You’re sitting in your backyard one night, popping your fingers on your iPad, when between apps you decide impulsively to see if Amazon.com carries that special brand of aromatic barbecue pellets you like so much but can’t find at Stan’s. Behold, a poke tells you they do. Amazing but true, one more poke of your index finger orders a 10-pound bag, calculates shipping costs, arranges shipment, estimates the delivery date and charges your PayPal account. And, if you ordered an item sold by Amazon LLC inside the state of Washington, it also calculates the sales tax, collects it, and probably arranges remittence to the Department of Revenue. And you never moved from your lawn chair.
It’s easy. But, try this in California, or Texas, or Tennessee and Amazon will claim it’s excruciatingly complex and a revenue-draining pain in their digital brain. Not the selling, the shipping, arranging and charging, but calculating the sales tax. Collect sales tax? Amazon does it routinely in some states, especially ours. In most it flatly refuses, the main excuse being that collecting sales taxes, of which there are about 8,000 different versions in the United States, would be far too technically taxing. “Excessively burdensome,” they say.
According to a Supreme Court decision that pre-dates the online shopping age, this is fine. Mail-order or computer firms don’t have to collect sales taxes in states where they don’t have a “nexus,” or some kind of physical presence like a storefront, office or warehouse. Amazon is based in Seattle, and has an obvious physical presence, and has always collected sales tax here, as you no doubt have noticed if you patronize its website. It has none in California, for instance, and collects no sales tax there, avoids all those complicating factors and just coincidentally enjoys a near-10 percent price advantage as a result.
It’s not about the price advantage, says Amazon. Bunk, say its critics. If Amazon had to collect taxes it could do it easily. We know this, because in places it does it every day and suffers no ill-effects.
This loophole hurts local business, which can’t compete with one-click 10 percent discounts. It hurts states, that pay for their government by taxing retail sales. Amazon gets a big advantage, by virtue of being virtual and nothing more.
California voted to extend its sales tax to Internet sales. Amazon cut off its California suppliers and refuses to pay. New York passed a sales tax and Amazon sued. South Carolina and Texas thought about taxes, and Amazon offered to build distribution centers in exchange for an exemption. It happens over and over again. California says it lost $317 million last year to untaxed online sales. Estimates of uncollected sales tax lost to “remote” sales nationally will hit $23 billion next year. By the way, Amazon’s worldwide sales just hit $34 billion, in a rotten economy.
This situation will end soon. Local stores can’t afford so much unfair slack for online competitors. States can’t afford to give up the revenue. Amazon of course is not the only online retailer not collecting taxes, but it’s the biggest and more bold in its opposition.
Congress may consider a solution, and a national sales tax law passed in the name of regulating interstate commerce. Amazon’s CEO Jeff Bezos says he prefers a national simplified sales tax, which would be “great for Amazon.” Amazon’s big competitors, like Walmart and Target, are lobbying hard for a solution. They are a highly motivated bunch, but in the current atmosphere any kind of legislation adding a tax on anything is going to be tough to pass.
However it is achieved, there has to be a sales tax on online sales if there is going to be a sales tax at all. It’s the only fair thing.
© 2009-2012 TaxRates.cc
2011 - 2012 Tax Rate Guide and Tax Help Website