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NY Times, LA Times Want Amazon To Collect More State Taxes 507

theodp writes "Recalling that CEO Jeff Bezos originally explored placing on an Indian Reservation near San Francisco to 'have access to talent without all the tax consequences,' the NY Times argues it's time to put an end to the e-tailer's 'entity isolation' tax-avoidance games. The LA Times chimes in, saying Amazon's claims that collecting sales tax constitute an undue burden are 'worth a horselaugh,' noting that Amazon boasts it has no problem keeping track of millions of unique products."
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NY Times, LA Times Want Amazon To Collect More State Taxes

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  • by BESTouff ( 531293 ) on Monday December 28, 2009 @07:26AM (#30569664)
    Amazon has to collect taxes in countries where the law makes it mandatory, e.g. in the EU. So it's not so hard.
    • Re: (Score:3, Interesting)

      by GizmoToy ( 450886 )

      Perhaps, I'm not familiar with the tax laws in the various EU countries. I do know that there are many states that have taxes that vary by county. Counties are not easily discernible by zip codes, which makes it very difficult to accurately determine the buyer's location. You can't trust the buyers to do it, either, because if given the option they'll choose the one with the lowest tax.

      Add in the fact that each county has different taxes for different items (cigarettes, alchohol, ammo, soft drinks, even

      • by MooUK ( 905450 ) on Monday December 28, 2009 @09:07AM (#30570098)

        If the buyer lies, that's the buyer committing tax fraud and the buyer's problem, not Amazon's. 'Least, that's the way I'd see it. Require the buyer to state their county, and work it for that. Job done.

      • Re: (Score:3, Interesting)

        by ptbarnett ( 159784 )

        I do know that there are many states that have taxes that vary by county.

        It's worse than that. In Texas, the sales tax varies by city. There are a few towns/villages in the D/FW area that are literally a few blocks in size.

        Either way, Amazon probably has the resources to do so, but do all online retailers? I doubt it...

        The last time this subject came up on Slashdot, someone posted a link to an online source for sales tax assessment. I don't know if it used zip+4 or even the specific address.

        But, I think the real problem is not how complex it is: it's the penalty if you get even the slightest detail wrong. If Amazon screws up an order and annoys a customer, they mi

  • Amazon UK manages it (Score:5, Informative)

    by amorsen ( 7485 ) <> on Monday December 28, 2009 @07:28AM (#30569672)

    Amazon UK manages to collect the appropriate VAT, depending on country. Which is why, if you buy from e.g. Denmark, you should order from one of the smaller UK book stores so you get to pay the UK VAT (0% on books) instead of the Danish one (25% on everything).

  • by AndOne ( 815855 ) on Monday December 28, 2009 @07:29AM (#30569676)
    The NY times article chooses to skip mentioning all the taxes other than sales tax Amazon would be paying in those areas with its isolated tax groups. I also think it's cute that they feel amazon has a moral right to pay more taxes in this 'time of hardship'. But really, people are surprised when a company is avoiding as many taxes as possible, especially a tax that would make them less able to make a profit? They're surprised people aren't paying use taxes?
    • Re: (Score:2, Insightful)

      by jacobsm ( 661831 )

      You are missing the point of the article, the articles are not proposing that Amazon et al. pay one more cent of tax on their income just collect and remit to the proper taxing authorities taxes that are legally owed by the purchaser of the goods. Would it increase the cost of doing business for e-commerce firms, yes but so what? The cost of doing business is part of any business plan. Amazon and its ilk are utilizing a legal loophole to get an unfair advantage over local merchants.

      The handwriting is on the

      • by AndOne ( 815855 ) on Monday December 28, 2009 @08:38AM (#30569950)
        Requiring retailers(online or not) to collect use taxes starts us down a rather slippery slope and is probably not constitutional. Requiring they collect sales tax without 'a nexus of operations' is unconstitutional.

        I didn't miss the point of the article, I was pointing out that the article is disingenuous in it's description of the situation. The only legal loophole amazon is exploiting is the separation of sub-entities related to it's primary business as a way to avoid the presence of a legal nexus of operation. And those sub-entities are still paying taxes with respect to everything else that they do. Even if that loophole was closed then only a handful of additional states would be receiving sales tax.

        Additionally, if laws are passed requiring all online businesses to collect sales taxes this will have a distinct chilling effect on all but the largest of retailers.

