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More on Amazon and the sales tax

From Slate:

Amazon has aggressively fought state efforts to impose sales tax on its operations. In 2008, New York passed a law that required online companies to collect taxes if they had deals with marketing affiliates based in the state. The law was designed specifically to target Amazon and other large online retailers—many called it the “Amazon tax.” In response, Amazon sued New York over the law’s constitutionality—marketing affiliates, Amazon argued, did not constitute a significant presence in the state. (Overstock.com, another company that has carefully avoided collecting taxes, took a harder line. In response to the New York law, Overstock canceled its relationships with all New York affiliates, freeing it from collecting any taxes in the state.)

While Amazon is still fighting the New York tax law, the company has been collecting taxes in the state as per the legislation. But Amazon has pushed back against collecting taxes in three other states that passed similar laws—it told its marketing affiliates inColoradoNorth Carolina, and Rhode Island to take a hike, allowing the company to skirt tax collection there. And it has threatened to do the same in other states—including California—where legislators have proposed affiliate-related taxes.

So, is Amazon’s tax-free status unfair? Of course it is. As [Michael Mazerov of the Center on Budget and Policy Priorities] points out, Amazon has physical operations in 17 states in which the company and its employees enjoy the fruits of local taxes—police and fire protection, roads, hospitals, and other infrastructure that make its operations possible. Yet Amazon skirts tax collection in most of these places through clever legal tricks. For instance, it has incorporated its warehouses and Web site as separate legal entities in order to argue that it doesn’t really have a presence in Nevada, Texas, and other states. The Kindle offers another example of that strategy—the e-book reader was developed at Lab126, an Amazon office based in Cupertino, Calif. But that office is actually a legal subsidiary, freeing Amazon of collecting any taxes in California.

Anything that drives a company to resort to such trickery cannot be good public policy. The solution will ultimately need to come from Congress, which means it won’t happen any time soon. Out of fairness to brick and mortar retailers, as well as to state and local governments, it needs to happen eventually.

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2 Comments

  1. Ringo says:

    Fair or not to “brck and mortar retailers”, I guess the question might come down to the idea of what business model we want to promote? If I recall correctly, the whole idea of “no sales taxes” for internet sales was about helping such internet businesses get off the ground by encouraging sales over the internet in the face of the fact that the shipping costs are often as much, if not more, than the sales taxes. Now those business models have succeeded beyond expectations with internet sales going up each year as a percentage of overall sales. Whether that’s to the detriment of brick and mortar….I don’t know, I haven’t seen any statistics on that but if the “Black Friday” stories coming out today are any indication, the brick and mortar businesses are doing just great. So….back to the question, do we want to encourage more brick and mortar with their eyesore parking lots, their huge carbon footprints, their encouragement of muggings in parking lots and the encouragement of millions to drive many miles in their polluting autos to buy “a” gift? Or do we want to encourage more eco-friendly e-commerce? (or is it more eco-friendly?) Not sure where I fall on this but I do as much online shopping as possible and avoid malls and strip shopping centers and “big box” stores as much as possible. Now, that means that the local gov’t isn’t collecting much in sales tax from me….so what? I don’t get much in the way of “service” from local gov’t anyway.

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