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Government The Almighty Buck United States

Why Amazon Fights State Sales Tax, But Supports It Nationally 165

cagraham writes "The Wall Street Journal reported this morning that Amazon will begin charging customers in Connecticut, Massachusetts, and Wisconsin sales tax today, after fighting against it for years. Amazon now charges sales tax in 16 states, affecting roughly 163 million Americans. Yet despite Amazon's continued fight against sales tax on the state-level, they support a Senate bill that would allow all states to tax online retailers. It seems like a contradiction, but it's actually a calculated move to undercut rivals like eBay (who would have a far harder time dealing with sales tax laws), and even an unequal playing field (many states that tax Amazon don't tax other online retailers)."
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Why Amazon Fights State Sales Tax, But Supports It Nationally

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  • Duh (Score:3, Insightful)

    by Desler ( 1608317 ) on Friday November 01, 2013 @06:26PM (#45306737)

    Is anyone actually surprised about this? Of course Amazon did this to hurt it's competition. It's also why they sell books at far below other places. It's not because they care about you, it's because they want to drive out everyone else.

    • by Desler ( 1608317 )

      *Its* competition, I should have said.

    • Re:Duh (Score:5, Insightful)

      by ShanghaiBill ( 739463 ) on Friday November 01, 2013 @08:54PM (#45308031)

      Of course Amazon did this to hurt it's competition.

      Of course, but that doesn't make them wrong. Taxes should be fair. If I buy something, the tax on it shouldn't depend on who I bought it from, or where they are located. Capitalism works best when companies compete to deliver value to their customers, rather than competing to avoid taxes.

      • Re:Duh (Score:4, Insightful)

        by fl!ptop ( 902193 ) on Friday November 01, 2013 @10:53PM (#45308721) Journal

        Taxes should be fair. If I buy something, the tax on it shouldn't depend on who I bought it from, or where they are located.

        How do you define "fair?" Is it fair, for example, that I can drive across my state line and buy groceries and clothes and pay no sales tax? Shouldn't my state be allowed to compete by lowering or eliminating their own sales taxes?

        Gasoline tax is also lower in my neighboring state, and I buy gas there whenever I can. Most of my driving is in my own state, causing wear-and-tear on the roads that's not being paid for by my gas tax. Is that unfair?

        Avoiding taxes is one factor companies consider when deciding to locate somewhere. It's also a tool states can use when competing with each other to lure businesses to locate there. That seems pretty fair to me.

      • So... if I want to sell you something and you're located in the US, you say I should pay US sales tax, even though my locality (Hong Kong) doesn't have a sales tax at all?

        Doesn't sound exactly fair to me. And then I'm not even contemplating the nightmare of having to charge customers taxes, based on where they are located, and then manage to pay it to the relevant overseas governments.

        • by dkf ( 304284 )

          So... if I want to sell you something and you're located in the US, you say I should pay US sales tax, even though my locality (Hong Kong) doesn't have a sales tax at all?

          Doesn't sound exactly fair to me. And then I'm not even contemplating the nightmare of having to charge customers taxes, based on where they are located, and then manage to pay it to the relevant overseas governments.

          What actually tends to happen (based on experience with countries that do have national sales tax systems like VAT) is that as a foreign customer you don't pay the sales tax, but you instead have to pay any local import duties. Now, they might be zero in your country/area, but that's not the exporter's problem.

          The other way that technically works is that you have to pay the sales taxes and you're free to take your business elsewhere. That's what happens if you buy the goods/services in person. (Again, you m

          • Um, he was not talking about being a foreign customer, he was talking about being a foreign vendor. Why should he be required to collect sales tax if he sells something to someone in the U.S. and ships it to them? And in fact, he is not required to collect sales tax.
            I do not know the law, but would I be required to collect the VAT if I sold something to someone in England and shipped it to them? Would you support a law requiring online businesses in the U.S. to do so? If not, why do you support a law requi
          • What I don't understand is why Amazon actually cares about that.

            They are a company that is located in a certain location (well maybe a few), and they sell out of that one company, and thus have to pay sales tax for that very place they are. They'll have to figure out once how much that is, after that they're done. They don't sell in the location where the customer is.

            Just like if you go to a book store, the brick and mortar type, you pay the sales taxes that depend on whatever that location happens to have

            • What I don't understand is why Amazon actually cares about that. ... They are a company that is located in a certain location (well maybe a few)...

