Why Amazon Fights State Sales Tax, But Supports It Nationally

cagraham writes "The Wall Street Journal reported this morning that Amazon will begin charging customers in Connecticut, Massachusetts, and Wisconsin sales tax today, after fighting against it for years. Amazon now charges sales tax in 16 states, affecting roughly 163 million Americans. Yet despite Amazon's continued fight against sales tax on the state-level, they support a Senate bill that would allow all states to tax online retailers. It seems like a contradiction, but it's actually a calculated move to undercut rivals like eBay (who would have a far harder time dealing with sales tax laws), and even an unequal playing field (many states that tax Amazon don't tax other online retailers)."

Comments

Duh

[Desler]

Is anyone actually surprised about this? Of course Amazon did this to hurt it's competition. It's also why they sell books at far below other places. It's not because they care about you, it's because they want to drive out everyone else.

Re:Duh

[ShanghaiBill]

Of course Amazon did this to hurt it's competition.

Of course, but that doesn't make them wrong. Taxes should be fair. If I buy something, the tax on it shouldn't depend on who I bought it from, or where they are located. Capitalism works best when companies compete to deliver value to their customers, rather than competing to avoid taxes.

Re:Duh

[fl!ptop]

Taxes should be fair. If I buy something, the tax on it shouldn't depend on who I bought it from, or where they are located.

How do you define "fair?" Is it fair, for example, that I can drive across my state line and buy groceries and clothes and pay no sales tax? Shouldn't my state be allowed to compete by lowering or eliminating their own sales taxes?

Gasoline tax is also lower in my neighboring state, and I buy gas there whenever I can. Most of my driving is in my own state, causing wear-and-tear on the roads that's not being paid for by my gas tax. Is that unfair?

Avoiding taxes is one factor companies consider when deciding to locate somewhere. It's also a tool states can use when competing with each other to lure businesses to locate there. That seems pretty fair to me.

Re:Duh

[Anonymous Coward]

Check your state laws. In almost every case, if a state charges sales tax then that state *also* has a use tax. The use tax is negated by paying your state's sales tax.

Otherwise, the use tax applies. It typically applies to anything purchased out of state (or that has been purchased but your state's sales tax hasn't been paid, if your state's sales tax would have applied to that purchase) that is put into use in your state.

Buying dinner out of state and consuming it out of state? No use tax due to your home state.
Buying a grill in another state and taking it home to your state? You owe use tax. Typically, you can deduct sales tax paid to another state from your state's use tax bill.

So, yes, essentially everyone is breaking the law. No doubt you are too, unless you live in a state without use tax.

Re:Duh

[duke_cheetah2003]

Having lived in a "use tax" state... it's pretty much unenforced.

It's next to impossible to enforce even if they tried. I don't think they try. Unless you're a fairly decent sized business importing materials and goods from out of state.

Average American I bet has no idea what a 'use tax' is, and even less declare it on their state taxes.

I ran a small business in that state for several years, and we never paid use tax on anything we bought online for our business. No one noticed, no one cared.

Re:Duh

[Attila Dimedici]

Um, he was not talking about being a foreign customer, he was talking about being a foreign vendor. Why should he be required to collect sales tax if he sells something to someone in the U.S. and ships it to them? And in fact, he is not required to collect sales tax.
I do not know the law, but would I be required to collect the VAT if I sold something to someone in England and shipped it to them? Would you support a law requiring online businesses in the U.S. to do so? If not, why do you support a law requiring a business in California to collect sales tax for New York?

For the record

[Anonymous Coward]

Amazon has supported a national sales tax since the late 90s. Their position hasn't changed, just people's false memories.

They don't support having to figure out 10,000 taxing jurisdictions each with their own weird rules. And there is no justification for Amazon to collect sales tax below the state level anyway, unless they are shipping to a state where they have a presence or nexus.

The supreme court has already ruled on this in 1992, and their ruling was quite clear. So either Congress gets off their butts and passes a law, or Amazon can just keep fighting it out in district courts for years.

That does not absolve people from paying use tax, which most don't. But use tax was never meant for consumers, and states have little power to enforce it on anyone except businesses. So a national sales tax makes the most sense in this case, which is why Amazon supports it.

Re:For the record

[iamhassi]

They don't support having to figure out 10,000 taxing jurisdictions each with their own weird rules.

