.

So, it is better to punish people for being successful rather than punish people for spending foolishly?
How about the fact that people who make more, spend more?
How about the fact that people who make more pay more in other taxes to the point they pay more taxes over all?
How about the fact that people who are poor spend a greater portion of their income on items that are not taxed?
How about the fact that people who are poor benefit vastly more from the services provided by taxes?

You say income tax is the fair way to go, but income tax rates often increase as one's income increases. Would you support a flat rate tax, say a straight 25% off the top, where everyone who earns any income must pay a certain percentage as tax, without any deductions or credits?

You think it is wrong to be charged the same amount for an item regards of one's income? Tell me, do you work for free or for a reduced rate if your employer's profit goes down? Please explain why a shirt should cost less for someone who makes less money when that is not tied to the cost of production and sale of the shirt? Why should the tax rate be different as only a flat rate tax is fair?

Re:The problem with "legal" taxation

[DaveV1.0]

The only problem with your conjecture is that the public want their government-provided goodies which cost money. Money that the government gets through taxation.

BTW, before that "tea party" you mention ever happens, it is much more likely that the U.S. government will not be able to continue to sell its debt, resulting in hyper-inflation of the dollar and a collapse of the U.S. economy and probably of the U.S. government.

If you do not understand how and why hyperinflation will occur, you need to go read a book on economics.

Re:Strong beating up weak to save the rich...again

[Red Flayer]

I also can pay myself a 'reasonable' salary out of my total bill rate, that saves me $$$ in SS and medicare taxes. For example, say I bill out $100K. I pay myself a 'reasonable' salary of $40K. That means I only have to pay SS and medicare taxes on that $40K. The rest of the $60K falls through and EOY on my personal taxes, and I only pay regular state and federal taxes on that. Save a decent amount of money.

Careful, there. You need to talk to a tax accountant before you get audited. Is $40k reasonable pay for the services you perform on behalf of the corporation? What would someone performing your job get paid in a traditional salaried role?

An acquaintance of mine does tech support in the fashion industry in NY. He got busted by the IRS for doing exactly what you're doing, and had to pay penalties, plus FICA on the difference, and he had to convert the S-Corp into a C-Corp instead (so then he had the joys of paying corporate income tax, paying dividends to himself, paying capital gains on the dividends, and paying income tax & FICA on his salary).