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Jeff Bezos Calls Sales Tax Requirements On Amazon Unconstitutional 623

Posted by timothy
from the doesn't-want-to-be-an-enforcer dept.
Steve1960 writes "Amazon.com chief Jeff Bezos says the online retailer won't collect tax from most of its 90 million customers until Congress clearly mandates it. Although a growing number of states are demanding that Amazon collect and remit tax on sales within their borders, such demands are 'interference in interstate commerce' and prohibited by the Constitution, Bezos said."
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Jeff Bezos Calls Sales Tax Requirements On Amazon Unconstitutional

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  • by MrEricSir (398214) on Tuesday May 17, 2011 @06:56PM (#36159804) Homepage

    ...just buy a copy of the US Constitution on your Kindle and read it for yourself.

  • In other words (Score:2, Insightful)

    by jhoegl (638955)
    Collecting taxes for multiple states will require that we spend money on employing people to review, understand, program, and monitor these activities.
    • Collecting taxes for multiple states will require that we spend money on employing people to review, understand, program, and monitor these activities.

      It means the States will need to employ people in sales tax audit departments to increase the revenues each state collects. It should be a net gain for them.

      This isn't restricting interstate commerce - it's just requiring companies that sell to states they are not located in to collect the sales/use tax for those states. It's adding requirements to collect taxes but not saying they can't sell to other states. If they don't collect the taxes the States will have to go after the companies and not the Federa

      • Re:In other words (Score:5, Insightful)

        by Local ID10T (790134) <ID10T.L.USER@gmail.com> on Tuesday May 17, 2011 @07:51PM (#36160392) Homepage

        This isn't restricting interstate commerce - it's just requiring companies that sell to states they are not located in to collect the sales/use tax for those states. It's adding requirements to collect taxes but not saying they can't sell to other states. If they don't collect the taxes the States will have to go after the companies and not the Federal government.

        First, taxation is in fact a restriction of trade. Indeed it is one of the primary restrictions of trade exercised by governments.

        Second, requiring a company to collect taxes in a state in which it has no physical presence could be construed as taxation without representation, an issue which historically speaking is unpopular in the USA - I think we fought a big war over it at one time... Which is why the interstate commerce clause exists in the first place. According to the Supreme Court (Gonzales v. Raich, 2005) "...For the first century of our history, the primary use of the [Interstate Commerce] Clause was to preclude the kind of discriminatory state legislation that had once been permissible."

        • Re:In other words (Score:5, Insightful)

          by Anthony Mouse (1927662) on Tuesday May 17, 2011 @10:42PM (#36161726)

          taxation without representation

          That's not the half of it. The real problem is protectionism. A state wants people to buy locally because it creates local jobs, etc., and an easy way to do that is to create a tariff on goods imported into the state. Of course, that's economically very inefficient because it's a waste of resources for every company to build a separate facility in every state just so they can avoid the tariffs, so we give regulation of interstate commerce to Feds who presumably won't do that.

          So what's the problem with sales tax on interstate transactions? The problem is that the state can create raise the sales tax and then give the money to local businesses as subsidies, which has the exact same result as a tariff because the local companies can reduce their prices by the amount of the subsidy (i.e. the amount of the tax) and thereby have that much lower prices than out of state companies. In fact, basically any sales tax collected has essentially this result, because all else equal a higher sales tax will mean either more services/subsidies or lower non-sales taxes, which are both effectively subsidies to local businesses and individuals.

          In other words, collecting sales tax on interstate transactions effectively create state-level import tariffs because out of state companies have to collect the tax but they don't receive the benefits from it. It's taxation without representation and protectionism.

    • Re:In other words (Score:5, Informative)

      by LWATCDR (28044) on Tuesday May 17, 2011 @07:17PM (#36160026) Homepage Journal

      Except it is unconstitutional for a state to tax or regulate interstate commerce. Imagine if California could put a tariff on Florida Orange juice coming into the state to protect California growers?
      That is one of those things that is clearly forbidden in the constitution. The issue is that the internet confuses where the commerce is taking place but it is no different than catalog sales and those are also not taxed.

