NY Times, LA Times Want Amazon To Collect More State Taxes

theodp writes "Recalling that CEO Jeff Bezos originally explored placing Amazon.com on an Indian Reservation near San Francisco to 'have access to talent without all the tax consequences,' the NY Times argues it's time to put an end to the e-tailer's 'entity isolation' tax-avoidance games. The LA Times chimes in, saying Amazon's claims that collecting sales tax constitute an undue burden are 'worth a horselaugh,' noting that Amazon boasts it has no problem keeping track of millions of unique products."

Comments

Note the lack of mentioning all the other taxes

[AndOne]

The NY times article chooses to skip mentioning all the taxes other than sales tax Amazon would be paying in those areas with its isolated tax groups. I also think it's cute that they feel amazon has a moral right to pay more taxes in this 'time of hardship'. But really, people are surprised when a company is avoiding as many taxes as possible, especially a tax that would make them less able to make a profit? They're surprised people aren't paying use taxes?

Re:Note the lack of mentioning all the other taxes

[AndOne]

Requiring retailers(online or not) to collect use taxes starts us down a rather slippery slope and is probably not constitutional. Requiring they collect sales tax without 'a nexus of operations' is unconstitutional.

I didn't miss the point of the article, I was pointing out that the article is disingenuous in it's description of the situation. The only legal loophole amazon is exploiting is the separation of sub-entities related to it's primary business as a way to avoid the presence of a legal nexus of operation. And those sub-entities are still paying taxes with respect to everything else that they do. Even if that loophole was closed then only a handful of additional states would be receiving sales tax.

Additionally, if laws are passed requiring all online businesses to collect sales taxes this will have a distinct chilling effect on all but the largest of retailers.

As a final note, perhaps states should start enforcing use taxes if they're that concerned about it, but given the complexity of doing so, and the fact that enforcing it would probably cost more than could be recouped from them, use taxes still seem rather silly in their logic. Americans(speaking of patriotism) pathologically do not like paying taxes and expecting them to volunteer(in the sense of paying a nearly totally avoidable and confusing tax) even more money during a recession seems like an exercise in futility. Perhaps if the government provided a line item receipt on how tax money was spent we might feel differently.

Re:Note the lack of mentioning all the other taxes

[iamhassi]

" I also think it's cute that they feel amazon has a moral right to pay more taxes in this 'time of hardship'."

I think it's cute that the NY Times forgets Amazon is online, they don't rely on local people, and could just as easily move overseas as it could to another state to save that billion dollars in taxes. I'm sure there's plenty of states that would welcome Amazon and the 15,000+ jobs it brings with tax-exempt status.

Please California, chase away all of your big businesses! Midwestern states would welcome the jobs.

If online taxes were required I'd just purchase more from eBay and chinese vendors. Is that what California wants? People are going to buy wherever it's cheaper, whether it's down the street, online or overseas.

Smaller companies?

[alzoron]

It might not be an undue burden to Amazon, but what about smaller online companies? You could use software to manage the collecting of sales tax for everything but the real problem comes to sending off that money to every town, county, and state that collects sales tax. Someone buys something for a couple bucks and suddenly you have to send payments of a few cents to three different places. Even if you save it all up and send it bi-yearly you could be looking at thousands of separate payments based on how widespread your client base is.

You can't just look at a huge company with millions in revenue and make a one size fits it all decision.

Re:From the NYT article, they are following the la

[julesh]

The letter of the law may allow someone with access to expensive lawyers to avoid paying taxes, but it is not in the spirit of the law?

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

(US Appeals Court Justice the Honourable Learned Hand)

Re:How do you think it works in the EU ?

[Dhalka226]

Those entities where they do it are done on a country level, which is fairly simple.

I won't claim that Amazon can't get it done, because they're smart people with incredible infrastructure and metric crap-tons of money that they could throw at the problem if they so desired. I can tell you that I live in Cook County, Illinois where Amazon would be forced to collect not only the Illinois state sales tax, but also a Cook County sales tax. I can tell you that since they sell cigarettes, that county sales tax is different for that product versus others. I can tell you that while I myself do not live in Chicago, if I did and I ordered from Amazon they would also then be obligated to collect yet another sales tax. And that, you guessed it, Chicago also levies "sin taxes" on certain products including cigarettes, soft drinks and--don't ask me why--bottled water. And I can tell you that the tax rates are scheduled to change in July 2010.

That is, of course, one potential set of jurisdictions for one potential customer. Now multiply that ridiculous level of legal complexity for every possible combination of city, county and state that are applicable and you're quickly arriving at a system of rather ridiculous proportion. Better that we not bother, in my mind.

Before anybody says "but we're only talking about state taxes!" I'll head it off by saying two things: First, that if we're going to make them collect state taxes you can bet the next debate is going to be about other levels of government as counties* and cities all complain about how their budgets are struggling too. And second, that it only helps marginally. In my example, about half of those county and city taxes are actually collected and administered by the state of Illinois, essentially making them state taxes that are only applicable in certain areas.

I understand the plight of the brick-and-mortars who not only have to compete on price but also on a lack of sales tax. I also understand the struggles of many cities and states with their budgets for the past decade or so now. But this is a ridiculously complicated system, far different from the "ZOMG X% VAT" that Amazon deals with in other countries. Setup would be bad enough, much less maintaining compliance with all such systems.

Impossible? No. Unwieldy? Definitely. Worthwhile? Not in my mind.

* I think Cook County may be the only county in the country that is legally permitted to levy its own sales tax, but I'm not sure.

Burden

[Skapare]

Yes, there is a real burden here. A "brick" store only has to deal with exactly ONE tax rate, which is the rate for their physical location. A chain of stores would only need to deal with this on a per-store basis. However, the web retailer is expected to charge tax based not on their own physical location, but rather, the location of the customer ordering the merchandise. This means keeping a database, and keeping it updated, for each and every single tax jurisdiction in the country. In many states this varies by individual city and town. There are thousands of these. In some cases they are even split across zip codes. And it's not just rates to worry about. Different jurisdictions have different exemptions of what products don't require a tax (food in one place, only perishable food in another, bath products might be included in another, school supplies exempted in a few, etc).

Then there is the issue of ensuring the taxes get paid to the proper government entity. That and making sure people are not subverting the system by sending packages to other locations.

Some solutions to this are possible.

I suggest that instead of the stores charging the tax, the credit/debit card processor charge the tax. The advantage of this is that they readily know the billing address of the account holder. Their payments to the government entities would be more in bulk, instead of these governments getting thousands of small payments from all the "mom and pop" web sites that would be compliant with tax law changes. The one change that would need to be made is each credit/debit charge would need to have split up according to product type classifications (a federal standard needed for that).

Another alternative is for a federal law that simply requires each of the states to submit ONE tax rate for the whole state, and accept a set of exemptions designated by that federal law, to be part of the inter-state tax program. One other requirement is, to be a part of it, they treat in-state web retailers exactly the same as out-of-state (e.g. all or nothing).

The burden on web retailers is NOT a myth. It is very real. Amazon can probably handle it. But you know the smaller retailers will be next, and eventually they will try to impose this on others. Taxes are essential, but it needs to be kept simple. Also, smaller retailers need to have a SINGLE (not 50) payment destinations (a central clearinghouse for this).

The press is self-interested on this topic

[giladpn]

The NY Times and other paper publications are right now on a crusade to attack the low cost base of internet business.

They are talking about de-indexing Google for similar reasons.

We should understand the interests behind such attacks.