This x9000.

Back in the day I worked with a company that provided a very popular ecommerce shopping cart that online shops could use to easily peddle their goods online. I remember when they rolled out the ability to charge sales tax and OMG the nightmare it created for support. Because remember, it's not just the State sales tax, often individual cities and counties charge a tax, AND on top of that tax different items can be taxed at different rates, like alcohol and certain foods. We had a company that would automatically update the database of taxes for everywhere and we allowed the stores to put in their own rates but it didn't stop them from calling non-stop complaining that some places were too low or too high and they didn't want to figure out the rate themselves and blah blah blah

Re:For the record

[margeman2k3]

You think that's bad?
I worked at a cafe in Ontario, and we had so many tax rules that the company writing our POS software couldn't even get it to work properly.

It looked something like this:
Non-food items are charged 13% tax
Some non-food items are charged 5% tax
Most food items are charged 13% tax
Some food items are charged 5% tax
Other food items are tax free
If you spent less than $4 on certain food items, it was tax free
If you were buying "bakery" items (bagels, etc), then they were tax free if you were buying at least 6, but the total had to be under $4, and you couldn't buy a drink with it.

And this was just for a coffee shop.
I can see why Amazon would be willing to charge X% nationally, as long as they don't need to deal with crap like that.

Re:For the record

[Creepy]

A national sales tax will not happen - it is unconstitutional and a right reserved for states. Collecting sales tax on behalf of the states has been proposed, but some states don't collect sales tax and again, it probably would be struck down as unconstitutional based on state's rights to collect the tax.

And the reason you get between 2000 and 19000+ jurisdictions (depending on who you ask) that change daily is because taxes need to be collected in the location of the buyer if the business doesn't have a presence in the state. That means you need to know state, county, and municipal taxes for every resident of the state. Any attempts to collect the tax in one location has been shot down because the rest of the state thinks it is getting robbed out of deserved taxes (but technically you'd still owe this tax and would be responsible for paying it, just like Sales and Use taxes today).

States have the right to request records of names and amounts of purchases made through catalog and internet sales to their state, and could easily be picking a few out of state vendors and nailing people for tax evasion. I don't think it would take many arrests and either fines or jail time to get massive amounts of people to pay taxes just because they're scared not to.

Re:For the record

[colinnwn]

It just doesn't work this way. First tax jurisdictions aren't divided by zipcode as you allude to. You remit taxes to the state, county, city, and special taxing jurisdiction. As I recall there are 40,000 different "jurisdictions" in the US that can collect tax, but hundreds of thousands of different combinations of those overlapping jurisdictions. Some states will distribute the funds for you as long as you submit a report of what amounts should go where, other states the individual jurisdictions collect their own tax. In addition each of these jurisdictions have hundreds or thousands of tax laws or private letter decisions on how their code should be interpreted.

Now if you are saying our tax code should be set up the way you suggest, then I agree. But right now it is not set up in any manner where you can do that.

Re:For the record

[Attila Dimedici]

As someone else pointed out, there was a constitutional amendment passed to make income tax constitutional, so it is not unconstitutional.

New Hampshire

[J'raxis]

Yet another reason to live in New Hampshire: No sales tax.

Re:Haven't used Amazon in over a year

[hawguy]

There are other places to get stuff from where you don't have to pay the California extortion. B&H, J&R to name 2 off the top of my head.

I'd rather my money go to UPS and FED-Ex than the bozos in Sacramento.

Of course, you're still required to pay the tax even if the retailer doesn't collect it.

In praise of New Hampshire

[Okian Warrior]

Yet another reason to live in New Hampshire: No sales tax.

In further praise of New Hampshire note that we also don't have an income tax and, unlike California, we're not bankrupt. Also, the unemployment rate is pretty low - currently 5%.

(We have high property taxes, but one of the lowest overall tax burdens, so having high property taxes isn't as important as you might think.)

Re:In praise of New Hampshire

[J'raxis]

The "Massholes bringing socialism here" thing is largely a myth. Most people moving from Massachusetts are in fact economic/political refugees, just like some of the people in this thread. (I left the day Romneycare went into effect, 2007-07-01.) And most settle around the southeastern part of the state, between Manchester/Nashua and the seacoast.

