As the owner of an independent bookstore, there is no question that the Internet is crucially important to the survival of my business. It has become a facilitator for books like nothing in the history of humanity. The idea that e-books will replace paper books will simply never come true, but another negative impact of Internet bookselling is still an obsessive concern of mine. In the last two years, a monumental argument has arisen that will pit nearly every state in the Union against the world's largest online bookseller in ways that will forever alter business in the United States.
As of last May, Internet retailers only paid sales taxes in New York. Years ago, Eliot Spitzer pushed an Internet sales tax initiative through the New York state legislature. Amazon.com, the nation's largest online bookseller, panicked and did nothing. New York was too great a market and Spitzer too powerful an opponent. The law passed, setting a strong precedent for a long-overdue revision of the interstate statutes of the Commerce Clause of the Constitution.
Amazon then sued New York, figuring that the courts would overturn the law much faster than elected representatives of the people. They were wrong. The plan backfired and Amazon was ordered to begin collecting taxes. At the same time oil prices went through the roof.
With a margin of profit lower than the national sales tax average and countless Amazon Prime customers locked in at obscenely low shipping rates, Amazon founder Jeff Bezos saw the writing on the wall. He rapidly began seeking a way to avoid the third meltdown of his business in the last decade. He got out his Kindle, grabbed a list of vague numbers, jumped on a giant soapbox and tried to stave off the perception that his Kindle-fever was anything but panic. Then in June, Rhode Island passed a law following New York's lead. On Thursday, North Carolina jumped on board as well, passing a sweeping e-fairness law. Facing the greatest drop in tax revenue since the Great Depression, states across the country have decided that Amazon no longer needs its tax breaks.
Amazon has responded by dropping its affiliates in North Carolina and rattling a saber engraved with the motto, "We don't pay taxes." The problem for them is that other states waiting in the wings are more destitute and powerful than North Carolina. California charges sales taxes that are almost double the national average. With a titanic economy on the brink of near-anarchistic failure, broadly despised Governor Arnold Schwarzenegger is almost all that stands between Amazon and the tax man.
The consequences of enforcing a sales tax after such a lengthy period of legislative inaction, however, are devastating. Amazon simply cannot survive if it has to pay sales taxes. If nationally enacted today, enforced tax legislation would put at least $1 billion of Amazon's yearly operational costs and profits into state coffers. Under such pressure, Amazon would briefly comply and then collapse. Three weeks later you would find them on the nightly news, appearing before Congress for a bailout, "selling," as the poet Franz Wright says, "the emptiness of their own hands." Like the auto companies before them, Internet retailers used your roads, your government, and your tax subsidized infrastructure to support non-viable companies that killed your local businesses. Nothing in life, as the saying goes, is free.
The Kindle masks the fact that selling shares and peddling bogus sales numbers to dodge billions of dollars in taxes always has the same ending in America, punishing the poorest of people, who never bought into the scheme in the first place. The argument has nothing to do with whether or not your Kindle is pretty or the technology great. We are at the very beginning of what will be the first major online retail extinction and there is nothing that can take us away from the wreckage they will leave behind.
I trust Amazon sends that 6 percent on to the taxman, but that's between them and the commonwealth.
All taxpayers are required to declare all untaxed purchases on their state returns so that the appropriate sale taxes are collected. Paying taxes supports the state that the taxpayer lives in. Because a taxpayer chooses to dodge this responsibility is not Amazon's fault.
And regarding the Kindle, I don't have one but I wish I did. Creativity and human thought is no more bright put on paper than in an alternative media, the internet proves that. And any mechanism that reduces waste can only be a plus for the environment and our overflowing landfills.
------
Total before tax: $ 6.39
Sales Tax: $ 0.38
------
Total for this Order: $ 6.77
This is my last Amazon book for the Kindle that cost more than zero. Where in here does anyone see a problem for Amazon?
The affiliate tax or 'Amazon Tax' is unconstitutional, and up for appeal to a higher court that should have it's ruling later this year. Laws RI and NC enacted only caused Amazon to drop the affiliate program, and therefore continue business as usual (not collecting sales tax). When the NY law gets defeated, the other states with similar law will fall as well.
For the sake of argument, let's say the Feds pass a law requiring etailers to collect Sales tax for all 45 States that require Sales Tax. That means Amazon, eBay, websites, and even your bookstore, Mr. Green, would be collecting tax for over 8000 tax districts that are not defined by zip code, and you would need to file monthly/quarterly statements to those States. All Amazon needs to do is charge for the tax and they are done with no change to their bottom line. They already have software in place to handle the burden. For small business etailers on eBay and websites, it will be a bookkeeping nightmare that will put most small businesses out of business. The big box stores like Amazon will survive and thrive.
The coming death won't be of Amazon, it will be of your internet bookstore.
Alex, after reading your article, I decided to pay your site a visit. Pottered around for a while until I came across the listing for "Gilead", by Marilynne Robinson. This book caught my attention and I tried searching for more information about the book on your site. In vain. You can probably guess what I did next.
Yep. That's right. Logged onto Amazon and checked out the book.
Am I buying "Gilead" from Amazon? Probably not. But guess what - by not pushing towards recognizing your market niche and satisfying your target audience, you're not moving anywhere closer to being a profitable business.
Of course, there are a lot of hidden assumptions: I assume, as a curious well-read adult in the 26-34 demographic, I am one of the people whose business you would seek to attract. Secondly, I assume that your bookstore is a business designed for profitability and is not a hobby.
Do correct me if I'm wrong.
Every year millions of books get published. If you take the comics, cook books, travel books and self-help stuff out and you focus on real literature (not much of which makes it to the NYT best-seller list), you are down to a couple thousand books worth reading. And there are plenty of book lovers who can keep up with a significant subset of those. If books are your life, the whole thing takes on a completely different dimension.
I have purchased tv, home theater system, gps, books, and more books, and camera, and mp3 players. EVERYTHING from amazon.
love their customer service, love their shipping. its a wonderful company.
brick and mortar is an unviable business. too much overhead. Amazon is here to stay for a long time.