              Amazon has warehouses in quite a few places. They want to have them everywhere, to facilitate same-day deliveries. Under the current system, that means they would have a presence in every state, meaning that they would always need to collect sales tax anyway (for customers in states with sales taxes). This hurts them much more than most online retailers, who generally have a presence in one or two states and only have to worry about sales taxes for those states. That's why Amazon wants sales tax to be colle

        • When you're talking about completely independent jurisdictions then the tax is covered by trade treaties. You either need to pay import / export duties, or there is a treaty that waives them. Taxes in one jurisdiction don't apply to people in another. The situation in the EU, for example, is that member countries agree to waive all import duties on goods from each other, but in exchange they charge VAT on all sales, even those destined for export, at the same rate, and those rates are harmonised such tha

          • I don't see why these various states can not simply charge VAT on all sales, even those destined for export to other states (like the EU does).

            Also as long as they keep the VAT rates not too much different, there is not much incentive to buy from another state - increase in shipping cost due to longer distance should cancel out most such advantages, unless you're talking about 10 percentage point differences.

            • The second part is the problem. Sales tax in the USA can be charged by states, counties and cities. You may be paying sales tax to three nested jurisdictions with a cumulative rate of almost 20%, or you may be paying no sales tax at all, depending on where things take place.
      • If you buy something the tax does not depend on who you bought it from. In every state in the U.S. that I am aware of, you are required to pay the same tax when you purchase something no matter where you buy it from. The difference being that if you bought it from an organization that is not under the jurisdiction of the state you live in, THEY are not required to collect it for the state and it is YOUR obligation to report and pay the tax (in which case it is called a "Use tax" rather than a "sales tax", b
      • If I buy something, the tax on it shouldn't depend on who I bought it from, or where they are located.

        Of course it should be. Or are you saying you should pay the same tax to a small boutique store in littletown, usa that you'd pay to a large flagship store on 5th ave in NY? Just like the cost of living is different between small town America and NYC, the cost of providing services (fire, police, etc) to business in smalltown is less. So why should the taxes be the same?

    • by gl4ss ( 559668 )

      not really to hurt competition.
      but a level playing field.. so others wouldn't tax the sales tax.

      it's ridiculous how easy dodging the sales tax in usa has been. "oh but we're selling online!" yeah...

      • it's ridiculous how easy dodging the sales tax in usa has been. "oh but we're selling online!" yeah...

        It's not just online; all out-of-state sales (think "mail-order") have been that way since the country was formed. Online retail just makes "mail-order" much more convenient and commonplace. Sales tax is a matter of state law, and states have no jurisdiction to impose taxes or tax collection duties on anyone outside the state. Amazon wants to change that by making sales tax collection and reporting a matter of federal law rather than state law. Amazon supports this because they would have to collect sales t

  • I'm reminded of a supreme court quote:

    The power to tax is the power to destroy.

  • For the record (Score:5, Informative)

    by Anonymous Coward on Friday November 01, 2013 @06:31PM (#45306787)

    Amazon has supported a national sales tax since the late 90s. Their position hasn't changed, just people's false memories.

    They don't support having to figure out 10,000 taxing jurisdictions each with their own weird rules. And there is no justification for Amazon to collect sales tax below the state level anyway, unless they are shipping to a state where they have a presence or nexus.

    The supreme court has already ruled on this in 1992, and their ruling was quite clear. So either Congress gets off their butts and passes a law, or Amazon can just keep fighting it out in district courts for years.

    That does not absolve people from paying use tax, which most don't. But use tax was never meant for consumers, and states have little power to enforce it on anyone except businesses. So a national sales tax makes the most sense in this case, which is why Amazon supports it.

    • by osu-neko ( 2604 )

      The supreme court has already ruled on this in 1992, and their ruling was quite clear. So either Congress gets off their butts and passes a law, or Amazon can just keep fighting it out in district courts for years.

      The Wikipedia article on the case you're referring to [wikipedia.org] indicates there has been some congressional action on the matter, or attempted action at least. I wouldn't count on this congress actually managing to get real legislation done, though...

    • Re:For the record (Score:5, Insightful)

      by iamhassi ( 659463 ) on Friday November 01, 2013 @06:45PM (#45306915) Journal

      They don't support having to figure out 10,000 taxing jurisdictions each with their own weird rules.

