Amazon Botches Sales Tax, Overcharges NJ 179
Hodejo1 writes "On July 1 Amazon started to charge sales tax to NJ residents, which is 7% in the state. But something was not right when I attempted to buy a book for my daughter. Just as I was about to finalize the order I noticed the charges were way off. The book cost $8.09. The tax I was to be levied was $0.85. That's a 10.5% tax rate! Why am I being charged 10.5%? It turns out that Amazon is also charging me tax on the $3.99 cost of shipping and handling. That's a problem, because New Jersey does not tax shipping and handling as I confirmed on the state's web site. I then checked a purchase I made from Amazon on October 7th of this year. Guess what? I was taxed on the $13.50 shipping and handling charge for that order. Now it is very possible — probable most likely — that this is nothing more than a coding error on Amazon's site. But it's a whopper! Just consider the hundreds-of-millions of dollars in sales Amazon makes in New Jersey each year. These extra dimes add up very quickly. Has Amazon been overcharging NJ residents' sales tax since July? If so, why haven't they picked it up by now?"
Going to get worse before it gets better (Score:4, Interesting)
As several people have pointed out Amazon appears to be applying the correct sales tax. The fact that the resident of NJ doesn't understand his own sales tax demonstrates how complex sales tax can be. Every state, county, and city can have their own sales tax laws which have to all be correctly applied based upon arbitrary characteristics. A state can have a tax rate of 4% with an additional 3% for prepared foods and then a city in that state could have a 2% tax on sugary treats. What counts as a prepared food or sugary treat? That will vary just as much and may not even follow common sense, tomatoes have even been legally defined as vegetables for tax reasons.
A national sales tax could make a lot things a lot simpler but would force states to relinquish a lot of power as every business that could use the national sales tax instead of the local taxes would. States with high sales tax would see a large revenue drop while residents of states without a sales tax would be penalized. I could see brick and mortar stores jumping through hoops to selectively use the lower tax rate, if the local tax rate is higher then the national one they'd "order" the item for the customer and then "deliver" it from the backroom.
The best solution I can see is if the federal government runs a sales tax database that every retailer can query. The retailer submits the location, price, item, and some relevant descriptors: "luxury", "food", "service", "book" and the API spits back what the sales tax should be for the item. It's then beholden to the states to keep their relevant data updated. The states would be limited in how creative their sales taxes could be as the software would need to support it but the states wouldn't need to cede power to the federal government.
Re:Tax rate too low? (Score:5, Interesting)
I am somewhat confused. I thought only filthy free market capitalists wanted to pay lower taxes.
As a fithy free market capitalist (FFMC), let me chime in. We FFMCs do indeed believe in lower taxes, but we also believe in sensible taxes. Taxes should be simple, fair, difficult to avoid, and should not inhibit economic growth and prosperity. So taxes on income and labor and the worst, taxes on revenue are better, taxes on property or consumption are better still, and taxes on things you want to discourage are the best of all. If you look at the things we tax in America, it would be difficult to design a dumber tax system. Most taxes are on production or profits (income tax and payroll tax), and we have some of the lowest consumption taxes in the developed world. So we end up with millions unemployed at the same time we run up trillions in deficits because we don't produce enough to satisfy our consumption levels. That is a symptom of a broken system. Unfortunately, sensible tax reform isn't even on the political horizon.
Re:Amazon Makes? (Score:4, Interesting)
"But it's a whopper! Just consider the hundreds-of-millions of dollars in sales Amazon makes in New Jersey each year."
Wouldn't that be NJ making it?
How do you know they're aren't dutifully recording it all (Amazon) and handing it over to NJ?
In most (all?) states where sales tax is collected, any excess sales tax collected must be refunded to the customer or turned over to the state -- the company doesn't get to keep it.
Someone owes Amazon (+ us) an apology in this case (Score:5, Interesting)
So it seems that the submitter of this rant was entirely wrong, and sales tax does indeed apply to the delivery costs of taxable goods in NJ.
Will Hodejo1 or Timothy now hold their hands up, admit their mistake and promise to do better in future?