Slate: Amazon's Tax Stance Unfair and Unethical

theodp writes "We've talked before about Amazon's reluctance to collect sales tax, with Jeff Bezos going so far as to say it's unconstitutional. So it's not too surprising to see Amazon support a California referendum to repeal sales tax for online retailers. Slate's Farhad Manjoo loves buying from Amazon and would hate to pay higher prices, but says the e-tailer 'has no intellectually sound arguments against collecting taxes from residents — by all ethical and civic standards, its position is unsound.'"

Comments

Just that pesky Constitution

[Anonymous Coward]

Damn those federal rights over interstate commerce.

Re:Just that pesky Constitution

[EraserMouseMan]

Which have been abused and used nothing today like what the framers had in mind.

Re:Just that pesky Constitution

[darkmeridian]

There are many aspects of the Constitution that need updating. I mean, this bears repeating however obnoxious, but some of the Founding Fathers were slave owners. They were not necessarily the most in tune with human rights.

Perhaps we want to clarify gun rights. Perhaps we should put in a very clear right to privacy (such as the right to contraception, to interracial marriage, and to abortion, perhaps) instead of having a non-elected Supreme Court cobble that together.

I don't know if it's a good idea. I would reject it because we'll end up banning free speech given the current political climate. But it's not stupid enough to dismiss out of hand. If we had another shot at drafting a Constitution, we might be able to do a better job than the Founding Fathers did.

Re:Just that pesky Constitution

[Seumas]

We've amended the constitution, where necessary. You know, for things like eradicating slavery and allowing women to vote. I don't really see where confusion is over the constitution. People always talk about how it is the job of the SCOTUS to "interpret the constitution", but last time I read the document, it began with "WE HOLD THESE TRUTHS TO BE SELF-EVIDENT". *Self-evident*...

The document seems pretty clear on things like free speech, the right to bear arms, the right to due process, and the right to be protected against unlawful search and seizure. The only reason to "go back and clarify" these things if if people actually mean "re-write to fit my political viewpoint which contradicts what the constitution says" instead of "clarify".

Yes, the constitution was written by imperfect men, but it's disingenuous for us to say things like "they were just farmers and slave-owners and have no relevance to today's society". The document aims to protect us against many things that went wrong in other societies. Things that *WE* seem to often fail to comprehend, today. Things that may seem irrelevant to us *because* of the protections the document has laid out for so long that we might be all too willing to fuck up, under the premise that "life is really different today".

I don't see a single thing in the constitution which does not belong there, for all of time and we're always free to add amendments if we agree that they are absolutely vital and valuable.

Re:Just that pesky Constitution

[Scareduck]

Oh, nonsense. Article I, Section 10:

No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.

In other words, what California and New York and all the whiners who are trying to install sales taxes on material from other states is a straightforward violation of the Constitution.

Re:Just that pesky Constitution

[sorak]

The document seems pretty clear on things like free speech, the right to bear arms

The right to bear arms shall not be infringed. Does that literally mean no weapons regulation period? So can you sell hand grenades to children? Or by "arms", do they only mean firearms? And does it matter that they had no standing military and that the need for a well-regulated militia was part of their rationale? Also, doesn't "well regulated militia" imply the government's authority to regulate militias? I think there are a few legitimate questions to ask. Even if you know your answer to every one of them, I don't think they are all clearly written in the second amendment.

Re:Just that pesky Constitution

[ceoyoyo]

Not being from the US, my idea of a duty is an EXTRA tax on imports, over and above what would be paid if the goods originated in the state. Duty is a method of favouring local goods by imposing extra tax on imported goods. So charging regular sales tax on out of state goods isn't a duty, it's effectively cancelling an anti-duty, and thus doesn't violate the article you cited.

Re:Just that pesky Constitution

[jcr]

Actually, the Declaration of Independence is law. It's an act of Congress, and as Judge Napolitano has pointed out on several occasions, if you have a copy of the United States Code, it's there right in the front of the first volume. It is in fact the beginning of American legislation.

-jcr

Re:Just that pesky Constitution

[spire3661]

You get the true context of the 2nd by reading the founders' papers.

"No freeman shall ever be debarred the use of arms. " ---Thomas Jefferson: Draft Virginia Constitution, 1776.

"One loves to possess arms, though they hope never to have occasion for them. " --- Thomas Jefferson to George Washington, 1796. The Writings of Thomas Jefferson, (Memorial Edition) Lipscomb and Bergh, editors.

