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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