On Amazon’s Tax Stance

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.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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