Amazon vs. The World

March 17, 2011 -

Retailers have been gunning for amazon.com for a long time and have tried in the past to use political muscle to "put them on a level playing field." When I say "level playing field," what that translates to in the eyes of retailers is "force them to pay state sales tax." Retailers have lamented that it is unfair that they have to make their customers pay sales tax while Amazon does not.

Now brick-and-mortar retailers have a new weapon to take on Amazon - the Alliance for Main Street Fairness. The group is pushing hard to change sales-tax laws in more than a dozen states including Texas and California. Before the group was associated with smaller, local businesses. Now it has the backing of retailers like Target, Best Buy Co., Home Depot, Sears, and Wal-Mart.

Amazon has fought efforts over the years to force them to collect sales taxes. Lawmakers would like to change all that but have to get by a 1992 U.S. Supreme Court ruling; the court said that "only merchants who have a physical presence in a state have to collect sales taxes." Amazon collects taxes in five states: Kansas, Kentucky, North Dakota, Washington, and New York.

Still that hasn't stopped the fight to level the playing field, because, as retailers see it, Amazon is "eating their lunch." Last week retailers pushed for a new law in Illinois that forces Amazon to collect sales taxes if it employs marketing affiliates in the state. This law is similar to a law in New York - and if retailers have their way - it will be federal law.

U.S. Sens. Richard Durbin, (D-Illinois) and Mike Enzi (R-Wyoming) are also considering legislation to force online retailers to collect sales taxes.

This is bad news for Amazon and could be a slippery slope for other retailers and online goods sellers that don't currently collect taxes. Would Microsoft, Valve, or Sony like it if the virtual goods they sell suddenly had a state or federal tax attached? I think not. Consumers would not be amused.

We'll continue to follow this story as it develops.

Source: WSJ


Comments

Re: Amazon vs. The World

There should simply be a federal sales tax that applies to companies that sell to customers outside of the state they physically exist in.

-Greevar

-Greevar

"Paste superficially profound, but utterly meaningless quotation here."

Re: Amazon vs. The World

an 'unreasonable burden'....

Consider that Amazon already collects sales tax for most european countries. Why is collecting US sales tax any different?

Re: Amazon vs. The World

Because the US tax code is an unholy mess and trying to determine the the tax rate when you basically serve the entire country is not feasible. US Sales tax is not as simple as state X charges Y%. In some states, that tax can vary across county lines, across cities, across zip codes. Brick and Mortar stores are easy because they simply have a single rate, the rate for their physical location. Amazon would need to figure out based on where the item is shipping, what the tax rate is for that particular address. They would basically need to hire an entire separate tax proecssing firm to track/update/send money for all the various taxes. If that's not an undue burden I don't know what is. Amazon is not the IRS.

Re: Amazon vs. The World

A fair point, but Amazon certainly has the resources to determine the sales tax for any address in the company.

The rub is that smaller independent online retailers don't.  If state governments or the federal government want to require sales taxes, they should be the ones developing the backend to keep track of them.  Set up a DB that any online retailer can access to calculate tax -- if taxing online retailers is really a good way to generate revenue, then it should pay for itself.

Re: Amazon vs. The World

I live in Houston Texas. Tax is 8.25% If I drive 12miles west it is 9.4%  25 miles east 6.3%  North 13 miles it's 10.12% I belive. BigRedButcase has a point our state Taxes are a complete cluster F$@!&.

Re: Amazon vs. The World

Forcing Amazon to collect out-of-state taxes would no doubt constitute an unreasonable burden. While brick and mortar stores can easily have local franchises handle sales tax issues, Amazon would be forced to handle these issues directly as an out-of-state corporation or else be forced to establish an actual physical presence in each of the states it sells to.

Only the federal government has the right to regulate interstate commerce. Hopefully they will not be so foolish as to allow the above scenario to take place.

Re: Amazon vs. The World

I loathe Amazon, not because the company doesn't pay taxes, but because it's driving every local bookstore or specialty store out of business, because its service operations are hired out of Pakistan or somewhere, and because it's set up as a sort of dictatorship. I like the convenience and speed, but I just don't like Amazon's attitude towards local stores, towards supporting local labor or towards its customers. Essentially, Amazon treats everyone and everything as 'My way or the highway'.

If Amazon gets knocked down a peg or two, or if it goes out of business altogether, no one will find me crying about it. I'd even be willing to pay more sales taxes to give their competition a chance to get rid of Amazon. Good riddance, I say. It couldn't happen to a more deserving company (other than Walmart of course... or maybe BP... maybe Exxon... okay maybe a few companies are worse, but Amazon definately ain't one of the good guys).

Re: Amazon vs. The World

I'll admit I give Amazon a fair amount of business, but I support local business when I can.  I've never bought a comic book collection from Amazon (though I would have during that glitch last year that had $100 books marked down to $10, if I'd caught it in time); I'd rather pay $50 to my local shop than $30 to people I've never met.

And yesterday I biked up to my local bookstore, the one my dad used to take me to when I was 4 years old.  (It's moved since; it was forced out of its original location when a new Borders moved in up the street.  The local store has done just fine since the move; the Borders is long gone.)  It didn't have the selection Amazon does, of course, but I came home with $35 worth of used and discounted books on my back.  (It would have been $45, but the used, discounted Popeye hardcover I had my eye on was too big to fit in my backpack.)

Amazon's really revolutionized the way people do business, but there's absolutely been a cost, to traditional retailers, to states relying on tax revenues, and to consumers' privacy.  I don't hate them, and I don't mourn the disappearance of major retailers like Borders, but it's definitely good to keep the local community in mind when you shop.

Re: Amazon vs. The World

It seems that Amazon is on it's way to becoming the Wal-Mart of the internet- and I mean that in terms of a universal hatred everyone has for them whether it is justified or not.  

Before we get to the "Amazon is evil and doesn't pay their share of taxes", keep in mind that they are definately paying payroll taxes and every other tax that companies pay.  Also, the sales taxes are payed by the consumer outright.  

Yeah, the government needs to close some huge budget gaps as well as reduce the budget.  Say what you want about income taxes (half of the population doesn't even pay them), but sales taxes directly affect everyone- especially the poor. 

Also, if you want to talk "fairness", big brick and mortar stores dominate the landscape.  Even today, the internet is the best way for a small company to stand a chance to compete with the big boys.  

 
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