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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."
Amazon UK manages to collect the appropriate VAT, depending on country. Which is why, if you buy from e.g. Denmark, you should order from one of the smaller UK book stores so you get to pay the UK VAT (0% on books) instead of the Danish one (25% on everything).
Finally! A year of moderation! Ready for 2019?
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?
I don't care what you say, all I need is my Wumpabet soup.
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.
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)
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.
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).
now we need to go OSS in diesel cars
* 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.
http://en.wikipedia.org/wiki/Sales_taxes_in_the_United_States. I know for a fact that counties in georgia also levy sales taxes, theres more listed here.. trust me cook county isnt the only one, and to assume so showed you have never left home.
"Georgia has a 4% state sales tax rate. Groceries are exempt from the state sales tax, but still subject to tax by the local sales tax rate. Counties may impose local sales tax of 1%, 2%, or 3%, consisting of up to three 1% local-option sales taxes (out of a set of five) as permitted by Georgia law."
MANY MANY MANY counties have sales taxes across the country.
You are entitled to your own opinions, not your own facts.
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.
It's not just a tax rate per address. It's per address per product. For example, in New York, clothing under $110 is exempt from state taxes but not necessarily exempt from county, city or other local taxes. Any clothing item over $110 is charged tax on the full price. In Massachusetts, clothing under $175 is exempt from state level sales tax but only the portion above $175 is taxed for higher ticket clothing items. In Connecticut only some clothing items under $50 are exempt from state sales tax. So, just in the category clothing, you can see that what is taxed, which portion is taxed and which items are included in the category definition is different. This is just on the state level and not including the myriad city, county, district and other taxes.
Taxes may be based on types of products: in Massachusetts, the American flag, among other items, is exempt from taxes; in Pennsylvania, textbooks and disposable diapers, among other items, are exempt; or as another poster mentioned, the Chicago Soft Drink Tax (where additional taxes are charged for "soft drinks".) Taxes may be based on areas: higher taxes for Bay Area Rapid Transit district and Louisiana tourism district or reduced taxes for New Jersey's Urban Enterprise Zones. Taxes can be charged based on intended use: in Indiana, a 15 ounce bag of potato chips is tax exempt (food items are exempt) whereas a personal sized bag is taxed because it is for immediate consumption and in California fertilizer is exempt if it's used to grow food.
Realistically, taxes can be based on any criteria that enters the twisted mind of a politician in the tiniest of jurisdictions, Currently, sales taxes can differ based upon temperature of food, whether the customer is a college student, distance from an airport, whether the product is in its original package, whether the product is intended to be used at home, etc. Most sales taxes are charged based upon the sales price while Hawaii also charges a portion of their excise tax (their sales tax equivalent) on the wholesale price and other states only charge on a portion of the sales price (such as the amount of clothing over $175 above.) Many states and municipalities also charge a restaurant and/or hotel tax and it's amazing what can get swept into that tax, such as candy, chips, soft drinks, juice boxes, bottled water, or other immediately consumable items, which an online retailer may sell.
In addition, many states have tax "holidays" when taxes are not charged: in Florida, a "back-to-school" tax holiday is often enacted on clothing, books and school supplies under a certain price; in Georgia, a tax Holiday, usually in October, is enacted on Energy Star rated appliances; Texas's tax holiday lasts for an entire weekend and applies to many items and exempts clothing and footwear under $100 but still taxes golf shoes, no matter the price.
Sales taxes are much more complicated than most people realize and they are completely at the whims of state, county, regional and municipal government officials. The category definitions are different from state to state and often different for local taxes within the state. This means the local taxes are often different from other locations within the state but also means that the local definition may differ from the state's own definitions. So for any given product, any of the taxes; state, county or municipal; may or may not apply. For a physical store, a local accountant can advise you how the taxes apply for that particular location but an online store would need to know what rate applies for every single product for every single address. Obviously, most of these combinations would never actually occur but the databases would need to contain a solution prior to the person placing the order.