        As a final note, perhaps states should start enforcing use taxes if they're that concerned about it, but given the complexity of doing so, and the fact that enforcing it would probably cost more than could be recouped from them, use taxes still seem rather silly in their logic. Americans(speaking of patriotism) pathologically do not like paying taxes and expecting them to volunteer(in the sense of paying a nearly totally avoidable and confusing tax) even more money during a recession seems like an exercise in futility. Perhaps if the government provided a line item receipt on how tax money was spent we might feel differently.
    • Re: (Score:3, Informative)

      by adisakp ( 705706 )
      In the Chicago area, we have the highest as well as one of the most complicated sales tax in the nation. I live in the NW Suburbs we pay a state tax, a cook county tax, and a local (city) sales tax. The total in most places in Chicago and surrounding suburbs is 10.5%. There is also a dine-in sales tax of 1-2% depending on city and a "loop" sales tax so you pay around 13% tax to eat out in a restaurant. We have different sales tax rates for General Merchandies (9%) , Qualifying Food and Drugs (yep food t
      • Add to that the crappy cold winters, and the truly obnoxious gun control laws, and I can't for the life of me see why anyone stays there.

        Well, you do have great food, and the few weeks where the weather is truly perfect, it is gorgeous to look out over the lake...

    • by iamhassi ( 659463 ) on Monday December 28, 2009 @11:37AM (#30571524) Journal
      " I also think it's cute that they feel amazon has a moral right to pay more taxes in this 'time of hardship'."

      I think it's cute that the NY Times forgets Amazon is online, they don't rely on local people, and could just as easily move overseas as it could to another state to save that billion dollars in taxes. I'm sure there's plenty of states that would welcome Amazon and the 15,000+ jobs it brings [] with tax-exempt status.

      Please California, chase away all of your big businesses! Midwestern states would welcome the jobs.

      If online taxes were required I'd just purchase more from eBay and chinese vendors. Is that what California wants? People are going to buy wherever it's cheaper, whether it's down the street, online or overseas.
  • Amazon has found a way to put portions of its business into the tax-haven equivalent of reservations. By creating wholly owned subsidiaries for the parts that are treated separately for tax matters, Amazon is under no obligation to collect sales tax. This legal technique is called “entity isolation,” said Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities in Washington.

    The state and federal governments made complicated tax laws and Amazon is following them in a bus

  • Smaller companies? (Score:5, Insightful)

    by alzoron ( 210577 ) on Monday December 28, 2009 @07:35AM (#30569690) Journal

    It might not be an undue burden to Amazon, but what about smaller online companies? You could use software to manage the collecting of sales tax for everything but the real problem comes to sending off that money to every town, county, and state that collects sales tax. Someone buys something for a couple bucks and suddenly you have to send payments of a few cents to three different places. Even if you save it all up and send it bi-yearly you could be looking at thousands of separate payments based on how widespread your client base is.

    You can't just look at a huge company with millions in revenue and make a one size fits it all decision.

    • Exactly, keeping track of and collecting the sales tax in the many different governmental authorities that levy a sales tax wouldn't be that hard for Amazon. It would however place another barrier to entry for a small business that would like to get started selling over the Internet. Which is why the NYT and LAT are for it, small businesses are harder to regulate and control and reduce people's dependency on the government.
    • Re: (Score:3, Insightful)

      by berberine ( 1001975 )
      Ten years ago, I worked for Nebraska Bookstore. It's not huge when compared to Amazon or Barnes and Noble. I worked in their catalog department. When we rang up an order, out of state purchases got 0% tax and, if it was shipped in-state, there was a little chart above the register with each city listed alphabetically and what their tax was. This was because, in Nebraska, there is a state tax and a city tax. So, they figured out what the two together were and made a handy list for us.

      Everything we di
      • Re: (Score:3, Interesting)

        by peragrin ( 659227 )

        There is over a hundred different tax rates in NY state alone. The company I work for has seven different locations in seven different counties. Any one can come to us and buy stuff. However since we do somuch business around the state we have to deal with taxes to the point where one of our accountants (out of three) spends half of her week justkeeping it straight. Failure is expensive. You see when the state audits you they take a sample of errors made and multiply that by the number of years they go bac

    • Re: (Score:3, Insightful)

      by ZorbaTHut ( 126196 )

      My mom has been trying to start a new museum lately. One of the big projects is to set up Internet-based donations. Naturally, every state has its own laws on how donations to non-profits work. Non-profits have to be registered separately in every state (technically there is a "standard form", but the states who take it all require extra documentation as well) and tax reporting is just a gargantuan enormous burden. Too complicated for any small non-profit to ever manage.

      As a result, there are companies that

    • Several start-ups developed zip-code based tax collection systems at the dawn of the web era. They were little-used, but exist. The US Congress prohibited "taxing the internet" for most of the 1990s and 2000s to the chargrin of states. Problably would hurt the bubbles they were speculating in.
      Customers hate paying sales taxes too. So many use the internet for that reason.
      After two major recessions this decade, governments are re-examining the tax issue.
    • Well, I can't speak to other states, but in New York, it's ordered by County ( with a very few City jurisdictions ), and you remit the total tax collected on a single check with a quarterly form. It's fairly trivial.

