Amazon and the ‘Marketplace Fairness Act’

by Reihan Salam

At Time, Brad Tuttle seems to be arguing that Amazon has made a sudden about-face in calling for a common federal standard regarding how online retailers impose state sales taxes. While the fact that Amazon is now backing the “Marketplace Fairness Act” really is new, Amazon has long supported the Streamlined Sales Tax initiative. Bezos has explicitly said the following: 

Our point-of-view on this is that we should simplify the sales tax system, and we’ve been insisting on this for 10 years. We support the streamlined sales tax initiative, and 22 states have signed on. The right way to fix this is with federal legislation. Sales tax is very complicated. We’re no different from big chains of retailers. They don’t collect sales tax in states where they don’t have nexus either. So everyone is following the same rules.

What is the Streamlined Sales Tax initiative?

This Agreement is the result of the cooperative effort of 44 states, the District of Columbia, local governments and the business community to simplify sales and use tax collection and administration by retailers and states. The Agreement minimizes costs and administrative burdens on retailers that collect sales tax, particularly retailers operating in multiple states. It encourages “remote sellers” selling over the Internet and by mail order to collect tax on sales to customers living in the Streamlined states. It levels the playing field so that local “brick-and-mortar” stores and remote sellers operate under the same rules. This Agreement ensures that all retailers can conduct their business in a fair, competitive environment.

Is it fair to say that Bezos has been dodging state sales taxes? No, I don’t think it is fair. Rather, he has long maintained — correctly in my view — that federal legislation was required if state sales taxes were to be collected in states where Amazon doesn’t have nexus. And now there is a proposal that irons out the haze of confusion.

It is also worth noting that Amazon does rather well even in states where it does have nexus, e.g., here in New York state. Amazon has spent years and billions of dollars building a “moat” around its competitive position — its logistical apparatus, its transition to digital media, etc., have all made the sales tax question far less important than it had been during Amazon’s first decade. Even if we embrace the most cynical explanation, Amazon has no reason to oppose something like the Marketplace Fairness Act because it is now a powerful incumbent.