      This x9000.

      Back in the day I worked with a company that provided a very popular ecommerce shopping cart that online shops could use to easily peddle their goods online. I remember when they rolled out the ability to charge sales tax and OMG the nightmare it created for support. Because remember, it's not just the State sales tax, often individual cities and counties charge a tax, AND on top of that tax different items can be taxed at different rates, like alcohol and certain foods. We had a company that would automatically update the database of taxes for everywhere and we allowed the stores to put in their own rates but it didn't stop them from calling non-stop complaining that some places were too low or too high and they didn't want to figure out the rate themselves and blah blah blah

      • Not only different tax rates for different products, but different tax rates for the same product depending on how it is prepared or packaged. For example a coke out of a fountain intended for onsite consumption can be taxed differently than a coke in a can meant to be carried out, or coke in a 12 pack meant to be taken home.
        • Re:For the record (Score:4, Interesting)

          by margeman2k3 ( 1933034 ) on Friday November 01, 2013 @08:53PM (#45308021)
          You think that's bad?
          I worked at a cafe in Ontario, and we had so many tax rules that the company writing our POS software couldn't even get it to work properly.

          It looked something like this:
          Non-food items are charged 13% tax
          Some non-food items are charged 5% tax
          Most food items are charged 13% tax
          Some food items are charged 5% tax
          Other food items are tax free
          If you spent less than $4 on certain food items, it was tax free
          If you were buying "bakery" items (bagels, etc), then they were tax free if you were buying at least 6, but the total had to be under $4, and you couldn't buy a drink with it.

          And this was just for a coffee shop.
          I can see why Amazon would be willing to charge X% nationally, as long as they don't need to deal with crap like that.
          • I know it's crazy. My wife is a sales tax accountant (dealing a lot with Canada right now) and when she talks about things like this it just makes me mad. She's no fan of one of the provinces in Canada, and Denver Colorado, because they have especially strange tax rules. I looked it up and in the US I believe there are 40,000 different taxing entities and each one can have hundreds or thousands of rules in law and special considerations in private letter rulings.
          • You think that's bad?

            I worked at a cafe in Ontario, and we had so many tax rules that the company writing our POS software couldn't even get it to work properly.

            That's still at the provincial (state) level. GP post already mentioned the stupidity of hundreds if not thousands of city/county/district-level sales and use taxes per state, each of which might have slightly different tax rules like you see in your cafe.

            So if your POS software company is already having a hard time working at a provincial level, multiply that by up to the number of municipal areas to see how much worse it is in the US.

      • The problem is, is that they were probably collecting the taxes, to make it appear on the outside like they were doing the right thing, but they probably weren't remitting them to the government. Sure a good ecommerce system can ensure with somewhat decent accuracy that the correct amount is being collected, but it doesn't help you with actually transferring that money to the correct entity. I don't think a system exists that tells you how to remit taxes to the thousands of different tax jurisdictions in
        • You have to collect the correct taxes for every jurisdiction, but you submit them to the states, not to local jurisdictions. The state then distributes the funds according to the data in your filing.

          • That depends completely on the state. My wife has told me how many do this vs. remit to the jurisdiction and I don't remember the ratio right now. For example in Louisiana you remit it to the parish tax collector, and in many cases you can't make the check out to "x parish tax collector" but to the tax collector's name personally.
        • There are a couple companies in the US that attempt to do this (determine the correct tax by sales location and nexus then distribute your payment to them from your company's ERP system). They're expensive and still make mistakes though. It requires active participation from the companies contracting them. It isn't a problem you can just hand off to them with a wad of cash and walk away from.
    • by Creepy ( 93888 )

      A national sales tax will not happen - it is unconstitutional and a right reserved for states. Collecting sales tax on behalf of the states has been proposed, but some states don't collect sales tax and again, it probably would be struck down as unconstitutional based on state's rights to collect the tax.

      And the reason you get between 2000 and 19000+ jurisdictions (depending on who you ask) that change daily is because taxes need to be collected in the location of the buyer if the business doesn't have a pr

      • Income tax is unconstitutional as well. Yet, we have an IRS enforcing the collection of income taxes.

        Whether a federal sales tax ever be enacted or not, that doesn't preclude an administrative agency enabling the states and local jurisdictions to collect their taxes. It could be set up in any number of ways.

