I love Amazon. Our family is a Prime member and, living in New York City without a car, we order from Amazon what feels like every other day. And their service is fabulous, with usually next-day diaper delivery for our new baby and customer service where you reach a real human being instantly. And pretty much a no-questions-asked return policy.
So with such great service and wide popularity with its customers, why does Amazon feel it can only compete with an unfair tax advantage?
As I detailed here, Amazon is unfortunately leading the political charge against states seeking to require online retailers to collect sales taxes on goods sold in their states. Just this past week, Amazon terminated its whole Illinois affiliate program, where local websites link to Amazon, in order to evade a recently passed Illinois law that required online retailers market in the state to pay sales taxes if they had people in the state marketing on their behalf.
Losses of state and local sales tax revenue from online retailers evading the tax will total an estimated $11.4 billion by 2012, according to this University of Tennessee study. That adds up to hundreds of thousands of teachers that states will need to fire, community health clinics closed across the nation, and cutbacks in public safety in all our communities.
Why Won't Amazon Compete on a Level Playing Field: I live in New York which passed a similar law, and Amazon chose not to terminate its affiliate program here, so I pay sales tax on Amazon purchases. But that hasn't stopped me and other state residents from using Amazon, since even with sales tax, it often provides better value than competitors locally.
But why should Amazon ever get the unfair competitive advantage of not having to collect sales taxes? A basic principle of tax policy is that the same product should be taxed the same whoever sells it. Customers should never be making decisions based on evading taxes; otherwise, less efficient retail strategies may be adopted based on the tax system rather than on the inherent value of the service.
Online Tax Evasion Shifts Tax Burden onto Low-Income Families: And it's just economically unfair to make it more expensive to shop at a local store than to shop online. Online shoppers at places like Amazon are wealthier than people who only shop locally. So if online shoppers aren't paying the sales taxes needed for local schools and hospitals, that means the tax burden shifts from wealthier residents to poorer residents. Most people don't realize lower-income families pay a higher percentage of their income in state and local taxes than the wealthy, so the rise of online shopping and tax evasion is just making a bad situation worse.
Excuses for Online Sales Tax Loophole aren't Persuasive: And the following are just a few quick rebuttals to Amazon and other online retailer arguments as to why they deserve their loophole. I'm going to tap a report by Michael Mazerov at the Center on Budget and Policy Priorities, who has been birddogging Amazon for years on this issue, for many of these arguments:
Need a Federal Solution: Ultimately, even the laws like New York's and Illinois's will only address part of the problem of online retailing. What's needed is a federal law requiring all retailers selling goods in any state to collect and remit sales taxes to the home state of each customer. A Main Street Fairness Act has been introduced repeatedly over many years, but is now needed even more desperately by state governments facing massive deficits.
Crossposted from TechProgress
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Sometimes clothes are taxed in New York City, sometimes not. Food? Sometimes, depends. Soft drinks are subjected to a special tax in some parts of PA.
In short - shopping cart software as we know it can't do what needs to be done mostly because the states sometimes don't have a clue how to untangle the information and pass this to the local merchants let alone those outside the state.
The day may come when state taxes will become standardized making it possible, but not today.
Plus, it's misleading to act like Amazon is the agressor here. It's retailers like Target, Barnes & Noble, and Wal-Mart who are the ones pushing the issue by forming the innocuous-sounding "Alliance for Main Street Fairness" (corporations love front groups) to lobby governments to force Amazon to collect taxes.
It all has nothing to do with state budgets and even less to do with Main Street -- it's a bunch of rich companies trying to stay rich by putting the squeeze on a successful rival. But those of us actually on Main Street will end up footing the bill.
Sure, I'll support that as soon as I see corporations lobbying for laws not based on evading taxes.
See FairShareTaxes.org for a real doozy about the wealthy...PS my daughter in law with 3 children LOVES shopping on Amazon because she can shop from home while the children are sleeping...
Why do people who live in NYC drive to New Jersey to avoid paying taxes on clothes? Or people who live in Maryland drive to Delaware that has no tax?
He mentions trucks that get a packages to the homes. First, UPS or Fed Ex pay those taxes and secondly, even if they were Amazons trucks, they would by buying gas in the states they are delivering. And most states use gas tax/tolls for roads.
Going back to my first point, New Jersey chooses to not charge sales tax for clothes, while NY does. Delaware chooses to charge no sales tax, while Maryland and PA don't. These are choices those states make to their tax code. Illiniois can choose to tax internet purchases, and Amazon can choose not to do business with that state. If more stats follow suit Amazon will be required to go back to doing business if they want to make money. This is free choice, Amazon can choose to do business with one state while not doing business with another, just as each state can choose to tax who they want, what they want. This is not unfair business practices, just a business making a choice.
Also, most states already require people to pay sales tax on internet purchases, except the taxpayer has to claim them.
2. If the merchant doesn't collect the tax, the consumer is required to pay the state directly.
3. If you but from someone that does not collect tax and you don't remit the amount due to the state you are EVADING a tax.
4. The argument that it is too burdensome for an enterprise like Amazon to collect and remit the tax is too silly to be taken seriously.
5. The argument that collecting tax on out-of-state Internet sales would unfairly burden the poor ignores the reality that the poor don't shop over the Internet as much as higher income groups.
6. An argument could be made that making the collection of sales taxes mandatory would decrease pressure the raise tax rates or even allow tax rates to be lowered.
Raising property taxes would be a much fairer way, to the poor, of raising government revenues.
And on a side note (not to you Roxanne) anyone concerned about the poor being burdened by disproportional state taxes should be against the cigarette sin tax. It's a regressive tax shouldered predominantly by the lower classes, yet every do-gooder that cares seems to keep clamouring to raise it.