      • Re: (Score:2, Informative)

        by cslax (1215816)
        Actually it was the result of Gibbons v. Ogden(1824) [wikipedia.org].
  • by rsilvergun (571051) on Tuesday May 17, 2011 @06:57PM (#36159810)
    Seriously. Just raise the income tax back to pre-Regan era levels. Problem solved. What are they going to do? Leave? They don't just stay here for low taxes, we've got 2 weak neighbors (Canada & Mexico) and a stable society that protects them & their money. Seems to me they should start paying for all that security and wealth, instead of balancing the budget on the backs of the poor.
    • by Dyinobal (1427207)
      Um ya they will just leave. With the way global communications work currently it's not difficult to manage a business from else where in the world.
      • by Sir_Sri (199544)

        including from canada. Where we have a strong currency, diverse economy and marginally less incompetent politicians than in the US.

    • You are just going to create a pursuer/evader problem with this brain-dead "tax the rich" panacea.

      What makes someone rich? Pick a number. During the last US election cycle the number of what constitutes rich varied in values (the ones that came to mind were 40k, 250k, 1mil and 5mil). Anyone who is near or at the limit of being thrown into a higher tax bracket because of an idea like yours is going to do the most natural response: Keep themselves just shy of that limit. The reason "tax the rich" doesn't work

      • by riverat1 (1048260)

        The reason "tax the rich" doesn't work is because it creates incentives for people becoming underachievers.

        I have never understood this. If taxes are increased for you you're not going to be able to increase your total take home by reducing your tax bracket. For example say they increase the tax on income over $250,000. You still pay the same in tax rate as everyone else under $250,000 on your first $250,000 but now on income over that amount you pay an additional tax. You're still going to take home more than if you were under $250,000, just not quite as much as before.

        And rich people don't create jobs just

    • by deapbluesea (1842210) on Tuesday May 17, 2011 @07:51PM (#36160390)

      Just raise the income tax back to pre-Regan era levels

      I would say I'm amazed at the economic illiteracy of /.'ers, but it's not really a surprise given political discourse these days. I'll let the Joint Economic Committee do the talking for me. http://www.house.gov/jec/fiscal/tx-grwth/reagtxct/reagtxct.htm [house.gov]

      During the 1980s ERTA had reduced personal tax rates by about 25 percent, while the Tax Reform Act of 1986 chopped them yet again.

      after the high marginal tax rates of 1981 were cut, tax payments and the share of the tax burden borne by the top 1 percent climbed sharply. For example, in 1981 the top 1 percent paid 17.6 percent of all personal income taxes, but by 1988 their share had jumped to 27.5 percent, a 10 percentage point increase.

      The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.

      The 1993 Clinton tax increase appears to [sic] having the opposite effect on the willingness of wealthy taxpayers to expose income to taxation. According to IRS data, the income generated by the top one percent of income earners actually declined in 1993.

      according to the FY 1997 Clinton budget submission, individual income tax revenues as a share of GDP will be lower during the first four years of the Clinton tax increase, which include the effects of the 1990 tax increase, than under the last four years of the Reagan tax changes (FY 1986-89)

      Even so, individual income tax revenues rose from $244 billion in 1980 to $446 billion in 1989.

      • So eliminate all exemptions for those above a certain income. No overseas stashes, no lower capital gains rate, no nothing. Attempt to hide or underdeclare a significant amount of income, you pay triple and do time.

        Oh, you'd prefer to have a "residence" in Bermuda, would you? Enjoy your trip! Just sure you keep paying every nickel of your taxes from there, too. Traveling abroad remains much more pleasant if your passport doesn't get revoked with a wanted felon watch on it.