"[The Constitution preserves] the advantage of being armed which Americans possess over the people of almost every other nation...(where) the governments are afraid to trust the people with arms." ---James Madison,The Federalist Papers, No. 46.

"Who are the militia? Are they not ourselves? Is it feared, then, that we shall turn our arms each man gainst his own bosom. Congress have no power to disarm the militia. Their swords, and every other terrible implement of the soldier, are the birthright of an American...[T]he unlimited power of the sword is not in the hands of either the federal or state governments, but, where I trust in God it will ever remain, in the hands of the people. " ---Tenche Coxe, The Pennsylvania Gazette, Feb. 20, 1788.

After reading these comments from the men that founded our nation, it never even OCCURRED to them that we might want to lessen weapons in society. They deem the right to bear arms INALIENABLE. It doesnt get much fucking clearer then that.

Re:Just that pesky Constitution

[Solandri]

We have something called a Supreme Court for deciding semantic arguments such as yours when the wording of the law is ambiguous or could have multiple interpretations. And the Supreme Court of the United States has decided that interstate sales taxes are indeed a duty prohibited by the Constitution.

if he's so concerned

[jaymz666]

He should pay the use tax and be done with it, like a law abiding citizen

Re:if he's so concerned

[geekoid]

Actually it creates a firm ground in which we can build a thriving, prosperous, and advancing civilization.

Re:if he's so concerned

[cforciea]

I always hate when people say things like that. The whole reason we have a government from a economic game theory perspective is to act as a mutually accepted arbiter to enforce cooperation to avoid a Tragedy of the Commons scenario for shared resources. The economically rational choice is always to not take the cooperative action unless you can ensure everybody else is going to.

Donating to charities might still make sense because you aren't doing it necessarily in the context of rational self-interest, but the government is specifically a mechanism to leverage people's rational self-interest. There's no way to get away from that context. It therefore never makes sense to tell people to donate tax money except in the childish "if you love the government so much why don't you marry it" sense.

Re:if he's so concerned

[Aladrin]

And those other companies pay the taxes. And need the police support. Etc etc.

When Amazon ships something to you by UPS, and it gets stolen, Amazon doesn't call the police to report a theft. They call UPS and UPS handles it, because the package was in their care.

Perfectly sound legal arguments

[Eggplant62]

Someone please tell me how a corporation based in Washington State and legally incorporated in Delaware suddenly becomes a tax collector for states in which it does not have a physical presence? I can see being held liable for Delaware and Washington State, but until someone amends the tax codes of the remaining 48 states and other U.S. territories, I think it should remain that we don't pay sales tax on out-of-state purchases. I don't live in Ohio and I don't expect to pay Ohio state sales tax on a purchase I made over the Internet, nor do I expect the state of Michigan to tax my purchase from a company outside of Michigan.

Re:Perfectly sound legal arguments

[Osgeld]

you know they have warehouses scattered about the entire country right? So how is it any different than other e stores, for example if I buy from newegg I pay sales tax, its not a company based in my state, but they do have a warehouse located 3 hours southwest from me

Re:Perfectly sound legal arguments

[Bill_the_Engineer]

Someone please tell me how a corporation based in Washington State and legally incorporated in Delaware suddenly becomes a tax collector for states in which it does not have a physical presence?

I think the problem Amazon is having is that they had associates that were based in California. These associates have a physical presence in California and forces Amazon to abide by state law. Amazon wants to continue to have an associate program, yet not have to keep track of sales tax for each state that an associate exists. This is why Amazon is lobbying for this referendum in California.

Re:Perfectly sound legal arguments

[OverlordQ]

Someone please tell me how a corporation based in Washington State and legally incorporated in Delaware suddenly becomes a tax collector for states in which it does not have a physical presence?

Because it's easier trying to get the corporation to pay a sales tax then going after their own citizens for not paying the use tax.

Re:Perfectly sound legal arguments

[im_thatoneguy]

I think it should remain that we don't pay sales tax on out-of-state purchases. I don't live in Ohio and I don't expect to pay Ohio state sales tax on a purchase I made over the Internet, nor do I expect the state of Michigan to tax my purchase from a company outside of Michigan.

Except that you're missing the entire point of the law. You *already have to pay sales tax* on out of state purchases in pretty much every state with a sales tax.

The only change is that California in this instance wants to put the collection process in Amazon's hands.

