Ezra Klein believes that Amazon is trying to dodge taxes:
Let’s be clear: Amazon opposes this bill because it wipes out a price advantage they currently have against their competitors. And, as the Center on Budget and Policy Priorities has explained at length, their other arguments simply don’t add up. Now, Amazon is a business, and so you can’t fault it for playing hardball in an effort to retain a competitive advantage. But this is bad policy that they’re trying to protect — it’s starving states, killing brick-and-mortar stores and encouraging a race to the bottom among states who want to attract the offices of online retailers. Brown is right and Amazon is wrong.
Yet Jeff Bezos, founder and CEO of Amazon, has explicitly endorsed the Streamlined Sales Tax Initiative:
Our point of view on this is that we should simplify the sales tax system, and we’ve been consistent on this for about 10 years. It’s called the Streamlined Sales Tax Initiative. I think 22 or 23 states have signed onto it. Because the right way to fix this is with federal legislation. That’s where it can be fixed properly.
Sales tax collection is very complicated. And, you know, we’re no different from big chains of retailers — they don’t collect sales taxes in states where they don’t have nexus, either. So everybody is following the same rules. And I don’t think our customers would say, “Why don’t you just optionally collect the tax? I know you’re not required to do it, but aw, go ahead.”
Mike Masnick has offered context. More recently, he has gone further:
Over the past couple of years, a variety of states have tried to implement “Amazon taxes,” whereby they change the definition of what counts as “presence” in a state to include if a company has any affiliates. Frankly, this is ridiculous. An affiliate is really nothing more than an advertiser, and it defies common sense to claim that an advertiser counts as a direct employee of a company.
I am inclined to agree with Masnick and Bezos. This isn’t about Amazon playing hardball. Rather, this is about California pursuing an unconstitutional measure. A Streamlined Sales Tax Initiative would eliminate Amazon’s tax advantage over retailers in states where they don’t have nexus, and it may well be the right way to go.
It is important not to misunderstand sources of Amazon’s price advantage. I seriously doubt that paying sales tax would eliminate it, as suggested by the fact that Amazon fares well relative to other retailers in states where it does have nexus. This is an important point that I was surprised the CBPP failed to address. Granted, it certainly helps that Amazon doesn’t have nexus in many states with affluent Amazon consumers, but Amazon would adapt to the new competitive environment.
"Sales tax collection is very complicated."
I simply don't buy this argument. An out of work programmer could probably design a system to collect the appropriate state sales taxes in very little time. This isn't about complexity, but profits, which I don't begrudge Amazon trying to protect. But I also think California, which is routinely ridiculed by the rest of the country in spite of the fact that a huge portion of the nation's tech, entertainment, and agricultural innovations have come from the state, has every right to collect its sales tax. Ezra's right on this one.
Reply to this commentLinkReport AbuseWhat Klein calls a "race to the bottom", some of us would call "competitive federalism". The Streamlined Sales Tax is NOT the right way to go, since it would eliminate sales-tax competition among states. The right way to go, as Michael Greve and others have long argued (External Link
), is for Congress to pass a law providing that only the jurisdiction in which the seller is located can tax an interstate sale, online or otherwise. That way each sale would be taxed (or subject to one state's taxation), but no sale would be taxed twice, and the states would have to compete for mail-order and online retailers on the basis of their low tax rates.
Reply to this commentLinkReport Abuse@Allesnarf: The problem I have with the seller's tax jurisdiction being the one to tax an interstate sale is that the sales tax *I* pay would fund projects in the *seller's* community. It's taxation without representation -- the sales tax I pay should be the sales tax I approve in the voting booth and should go to fund projects in my own community.
Also, can you explain why you feel that the Streamlined Sales Tax project would "eliminate sales-tax competition among states"? My understanding is that it would not dictate sales tax rates or even require states to have a sales tax at all (though of course states without sales tax wouldn't join) -- all those decisions remain under the autonomous purview of the member states. All Streamlined would do -- in addition to simplifying and standardizing tax categories and sales tax returns, making collection easier for retailers -- is require fewer sales tax rates, so that one state can't have 14 different rates. (Though of course states don't have to join, so if a state really wanted 14 different rates, they could simply not join.)
@theliberalreader; You're absolutely right that it's not difficult for online retailers to collect sales tax. Although it can be too onerous a task to complete on their own, free sales tax management services are available to take care of it. (I happen to work for a company, FedTax, that offers one -- TaxCloud, External Link
.) The Streamlined Sales Tax Agreement actually has created a certification process for these kinds of services, wherein every Streamlined state tests the service and verifies that it adheres to state and Streamlined regulations. Upon successful completion of the process, services are designated Certified Service Providers. So any retailer using a CSP can be assured that the service has been rigorously tested and will do exactly what it says it does.
Reply to this commentLinkReport AbuseI have no problem paying sales tax for purchases from Amazon or some other online, out-of-state retailer.
I disagree, to some extent, with those who claim charging state sales taxes deprives such businesses of a competitive advantage - the convenience of being able to shop from home, finding, in the vast majority of cases, the exact article desired, is the REAL competitive advantage over brick-and-mortar stores, where a consumer might have to spend considerable time searching for the desired product, possibly without success.
I also have to say I tire of the hyperbole of states being "starved" by the current inability to collect sales taxes from such retailers. Possibly in isolation the numbers are impressive, but as a percentage of total revenues, I have a hard time believing they would amount to much.
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