        Those who have benefited most greatly from society can damn well pay most greatly for its upkeep. If they try to evade, society has every right to turn on them. No more accepting this "They'll duck it anyway, who cares?" If that's the case, get them to quit ducking it. Multibillionaires are notorious for demanding government handouts, but I imagine they'll draw the line at getting a mandatory vacation at Uncle Sam's expense for a few years, and they'll pay their damned taxes. They'll screech, but they'll pay.

      • OK, any of these Billionaires want to trade my wealth and tax burden with theirs is welcome to.

        But seriously, the "tax burden" went up when Millionaires became Billionaires.

        If I'm a CEO, and instead of making 30 times the base workers salary, I now make 300 times the base workers salary -- how many fools will I have in the media quoting the stat that I now have a "higher tax burden."

        This really isn't complicated math folks. This is more the result of brainwashing otherwise intelligent people by repeating a

      • by RobinEggs (1453925) on Wednesday May 18, 2011 @12:38AM (#36162386)

        after the high marginal tax rates of 1981 were cut, tax payments and the share of the tax burden borne by the top 1 percent climbed sharply. For example, in 1981 the top 1 percent paid 17.6 percent of all personal income taxes, but by 1988 their share had jumped to 27.5 percent, a 10 percentage point increase.

        The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.

        Look, I'm simply fed up and exhausted with people such as yourself endlessly spouting these same statistics about the supposedly ever increasing relative tax burden on the rich and how this supposedly makes everyone with a 7 figure income some kind of martyr. Claiming or even unequivocally proving that the rich account for higher percentages of total tax paid today than yesterday does not amount to proving that the rich are getting screwed or that their taxes are rising at a faster relative rate than other people's.

        What percentage of all personal income earned by US citizens do the top 10% make, today vs. yesterday? The top 1%? It's complete chicanery to bemoan the rich paying an ever increasing percentage of the tax pie without addressing whose income is rising and whose is falling. If the rich have been claiming an ever increasing percentage of total gross income earned by US citizens then no shit their taxes should be going up. That is, in fact, the claim of every liberal economist in the US: that the relative wealth of the top 1-5% continues to increase by a couple points per year while the middle and lower classes have experienced year-over-year losses in relative economic power for 39 years straight (I seem to recall claims that 1972 was the modern-era maximum for purchasing power and financial stability in the lower 90% of earners).

        Convince me that the rich don't have all the money and then I'll agree that they shouldn't pay all the taxes.

        The 1993 Clinton tax increase appears to [sic] having the opposite effect on the willingness of wealthy taxpayers to expose income to taxation. According to IRS data, the income generated by the top one percent of income earners actually declined in 1993.

        There shouldn't be any fucking choice about whether you "expose" income to taxation! If it's income, it gets taxed. This quote in comparison with your other choices amounts to admitting flat-out that while claiming they're sad little martyrs who pay all the taxes for everyone the rich are simultaneously hiding money from taxation. I can see things like a slightly lower (and by "slightly" I mean "sure as fuck not 20%+ lower") capital gains rate or a respectable deduction for capital gains to create investment incentives, but there should be no category of income, no method of accounting, that makes millions of dollars totally tax free.

    • Re: (Score:3, Insightful)

      You do realize that if you confiscated all of the money earned by everyone who earns more than $250,000 a year it would not even cover the Federal deficit for one year? What are you going to do the second year?
  • by Rie Beam (632299) on Tuesday May 17, 2011 @07:06PM (#36159912) Journal

    I'm just waiting for the Constitution to be declared unconstitutional, at which point a dark vortex will begin swirling underneath Washington D.C. and devour the National Mall...

    • by jrj102 (87650) *

      What Isn't Unconstitutional?

      The document is really quite simple. A good way to think about it is that it's an INCLUSIVE list of governmental powers, rather than an INCLUSIVE list. In other words, if the Constitution doesn't SPECIFICALLY allow it, the Federal government can't do it. (At least that's the theory.)