This isn't requiring Amazon to pay California taxes for all of their sales. This is requiring Californian citizens, who already are required to pay taxes an easier and more straight forward system of paying at the point of purchase as if it was a physical store instead of filling out a form and keeping receipts.

Sponsors

[crow_t_robot]

This Slate article has been brought to you by Best Buy, Target, Walmart, etc.

It's a practical nightmare

[localroger]

The problem is that sales taxes are a patchwork nightmare. Not only do different states have different rates, different collection mechanisms, and different auditing requirements, so do counties and municipalities. Just doing sales taxes for a small company that does business in 3 or 4 states is a nightmare; for a national company, it would be almost impossible. Then if you don't collect the right amount of tax, when the offended entity gets around to auditing you they hand you a bill for the tax on every transaction you've ever done since their last audit. I can understand why Bezos is so adamant about this; it's not about civic duty, but about practical possibility. If the tax was flat across the country and there was a single unified mechanism for remitting it, I doubt he would care so much.

Re:It's a practical nightmare

[I'm not really here]

I'm a small business owner. I sell to the 48 contiguous states and D.C. Right now, I have to be aware of any sales that occur in PA, and also have to be aware of any sales to people in Philadelphia specifically, because I must collect different taxes for each case. This is enough of a headache for a one person operation, but I make enough from the side business to make it worth the effort. I expect there are tens of thousands more like me, if not hundreds of thousands. We all are making an extra % of income from side businesses, collecting the tax for our state, and allowing other states to require their citizens to pay a Use tax on products they order across state lines. This is logical, and fair to businesses, as the burden to a business with one or two employees of having to keep track of the taxes in each county, borough, municipality, city, town, hamlet, and commonwealth in each state would be so extreme as to make nearly all small businesses either close shop or stop selling across state lines (and to cut one's audience to 1/50th the size almost guarantees going out of business in this day and age).

Now from my limited understanding of the economy, it would seem that a sudden disappearance of say 5-10% of income on hundreds of thousands of people in the 50 states could negatively impact our economy. Suddenly, I'd not have extra money to spend on entertainment and services (the only things our economy really produces much of at this point), and therefore those services would no longer be collecting taxes from me, and therefore the government would lose money. Seems pretty straightforward to me that to force the business to handle all of the tax legwork for all states in which they sell a product would kill any and all small businesses from selling anything on the internet, and would cripple the larger online businesses, eliminating the grease that makes the wheels of our economy turn.

Am I wrong here? I know I'd have to simply close up shop if a law required me to keep track of all 48 states' tax laws and all the tax intricacies of the various towns and sections of those states. I can't imagine I'm in the minority here.

Re:It's a practical nightmare

[hibiki_r]

But there's plenty of companies that have very little trouble doing this: I currently work for one. We sell online, but we have presence in every state, so we collect taxes in every state. Not only that, but we have retail stores, which deal with specific local taxes built on top.

As it happens, there are databases that you can purchase that have all the tax information you could possibly want, and all you have to do is import their updates when they happen: You can call a method that hands you the right tax rate based on the merchandise type and location to ship it to. The right accounts in the general ledger are updated so that we know how much we owe to each state/municipality, and then AP cuts the states the necessary checks.

Yes, it'd me madness to have to track of it all by yourself, but at that size, you don't have to. And Amazon is definitely large enough to handle that complexity without ruining them: The only question is whether they are legally obligated to collect the taxes or not.

Re:It's a practical nightmare

[Solandri]

The government really needs to set up an official central database for this. e.g. Set up a Federal website which any individual or business can visit and download a guaranteed up-to-date version of the latest tax table for the entire country. States and local governments should be required to update their tax rate on this site before the tax can officially be collected.

The current method of requiring businesses to collate this information themselves is too fraught with errors (it's really easy to miss a tax increase passed by a city one night), and gives an unfair advantage to bigger companies. Hiring a private company to compile the tax tables for you doesn't quite work because they don't indemnify you against their errors. If they screw up and you failed to collect $5000 in sales taxes because of it, you have to pay the $5000, not them. Having it be a single government site is the most efficient solution to the problem, and places the consequence for errors squarely upon the party making the error (whether it be the business getting a tax table entry wrong, or the state/local government failing to update the table).