  • by CrackedButter ( 646746 ) on Monday December 28, 2009 @07:42AM (#30569726) Homepage Journal
    if there were no tax heavens anywhere in the world and businesses just paid what they owed like the rest of us. Sure the prices will go up but if this happened from the get go, it wouldn't be an issue. I'm annoyed with companies avoiding paying tax but then using the government system to seek protections or create laws for their benefit.
    • if there were no tax heavens anywhere in the world

      I live in Delaware USA. There's no sales taxes, and low incomes taxes. I think its awesome. Please, raise your taxes.

    • by night_flyer ( 453866 ) on Monday December 28, 2009 @09:23AM (#30570192) Homepage

      "businesses just paid what they owed like the rest of us"

      Businesses don't pay taxes, the consumer does.

    • Ugh, businesses don't pay sales tax. They simply administer it (that adds overall item cost) and collect it from the buyer. The buyer just happens to be normal people who are probably pinching every penny they can in the current economic climate. Forcing Amazon to collect sales taxes is an administration cost for them and a tax increase for us.

  • No Way! (Score:4, Insightful)

    by b4upoo ( 166390 ) on Monday December 28, 2009 @08:12AM (#30569832)

    This is an attempt to please brick and mortar stores who want to push electronic sales into the toilet. On line sales already carry a great burden in shipping costs. If you add taxes on top of shipping costs you kill online sales completely.

    • Re:No Way! (Score:4, Insightful)

      by AnotherUsername ( 966110 ) * on Monday December 28, 2009 @09:27AM (#30570224)
      And brick and mortar carry a great burden in paying for their building(making it customer friendly, as opposed to being a warehouse), and all that comes with having a brick and mortar store. Guess what, it's part of having a business. They already have taxes on top of all of that. Many of the bigger stores have an online store as well, so they have both ends to deal with. Again, it's part of having a business.
  • Burden (Score:5, Insightful)

    by Skapare ( 16644 ) on Monday December 28, 2009 @08:22AM (#30569876) Homepage

    Yes, there is a real burden here. A "brick" store only has to deal with exactly ONE tax rate, which is the rate for their physical location. A chain of stores would only need to deal with this on a per-store basis. However, the web retailer is expected to charge tax based not on their own physical location, but rather, the location of the customer ordering the merchandise. This means keeping a database, and keeping it updated, for each and every single tax jurisdiction in the country. In many states this varies by individual city and town. There are thousands of these. In some cases they are even split across zip codes. And it's not just rates to worry about. Different jurisdictions have different exemptions of what products don't require a tax (food in one place, only perishable food in another, bath products might be included in another, school supplies exempted in a few, etc).

    Then there is the issue of ensuring the taxes get paid to the proper government entity. That and making sure people are not subverting the system by sending packages to other locations.

    Some solutions to this are possible.

    I suggest that instead of the stores charging the tax, the credit/debit card processor charge the tax. The advantage of this is that they readily know the billing address of the account holder. Their payments to the government entities would be more in bulk, instead of these governments getting thousands of small payments from all the "mom and pop" web sites that would be compliant with tax law changes. The one change that would need to be made is each credit/debit charge would need to have split up according to product type classifications (a federal standard needed for that).

    Another alternative is for a federal law that simply requires each of the states to submit ONE tax rate for the whole state, and accept a set of exemptions designated by that federal law, to be part of the inter-state tax program. One other requirement is, to be a part of it, they treat in-state web retailers exactly the same as out-of-state (e.g. all or nothing).

    The burden on web retailers is NOT a myth. It is very real. Amazon can probably handle it. But you know the smaller retailers will be next, and eventually they will try to impose this on others. Taxes are essential, but it needs to be kept simple. Also, smaller retailers need to have a SINGLE (not 50) payment destinations (a central clearinghouse for this).

    • I suggest that instead of the stores charging the tax, the credit/debit card processor charge the tax.

      This would completely screw a lot of tourist/travel destinations. Mall of America, the Disney Areas, shopping on Chicago's Michigan St, etc is all affected and all incentive for those municipalities to bring people in is gone.

      Another alternative is for a federal law that simply requires each of the states to submit ONE tax rate for the whole state, and accept a set of exemptions designated by that federal law, to be part of the inter-state tax program.

      Sounds like a much better idea.

    • Another alternative is for a federal law that simply requires each of the states to submit ONE tax rate for the whole state, and accept a set of exemptions designated by that federal law, to be part of the inter-state tax program. One other requirement is, to be a part of it, they treat in-state web retailers exactly the same as out-of-state (e.g. all or nothing).

      While it might be a good idea for states to decide on a flat rate tax for internet orders of any type, we are talking about State taxes here. Federal laws have no real weight on that topic, nor should they.