      So it shouldn't be surprising that so many things are unconstitutional-- it's a pretty short document.

      • by Rie Beam (632299)

        I'm assuming there's supposed to be an "EXCLUSIVE" in one of those two spots, no?

        But yes, that just gives more credence to why the term is overused. It's like saying because something isn't in the kernel, it shouldn't be included in any releases of an OS; in theory you could have a micro-government subsisting on just the constitution, but people demand things like police services and Flash 10, so you make room for them at lower levels, where they can do less harm to the overall structure.

        Also -- it's kinda

    • by alphatel (1450715) *

      ... the Constitution to be declared unconstitutional...

      Isn't it already?

  • Hmmm... (Score:5, Informative)

    by fuzzyfuzzyfungus (1223518) on Tuesday May 17, 2011 @07:07PM (#36159930) Journal
    I suspect that there is a reason why Bezos sells stuff on the internet, rather than practicing constitutional law. If I've been following the case correctly, the states demanding action are states where Amazon has a business presence and a customer. They are simply making an intra-state demand that those doing business in the state collect sales taxes, per usual.

    A state with no Amazon business would be on dubious interstate-commerce ice(though post Gonzales v. Raich virtually anything is arguably interstate commerce); but saying "businesses wishing to conduct business in this state must abide by state laws" is hardly a bold arrogation of interstate powers. Bezos is, shockingly enough, just protective of his ~5% advantage over the B&Ms...
    • "If I've been following the case correctly, the states demanding action are states where Amazon has a business presence and a customer."

      RTFA.

      FTA: “We’re no different from other big chains of retailers,” Bezos said. “They don’t collect sales taxes in states where they don’t have [employees], either.” ...

      First of all, most of where we do business — Europe, Japan, some of the states here in the United States – we collect sales tax.

    • Re:Hmmm... (Score:4, Informative)

      by larry bagina (561269) on Tuesday May 17, 2011 @07:23PM (#36160086) Journal
      There's a wrinkle you may have missed: some states (Illinois and New York come to mind) have passed laws declaring that an affiliate program is a business presence, which seems like a bit of stretch to me. Amazon has responded by terminating affiliate programs for residents of those states.
    • by Fjandr (66656)

      If I've been following the case correctly, the states demanding action are states where Amazon has a business presence and a customer.

      There are states that don't consider holding facilities to constitute a "substantial business presence." Those that do, Amazon is pulling out of in order to not have a business presence there. It seems pretty clear, at least from the article, that they are attempting to stay very firmly on the right side of tax law. Each state indicated by the article is a state that Amazon h

    • by Obfuscant (592200)

      I suspect that there is a reason why Bezos sells stuff on the internet, rather than practicing constitutional law.

      Me too. Since it appears he's saying he won't do something he considers unconstitutional until the congress tells him to, I'd say he has a pretty poor grasp on the Constitution and the role the congress plays in regard to it.

      For the slow ones, Congress cannot (is not supposed to be able to) tell someone to do something that is unconstitutional. Constitution trumps Congress. Unless they change it.

      That said, I don't know that a state requiring sales tax collection on a sale made within that state is uncons

      • Congress can pass an unconstitutional law. It remains in force unless and until the judicial branch overturns it. Besos is correct that he would have to follow the law until that happened.

    • AIUI, the states demanding action are the ones that think Amazon having affiliates living locally means the same as Amazon having a business presence in that state. Most people (outside of the states' tax offices) think that's something of a stretch.

      • by Obfuscant (592200)

        Most people (outside of the states' tax offices) think that's something of a stretch.

        Most people who don't have a dog in the fight think that justifying every action by congress as part of the interstate commerce clause is something of a stretch, but see how far that's gotten us?

        • by russotto (537200)

          Most people who don't have a dog in the fight think that justifying every action by congress as part of the interstate commerce clause is something of a stretch, but see how far that's gotten us?