There's an organization called the New Hampshire Liberty Alliance, of which I'm a board member; we rate State Representatives each year on their respect for liberty---both economic and personal---based on how they vote on bills with a liberty impact, for example, bills creating or eliminating taxes or fees, restricting or improving firearms freedoms, marijuana decrim/legalization, increasing or decreasing government transparency, and so on.

The most highly rated reps are from the same areas that those Massachusetts refugees tend to settle in. Rockingham County, for example. On the other hand, our most statist reps are from the college towns (Keene, Durham, Hanover) and the economically depressed areas such as Claremont and Berlin, not places "Massholes" are settling in.

We've had a couple of "high-profile" incidents where state reps trying to bring major statism to New Hampshire were recent movers here from the socialist holes to the south of us---a few years ago a rep from the Henniker area (I forget her name) introduced a bill to ban open carry in public buildings; she had moved here from Massachusetts less than a decade earlier. (The NHLA targeted her during reelection and she lost in the primary.) And just recently, Cynthia Chase, a rep who publicly claimed that freestaters moving here are "the single biggest threat" that N.H. faces was revealed to have moved here from Rhode Island herself in 2006 (two years after the FSP chose N.H.). But these few anecdotes don't really lead to the conclusion that Massachusetts movers are ruining the state.

Re:Haven't used Amazon in over a year

[hawguy]

Maybe if the retailer did collect it I wouldn't buy it at all because I couldn't afford it?

That's pretty much the argument from brick and motar retailers for forcing online retailers to collect sales tax. Otherwise, if you can't afford it at Best Buy, you're more likely to buy from B&H because it's x% cheaper there without the sales tax. And for a big dollar item (the kind that's expensive for retailers to keep in stock because it is so expensive), the savings often far exceeds to cost of shipping.

You should call your representatives and demand a 100% sales tax, because it's probably going to cost tens or even hundreds of thousands of dollars to punish me for not giving the government a couple of hundred dollars that I earned.

As a private citizen (as opposed to a business) there's probably a very slim chance of non-payment of sales/use tax being discovered, even during an audit, Unless you're making any large deductions of items that you should have paid tax on. I have significant self-employment income and deduct everything legally possible, which includes significant out of state purchases, so I do track and pay my use-tax accordingly. The savings from the business deduction is worth more than the savings from not paying the use tax.

California has a simple use-tax table that seems would get you off the hook for use tax liability by paying the tax in the table for all purchases less than $1000. For larger purchases you should still itemize.

This is Ridiculous

[Anonymous Coward]

Amazon fights local sales tax because they don't like the notion that any municipality with 3 pigs and a mayor can impose their own laws on Amazon despite Amazon having no physical presence there. If you were running a website, would you want to care about every law that some nut job five states over dreams up?

Re:1%

[hawguy]

And why is a regressive tax bad? People love to complain about regressive taxes, but the argument why they're bad always falls back to "because its bad!". I find that opponents of regressive taxes always prefer progressive taxes, as if that's somehow better. Why?

Because it puts an excessive burden on the poor, who are least able to afford it. The assumption is that the rich got rich from the work of the poor. Which is probably not so true today as it was when we had a more industrial economy.

Now the rich get rich in increasingly complex financial schemes to extract more and more money from the underprivileged. I don't think it's sustainable in the long term - the 1% has an enormous portion of the wealth in this country, and the class of poor is expanding as the middle class contracts. As more and more of the poor are unable to support themselves, someone's got to pay for them, and the rich carefully protect their riches to make sure it's not them. So who is left to pay taxes when the poor are too poor to pay taxes, the middle class is virtually non-existent, and the wealthy have made sure that they pay very little?

The problem in the USA isn't that there are too many poor people, it's that there are too few wealthy people - locking up the wealth in a tiny class of super rich does not make for a healthy economy.

Re:1%

[pepty]

A low income person will spend a higher portion of his income on food and housing than a higher income person -- things that are generally exempt from state tax. The higher income person will be eating out more, buying more "toys", buying an expensive car, etc and generally making more purchases that are not exempt from tax.