      As for who collects the taxes, well, if I recall correctly, most states do actually have a section where people are expected to list their out of state purchases on their tax forms. This sounds like a problem for NY and CA because people might not be as honest as they would like. Then again for the peo

  • When you think about it, the problem with most of the taxes imposed by states is that the idea is to pay for government provided services. Now, for out of state businesses, shouldn't the ONLY real burden be on the transit systems(roads and rails)? The postal system already charges money for delivering things, so really, it is just about transit systems. Sales taxes, such as they are, are a bit foolish to impose on out of state entities since the equipment that handles the actual exchange of money i

    • Re: (Score:3, Insightful)

      by drinkypoo ( 153816 )

      Now, for out of state businesses, shouldn't the ONLY real burden be on the transit systems(roads and rails)?

      No. Sales taxes go into general coffers are are used to pay for all types of services. Rails are private, we have no nationalized rail in the USA. That leaves roads, and heavy trucks do almost all the damage done to roads by vehicles (the majority of the remainder being done by weather.) Amazon also receives the benefit of police protection; without police, anyone would be free to loot their warehouse. They receive fire protection in that the FD will show up and try to put a fire out if their building is bu

  • by MikeRT ( 947531 ) on Monday December 28, 2009 @08:34AM (#30569934)

    All it would take is for California and New York to each pass a law creating a standardized tax rate for their entire state. No local sales taxes, etc. Just a single state sales tax which is redistributed by the state tax authority to municipal governments. It would then be as easy for Amazon as "cut a check every month and mail it to Sacramento or Albany."

    • Because it is now the United States of California and New York? I always thought that there were more than 2 states in the country...And to think that I thought I was born in Illinois. Is that on the California side or the New York side?
    • by Joe U ( 443617 )

      I for one welcome our new 15% state tax rate overlords.

      Seriously, a statewide sales tax in NY would either shortchange and ruin NYC services or overcharge and ruin the always-failing upstate economy.

  • When you buy something, amazon brings up a page that states:

        We understand that your state, and possibly city and local, governments levy taxes that may include taxes on the things that you purchased. Click here to send a report at the end of the month to the state, city, and local authorities regarding your purchases.

    It's then up to the individual to determine if they want the state to take care of the accounting or if they want to do it themselves.

  • I'm glad everybody's discussing the article... but I have another concern.

    What the holy hell is a "horselaugh?"

  • Where every single tiny loop hole in the law is exploited to the fullest by the large cooperations and everyone else has to obey the spirit of the law because they can't setup the giant shell game that is required to avoid paying taxes. How many fully owned separate legal entities comprise Amazon? It's all one giant cooperation for all intents but they break it up into a ton of little pieces to get around the spirit of the law. Leaving everyone else to have to make up for Amazon skips out on paying. It's no

    • Ikea is worse than I remember. The nonprofit ownership gave away 1.7 million dollars in 2004 and has a net worth of 36 billion.

      That's .005%

      You probably give a larger % to charity by just walking by a Salvation Army ringer once or twice during the holidays.

  • Taxless (Score:4, Interesting)

    by Plugh ( 27537 ) on Monday December 28, 2009 @09:09AM (#30570108) Homepage

    And then there are states like New Hampshire [], with no state sales tax (and no state income tax, either)
    I guess these dying dinosaur newspapers will concentrate their efforts where governments are largest and extract the most wealth from the serfs.

  • by giladpn ( 1657217 ) on Monday December 28, 2009 @09:16AM (#30570136)
    The NY Times and other paper publications are right now on a crusade to attack the low cost base of internet business.

    They are talking about de-indexing Google for similar reasons.

    We should understand the interests behind such attacks.
  • cost to implement and track. they are accounting nightmares to keep up with.

  • Well that's two down, one to go.
  • So the papers for two jurisdictions who have astronomically fucked themselves with their rampant fiscal incompetence want to steal more money from the private sector.


  • It's Not Tax Evasion (Score:3, Informative)

    by Adrian Lopez ( 2615 ) on Monday December 28, 2009 @10:18AM (#30570660) Homepage

    As with catalog sales in the days before the Internet, is not required to collect taxes in any jurisdiction where it doesn't have a business presence. There's no trickery involved. Amazon doesn't collect any taxes it isn't required by law to collect, just like you don't pay taxes in states that you've never set foot in.

    Since only the federal government can regulate interstate commerce, the ability of State X to force to collect its taxes when it doesn't have a presence in that state would require federal legislation to that effect. Also, for any such federal law to work it seems to me that tax rules and rates would have to be simplified across all 50 states. There's an effort to do so called the Streamlined Sales Tax Project, but despite its name it strikes me as ridiculously overcomplicated (as in "you need a certified computer program to handle the differences between each state's rules") due to the desire to please all the participating states.

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