          That's true, but on the other hand, here for once is something which clearly IS interstate commerce.

    • Re:Hmmm... (Score:5, Insightful)

      by cpu6502 (1960974) on Tuesday May 17, 2011 @07:34PM (#36160198)

      This affects more than just Amazon. It also affects anybody who sells used goods on Ebay or Craigslist or the newspaper. You would be expected to collect and mail tax to states ~2000 miles away.

      That is taxation by a government where you have No voice. It is immoral and unconscionable.

      So the question you should be asking: Do I sell across state lines? Am I prepared to file upto 50 different tax returns to 50 different governments? And what if I make a mistake? Will I be extradited hundreds or even thousands of miles from home to stand trial for Sales tax evasion or penalties?

      This also seems like a great way for states to abuse foreign citizens. Example: California residents pay 6% sales tax, while non-residents have to pay 16% sales tax. (Or something similar.) And without a voice in their legislature, there's not a darn thing you can do about it.

    • by nabsltd (1313397)

      Bezos is, shockingly enough, just protective of his ~5% advantage over the B&Ms...

      Although that ~5% may be an advantage, it pales compared to the price differences. For example, a 6' HDMI cable:

      $2.99 [amazon.com] with $5.14 shipping or free shipping on order totals of $25 or more

      vs.

      $12.99 [bestbuy.com] plus $5.99 shipping regardless of order total

      So, that's at least a 60% discount over the B&M's Internet site if you want the item shipped to your home, so the ~5-10% sales tax break is nice, but not really needed to crush the B&M.

  • by Adrian Lopez (2615) on Tuesday May 17, 2011 @07:09PM (#36159944) Homepage

    Bezos is right. Back in the days of catalog sales, the US Supreme Court decided that only those companies with a legal presence in a particular state are required to collect sales tax from the residents of that state. Unless the Federal Government steps in, there's nothing any of the states can do to compel a company to collect sales tax for states where the company has no such presence.

  • Bezos needs to stop bitching and just realise he's fighting an uphill losing battle he's going to inevitably lose.

    Most of what amazon sells is manufactures overseas (read: China) and Amazon is already somewhat international with presences in other countries, he should just move the Amazon warehouses overseas and be done with it.

    *Even if it means going to Mexico or something :)

    Disclaimer: I'm an Aussie and don't know anything about the rules of shipping and selling items in the US coming from warehouses in M

    • by mmcxii (1707574)
      Bezos needs to stop bitching and just realise he's fighting an uphill losing battle he's going to inevitably lose.

      That's about as intelligent as saying that you're going to die anyway so why not just lay down and die now?

      Every day he can hold off on unfavorable policies is a bit richer he will be. This way of thinking is what helps the rich get richer while attitudes like yours help keep the poor getting poorer.
  • GST/VAT/etc. Problem solved. Don't like paying taxes? Secede.
    • A strong central government is un-American, states' rights are enshrined in the constitution. That's not going to change regardless of how much sense it does or does not make.
  • Amazon's got a right to get over on taxes, while its competitior must pay?
    Doesn't sound like a fair marketplace to me. Looks like Bezos wants all the government infrastructure support for free--He wants his competitors to pay for the infrastructure.

    • by tibit (1762298)

      It's not that Amazon pays the taxes. The customer is supposed to, per each State's law. Purchases you do online from an out-of-state vendor, should be reported on your state tax forms, and you get a tax obligation on them.

    • by Solandri (704621) on Tuesday May 17, 2011 @07:38PM (#36160246)

      Amazon's got a right to get over on taxes, while its competitior must pay?
      Doesn't sound like a fair marketplace to me.

      Amazon is in Washington. If it sells something to someone in Washington, it charges sales tax. If it sells something to someone outside Washington but in a state where Amazon has some sort of presence (like a warehouse), they charge sales tax. Any other state, they charge no sales tax.