In the worst states the poor pay 7% of their income in sales/excise taxes vs 4.6% for middle incomes and 0.9% for the wealthiest. from ITEP:

States’ consumption tax structures are highly regressive with an average 7 percent rate for the poor, a 4.6 percent rate for middle incomes, and a 0.9 percent rate for the wealthiest taxpayers. Because food is one of the largest expenses for a low-income family, taxing food is a particularly regressive tax policy; five of the ten most regressive states tax food at the state or local level. Excise taxes on things like gasoline, cigarettes or beer take about 1.6 percent of the income of the poorest families, 0.8 percent from middle income families and 0.1 percent of income from the most well-off.

http://www.itep.org/pdf/whopayses.pdf

Re:Just Hateful

[Runaway1956]

Ill gotten gains?

Pal, I don't like paying taxes any more than the next guy. But, county, city, and state governments do require money to operate. Your county almost certainly has roads to maintain. Someone has to pay for it. Your schools cost money. Everything costs. So, how are you going to pay for it?

Each state has different formulas for funding things at the local level. Maybe your state doesn't use any sales tax for education, but the next state over uses most of sales tax for education. So, I can't know where YOUR sales taxes went 30 years ago, or today.

But, the fact is, 30 years ago, almost everything sold at retail WAS TAXED. The county and the state both had a sales tax, and they got their cut on just about everything. With today's internet, both are simply cut out of about half (or more) of their revenues.

Do I WANT to pay my county a few cents every time I make an online purchase? Not really. But, I do need my roads. I like having the parks cleaned up and maintained. And, the kids need stuff at school. Horatio has been wanting to do some much-needed work at the Horatio High School's football field. The money has to come from SOMEWHERE.

What I do NOT LIKE, is the fact that local and state governments have become more reliant on federal funds for everything, from school funds, to highway funds, to local infrastructure improvements. Local governments should be independent of Washington's money. Sales tax was a large part of that financial independence.

costly legal and technical burden

[sometwo]

Have any of you attempted to build a professional shopping cart and tried to get accurate sales tax working for states like California, Texas, and New York?

It's amazing how costly it can be because there's no easy way to map zip codes or any other easily looked up value to a tax rate. Zip codes can cross county lines and if a mall is built on a county line, there could be different sales tax rates within the same building. And yet, the states are no help in helping online stores to easily comply with the varying sales tax rates, even though they stand to make more money if people can more easily comply.

Even Paypal, Amazon Payments, Google, and other payment providers will not calculate sales tax for you, likely because it's so easy to get it wrong- The liability of miscalculating sales tax must be huge- Amazon has the money to fight the state tax offices but not a mom and pop online store.

There are several companies that exist solely to help shopping cart builders comply with the sales tax burdens of the different states, but the fees for using paid APIs can be high. One of these companies has map illustrating the problem.

Re:Just Hateful

[Kilo Kilo]

Yes, govt needs taxes, but why does my state need so much more tax than all the states around it? Why does my state need to tax a purchase I'm making in another state?

The taxes on the gas are supposed to pay for the roads. The property taxes are supposed to pay for the schools and town govt. A sales is acceptable because someone is doing business within the state. A sales tax on an out of state purchase is the state trying to punish you for going somewhere else to save a few bucks because they don't want to lower the taxes to be competitive with the other states.

Re:Just Hateful

[Runaway1956]

You still don't seem to connect all the dots. Large retail corporations have cut small retailers out, and at the same time, cut out local governments. Once upon a time, within living memory, the vast majority of people bought 99% of their goods locally. To get cheaper goods, or to benefit from lower tax rates, you had to actually drive across state lines. Yes - we did that. A lot of things in my home state were taxed, but 20 miles across the state line, some of those things were tax free, or taxed at a lower rate. So - from time to time, the family would load up, and we would make an expedition across the state line.

The problem today is, those huge megacorporations are basically depriving YOUR county, MY county, and EVERYONE's counties of much needed taxes.

If you're one who believes that you shouldn't have to pay taxes at all - I have very limited sympathy for you. I've already stated that I don't LIKE paying taxes - but pay taxes we must.

Oh - fuel taxes? Those go to state highways, for the most part. Your local government doesn't get a cut out of that. The feds have an excise tax on road use fuels, and the state has their taxes. No local government that I'm aware of gets ANYTHING from those taxes. So - how does your city pay for it's city streets? Your county or parish? You need to check that out. In MY county, they use part of sales taxes, part of property taxes, a portion of fines and penalties collected by the courts, and any federal or state grants that they can get their hands on.