You work and toil and earn bread, and I'll eat it

[Kohath]

It is the eternal struggle between these two principles -- right and wrong -- throughout the world. They are the two principles that have stood face to face from the beginning of time, and will ever continue to struggle. The one is the common right of humanity and the other the divine right of kings. It is the same principle in whatever shape it develops itself. It is the same spirit that says, 'You work and toil and earn bread, and I'll eat it.' No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle.

-- Abraham Lincoln, October 15, 1858 Debate at Alton

Unethical? Fix the Law Then.

[salesgeek]

Here's what California has done:

They changed the definition of having a location in California such that if you have a 1099 contractor doing advertising for you, you have a location in California, and therefore have to collect sales tax.

This is unconstitutional and irrational at the same time. If I hire an ad agency in your state, that does not mean I have moved there. It's no different than hiring an accountant, lawyer, or for that matter, a shipping company with a location in your state to define location (nexus). There's a reason why our constitution gives sole power to regulate and levy duties (tax) interstate commerce in a *uniform way*. This prohibition is to prevent trade wars between the states and to prevent large states from using taxation to force businesses to relocate there.

OK, so what about the poor, local businesses being put under by ______________.com?

Well, if you are a small local business, and sell mail order, you don't have to collect sales tax for shipments to anywhere other than your home state. That gives you an advantage in 49 states.

Re:Taxation is unethical

[eddy the lip]

I don't know, I hear Somalia's quite the libertarian paradise.

Let's just do away with sales tax

[spiffmastercow]

Sales tax is a regressive tax -- it hurts the poor the most, and is barely a burden on anyone beyond middle class. In addition, sales tax hurts local businesses, who have to compete not only on direct prices with the likes of Amazon, but then have to charge you an extra 5-10% as well. Instead, states should make up for lost sales tax with increased income tax. You'll get more consistent tax revenue, a healthier business community, and the added bonus of being able to know exactly how much you have to pay for stuff at the store before checkout without using a calculator.

Re:Let's just do away with sales tax

[FooAtWFU]

California has a big state income tax, and look at the volatility of their budget! Just as a practical matter: when you tax incomes, especially rich peoples' incomes, your tax revenues begin mimic the performance of the stock market to an uncomfortable degree.

A sound property tax system (unlike California under Prop 13) is probably a much better idea for most state governments, housing bubbles notwithstanding.

Re:Let's just do away with sales tax

[hibiki_r]

It's not about one person paying a higher sales tax rate than another, but the fact that the total percentage of your income that get hits by the sales tax has a lot to do with how much you earn. A minimum wage earner will have trouble saving, so most of his income is hit by sales tax. The more you save, the less tax you pay, and given that it's easier to save the more money you have, in essence its effect is not all that different from an income tax that asks for less the more money you have.

By your idea of fairness, a 95% tax surcharge on cars over $25K would also affect everyone the same way. It just happens that the people that don't own cars and those that couldn't afford a car with that base price would not get a tax hike. So really, it's an extremely uneven task under the guise of fairness.

The sales tax just punishes those who can't save.

Re:Let's just do away with sales tax

[Snarfangel]

A sound property tax system (unlike California under Prop 13) is probably a much better idea for most state governments, housing bubbles notwithstanding.

Actually, a sound property tax system would not only provide a much more stable source of funding than income and sales taxes, it would eliminate housing bubbles (which are really land value bubbles). See Land Value Tax: http://en.wikipedia.org/wiki/Land_value_tax

For fans of progressivity, land value is even more concentrated than income, plus it is much harder to hide in Swiss bank accounts or buy on the black market.

"by all ethical and civic standards"

[couchslug]

Bring legal standards or STFU. "Ethical" and "civic" standards are subjective. That's one reason LAWS were written.

All the Slate statement boils down to is "we haet Amazon, herp derp".

Hello? Is this thing on? "Tax Shipping!"

[transami]

I only repeat this every single time the subject comes up, but no one ever seems catch on. I repeat...

Since online retailers must SHIP product they are at a disadvantage with brick-and-mortar shops. Moreover, requiring sales tax collection for every state of every online retailer would create undue burden on MANY THOUSANDS of small business sellers and drive them out of business.

If taxes must be collected on online retail, there is only one sensible place to lay the burden -- on shipping. The shipping companies are already well equipped to handle per-state pricing structures and already have the computer infrastructure to easily add to a new line item.

A question for slashdot

[Okian Warrior]

One thing I've always wondered is why California needs so much money to operate.