      Their competitor is in some state. if it sells something to someone in that state, it charges sales tax. If it sells something to someone outside that state but in a state where it has some sort of presence (like a warehouse), they charge sales tax. Any other state, they charge no sales tax.

      Seems perfectly fair to me. The disparity arises when you're comparing a mail-order/internet business to a brick and mortar business. The brick and mortar business sells primarily to people who live in the state, the mail-order and internet businesses sell primarily to people who live outside the state. Fundamentally, the problem in that case is that the state's sales tax is too high, and thus puts the brick and mortar business at a competitive disadvantage. But for some reason it always seems to get portrayed as Amazon having some sort of unfair advantage. If the state is unhappy that its businesses are at a disadvantage due to high sales tax, the direct solution within their power is to simply lower their sales tax.

      If the states want their cake and to eat it too - keep their high sales tax but level the playing field - it's going to take an act of Congress to do it. Bezos is correct that the Constitution explicitly prohibits state taxation of interstate commerce. Only the Federal government has that power.

    • by PhreakOfTime (588141) on Tuesday May 17, 2011 @07:38PM (#36160258) Homepage

      Well then the competitor has a worse business model.

      Yesterday was a perfect example of this. I am buying landscaping right now, and was pricing out bushes. The same bush that sold for $35 per bush at Home Depot, was selling online for $25 FOR TEN.

      I am looking to do my job with the lowest cost to me, for the best quality. I am not looking to pay my money to subsidize a giant brick building being used to hold outdoor plants indoors.

      It's that whole 'vote with your wallet' thing that people keep complaining that they are unable to do with the local phone/internet companies. Yet when they can do it, its suddenly unfair to the business that doesn't get chosen?

  • ' “We’re no different from other big chains of retailers,” Bezos said. “They don’t collect sales taxes in states where they don’t have [employees], either.” '

    They also don't sell merchandise in those states to consumers.

    I do sympathize somewhat -- it seems like a bit of a burden to any online retailer to have to log and track sales tax for every single state in the United States in order to do business online. However, simply selling your product directly to consume

    • by sjames (1099)

      Mail order sellers have NEVER collected out of state sales taxes. North Dakota tried an end run by claiming computers and floppy disks were somehow different from catalogs and U.S. mail, but the Supreme Court disagreed.

      That's why you see on some of those mail order offers a thing that says residents of xyz states must pay sales tax. The business has a physical presence in those states.

      Part of the problem is the logistical nightmare. 50 different states with 50 different forms, deadlines, 50 different rates

  • How about an internet surtax of, say, 5% on top of any state tax? Or a flat internet tax of 15%?
    It's past time that internet businesses need government handouts to survive, especially Amazon. And we who are watching teachers, nurses, fire and police - or other vital local services - being laid off or threatening to stop pensions because tax revenues are falling are demanding that businesses who don't need subsidies not get subsidies.
    Congress can slap on whatever taxes it feels is appropriate.
    And internet bu

    • Re: (Score:3, Insightful)

      by scamper_22 (1073470)

      what an odd sense of morals you have.

      Amazon is a business which gets all its money voluntarily providing a useful service for everyone.

      Meanwhile the police departments profits by sending young people to jail for smoking a plant. Public sector workers are a monopoly operation and have the state back pensions the rest of the workers in the state don't get access to.

      I'm sorry, Amazon is 100% more moral than any board of education, police department of fire fighting service.

      I honestly don't know many people wh

  • http://en.wikipedia.org/wiki/Complete_Auto_Transit,_Inc._v._Brady [wikipedia.org]

    Two questions:
    1) Does the use of outside businesses for shipping constitute nexus on the part of Amazon? Probably not.
    2) Although Amazon forwards packages to these states, are they using any public services in said states outside of the shipping company? Not really.

    Truth be told, I think he's got a point under the current law. Simply sending a lot of packages to a place doesn't constitute owing that place a tax, at least on the part of Amazon.

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