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

[shawn.fox]

It is unrealistic for every company to figure out what sales tax applies in every state, that is why there is a company that does it for you: Vertex. I recently worked on a project to implement this software for a large retailer. Amazon has far more technical knowledge than the average bricks and mortar retailer, this is no reasonable excuse as to why they cannot pay local sales tax. It is long past time for the online retailers to start paying sales tax just like every other business.

Not having to pay sales tax is one of my primary reasons that I often buy products online. Online retailers already have a lot of advantages for many types of products, there is no reason that they should be subsidized over local retailers.

Re:Use Tax

[shawn.fox]

I call BS anyway. There are only 50, is it too much to have some schmoe simply look the damned tax up on a sheet of paper? WTF?

If only it were so simple. The US sales tax system is a byzantine mess. You have state taxes, city taxes, transit authority taxes, public improvement fees, etc which apply based on where the sale occurred. That is the easy piece though. The difficult part is that the tax rates themselves can be different based off the products. Some products are taxable in one state but not in others. A simple example is plain bottled water which is pretty much untaxed everywhere, and flavored bottled water which is taxable in most states. Then you have tax free holidays where a certain class of products are tax free for 3 days (typically back to school), but it is a different set of days for different areas of the country of course.

To top all that off, cities, states, etc are constantly changing the rules as to which products are taxable and which are not. It is a real pain in the a** to deal with, but all of the national retail chains have to deal with it, so why can't Amazon and the other online retail companies? The best case would be to just have a national sales tax that is the same everywhere instead of the current stupid system. Instead of forcing companies to devote millions of person hours to figuring out what taxes to pay, people could actually be doing something productive.

Re:Use Tax

[Rude Turnip]

You're not thinking like the IRS. Their line of thinking would be as follows: "Hurm...they are paying use tax. Must be trying to hide something else."

Re:Use Tax

[commodore64_love]

Ahem.

The IRS has *nothing* to do with Use Taxes. That's your local Member State that collects use tax, not the central government.

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

[A nonymous Coward]

Try 100K. We get a monthly update of 100K records.

Re:Use Tax

[bitt3n]

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.

I hope you're paying the chump tax, otherwise you're nothing but a scofflaw.

Consumer's fault, not Amazon's

[metaomni]

"Sales" tax is still being levied in the form of "use tax" that consumers are supposed to pay on their state tax returns. Just because most consumers are committing tax fraud doesn't make Amazon a guilty party here.

Re:Consumer's fault, not Amazon's

[bflong]

I honestly had never heard of Use Tax. A quick Google search reveals that I am a criminal.
Fan-friken-tastic...

Taxes are good...

[mi]

If there is an article about virtues of taxes on Slashdot, you can bet, it was posted by kdawson...

Just saying...

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.

Internet Tax Freedom Act & Why Only Amazon?

[eldavojohn]

Calling B.S. On Amazon's Taxation Arguments

Who the hell cares what Amazon claims? If you think it should be taxed, write your representatives and demand they do something about the bill that's been renewed through 2014.

And why are we singling out Amazon? Why not Dell or Newegg or even ThinkGeek? Is it because Amazon is doing too well?

Things just don't add up in Mazerov's posting. He levels charges that sound trivial to prove and prosecute--charges that would result in a lot of back taxes paid to a state. Why doesn't he call one of his colleagues up in any of these states and give them all they need to make a name for themselves? The only reason I can think of is that it's a not a cut and dry clear win for the state. Or there are simply too many companies they'd need to prosecute alongside Amazon -- like Best Buy or Walmart who have a presence in every state and run an e-commerce site.

Re:Internet Tax Freedom Act & Why Only Amazon?

[Otto]

New York came up with a workaround. Since Amazon lets people be "affiliates", they passed a law that says if you have an affiliate in the state, then that constitutes a physical presence, which means Amazon must collect sales taxes on all sales to New Yorkers.

Amazon responded by saying "fine, we won't have any affiliates in New York then" and cut them all off.

New York said "hey, no fair, you didn't cave like everybody else did, time for angry legal action!!".

That's the basic gist of it.

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?

The simple solution....

[Anita Coney]

When you buy something online or via a catalog, you should pay the taxes from the place it was shipped.

If I go to California to buy something, I have to pay California's taxes and not my own. If I pay someone to go to California to buy something for me, I'd have to pay California's taxes and no my own. But for some bizarre reason, when I pay FedEx to ship it to me, suddenly I do not have to pay California's tax but I have to pay my state's use tax.

So to give an example, if I buy something from Amazon and it ships from California, Amazon should bill me California's tax.

Here's why states hate this idea. Because it would allow the states to compete with each other to bring more shipping business into its state. For example, merely to get a bunch of shipping centers built in Oregon, that state could have no such tax. Amazon would then build their shipping centers there and the other states would get nothing.

There's nothing the government hates more than competing.

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.

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:Use Tax - 160,000 different rates

[jackb_guppy]

There are over 160,000 different sales tax rates in the US. Then there are exceptions like to a maximum item value of $2000 in Memphis or which item is charged which tax.

Also the tax rates are normally aligned with boundaries that postal code, city name or county do not follow, so just checking what mailing address does not help. In Washington State the tax rate follow elementary school boundaries for MTA additional amounts.

There are exception areas that like county land inside of incorporated city boarders. Arkansas has alot of towns like this one block in the center of town has a different rate.

Lastly, there is Texas that bases the tax based on location of the business.

All of this do able - I did it for nationwide service company (kill bugs). Personally, I would place the tax calculation as part of shipping requirement and look to Fedex and UPS to supply the tax rate to use.

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.