Here in NH, we've got no sales tax and no income tax. Our overall tax burden is among the lowest in the US (sometimes *the* lowest, depending on the year), so yeah - our property taxes are high but not high enough to make up the difference.

Despite this dearth of income, we manage to keep the roads plowed, the schools funded, and the streetlights burning.

So what part of the economic model is different for California? Do they have more road per person to maintain? Are there more criminals per person so that they need more jails? Do they have social services we're missing (universal healthcare)?

Are coastlines more expensive than inland borders?

There's a lot of economists (student and hobby) here on Slashdot. I just don't see the difference in models.

What am I missing?

Re:A question for slashdot

[BCoates]

NH is mostly a mixture of exurbs and retirement/vacation homes for Boston, so it's economic model is "leech of the city" and it's social safety net is "move to Massachusetts". California has nowhere to beggar-thy-neighbor to.

New Hampshire has the lowest birth rate in the nation, California's is above-average. Children are expensive but necessary.

Small states tend to do a better job getting their money's worth from the federal government. California is a massive wealth exporter to the rest of the country. The California federal tax/spending shortfall is about the same size as the California budget shortfall.

Re:Sidestepping for a moment...

[dpilot]

I won't deny a single thing you've said - I agree with pretty much all of it. I disagree with the currently popular remedies.

Many, many moons ago I had an epiphany, during the days of Bush I - whom I thought did a pretty good job in office. It was at that time that Resolution Trust was being set up as part of the Savings and Loan bailout. There was a co-worker, more conservative than I, who was griping about all the money being given to the poor, and at the time I was inclined to agree with him. Then as I watched more of the Resolution Trust process, I realized that the whole Savings and Loan problem was about rich people bilking poor people, and many/most of them somehow dodging any blame or need for restitution. Instead, THEY got the money, and my money went to backfilling the victims. In essence, it was a "wealth transfer" from taxpayers like me to crooked bankers.

At that point I realized that very likely, more of my tax dollars go to people making more than me than go to people making less than me. More of my wealth transferred UP than DOWN. When we talk about the budget problems, first off most of the focus is on the discretionary budget, which is a pittance. I'll give what's-his-name credit for looking properly at Medicare, though I disagree with his diagnosis and solution. I'm also unhappy that only peace-niks are looking at the defense budget.

In brief, I believe we have a market failure. Today when people say "socialism" it's as if it's an inherently bad word. I'm not in favor of it either, or rather I'm in favor of some hybrid system. But here's the point... The essence of Free Market Capitalism is that it allows a broader spectrum of ideas and resources to be mobilized for solving societies' problems. This broad spectrum should enable more efficient and economical solutions, so that it's cheaper for the customers AND allows the producers to enjoy a profit, both at the same time.

IMHO that's what's broken. Many of our industries are so consolidated that they're no longer Free Market Capitalism - they're essentially central planning, just in a few corporate boardrooms instead of government buildings. The upshot of this is that we have the most expensive health care in the world, with mediocre results. Our economy is doing less efficiently at health care than that "evil central planning." - though it is VERY profitable. We also spend more on defense than anyone in the world by a large margin, and I'll agree that we get a lot for it, but it would be really interesting to understand the cost effectiveness, and also how much if it is really a hidden corporate subsidy, both by contract and by "making a safe place to do business." (or read, export American jobs to cheaper places - paid for by my tax dollars)

Social Security is a different issue. Besides being outside the ordinary budget, I'm generally in favor of raising the age. What I really wish is that there were some way to tell when we were going to die. I have a reasonable expectation to live to 90+, so I'd prefer to keep working - I'm not ready to start coasting to the grave, and I know that golf and fishing can only go so far. But there are also those with a family expectation much shorter, and for them at my age they'd be closer to the grave than me. There's no one-size-fits-all solution. Or another way of putting it, the necessary decisions are way above my pay grade - I just wish someone were seriously addressing the issue in a complex - not simplistic, way.

Finally, since 2000 my financial boat hasn't been taking on water, but it has been settling lower in the water. But I don't blame taxes for that. I blame "my executives" who continue to enjoy faster-than-the-economy compensation increases at least partly by making sure my pay raises are slower than the economy, and compounding the problem by shipping US jobs overseas. In the past decade they've cashed in - but I guess letting the 3rd lowest top-margin tax rate in history increase from the 3rd lowest in US history to the 4th lowest in US history is too onerous.

Enough for now...