        Fact is, I suspect that sometime soon, online retailers WILL be collecting sales taxes, and that the funds will be distributed according to some really arcane formula that few of us can claim to really

        • As someone else pointed out, there was a constitutional amendment passed to make income tax constitutional, so it is not unconstitutional.
      • by hawk ( 1151 )

        >Collecting sales tax on behalf of the states has
        >been proposed, but some states don't collect sales
        >tax and again, it probably would be struck down as
        >unconstitutional based on state's rights to collect
        >the tax.

        Speaking as a lawyer . . .

        you're just plain wrong on this.

        The Supreme Court has made it clear that while states cannot force out of state entities to collect sales tax for them, it is for Congress to find a solution. It is not that states *cannot* tax the purchases, but that they can

      • Comment removed based on user account deletion
        • > interstate commerce

          You mean intrastate commerce, that is, state governments are forbidden from creating barriers to interstate trade. That is the sole domain of the Federal government, and is the sole reason for the Commerce Clause. The Commerce Clause is being abused to justify laws such as the AFA and is almost never used for its intended purpose.

          Taxing out-of-state purchases is completely unconstitutional and anyone who remits such "user fees" is an illiterate moron, or one who has never read The C

      • by lxs ( 131946 )

        Stop treating your constitution like it is the Bible. Constitutions get amended all the time. When the world changes, laws need to follow.

    • Another big problem with all the different taxes is that you have to remit them all separately as well. If the states were organized well enough to be able to collect all the taxes for all the various organizations in the state, I guess that isn't horrible only 50 places to pay it to. However let's be realistic you are going to need to end up remitting taxes to individual counties and cities as well and that becomes a complete nightmare. You not only need to know how much tax to collect at each level, you n

      • > I guess that isn't horrible only 50 places to pay it to.

        Incorrect. Some states (NH) outlaw sales tax on most goods (there are some taxed items, such as prepared foods but that is a restaurant tax). Other states have hundreds of sales tax zones (Nevada for example). This creates huge interstate commerce barriers for the smaller players, which is why Amazon gave up the fight and is now lobbying for it. The end result is there is literally hundreds (if not thousands) of individual sales tax zones - and s

  • There are other places to get stuff from where you don't have to pay the California extortion. B&H, J&R to name 2 off the top of my head. I'd rather my money go to UPS and FED-Ex than the bozos in Sacramento.
    • by hawguy ( 1600213 )

      There are other places to get stuff from where you don't have to pay the California extortion. B&H, J&R to name 2 off the top of my head.

      I'd rather my money go to UPS and FED-Ex than the bozos in Sacramento.

      Of course, you're still required to pay the tax even if the retailer doesn't collect it.

      • > Of course, you're still required to pay the tax even if the retailer doesn't collect it.

        Which is unconstitutional because it is a violation of the interstate commerce clause.

        • by hawguy ( 1600213 )

          > Of course, you're still required to pay the tax even if the retailer doesn't collect it.

          Which is unconstitutional because it is a violation of the interstate commerce clause.

          How is that unconstitutional? Are you saying that a state has no right to collect a tax from its citizens?

          As far as I know, every state that collects a sales-tax for in-state purchases requires use-tax to be paid on out of state purchases, even you drive across the border to purchase items that you'll use in your home state (though in that case, you can typically take a credit for sales tax paid in that state).

          Use-tax isn't new, California has had it on the books since the 1930's. So I think that it were tr

        • In theory the state is taxing your use of the good within the state, not the interstate commerce itself. That's why they call it "use tax". Of course, they don't apply "use tax" if you've already paid sales tax, and the rates are always the same. It's an obvious technicality, but one they've managed to get away with.

  • . . .is after Bezos completes his government takeover, and, a la ObamaCare, starts taxing you for NOT shopping Amazon.
  • New Hampshire (Score:3, Informative)

    by J'raxis ( 248192 ) on Friday November 01, 2013 @06:46PM (#45306929) Homepage

    Yet another reason [freestateproject.org] to live in New Hampshire: No sales tax.

    • by Okian Warrior ( 537106 ) on Friday November 01, 2013 @07:11PM (#45307141) Homepage Journal

      Yet another reason [freestateproject.org] to live in New Hampshire: No sales tax.

      In further praise of New Hampshire note that we also don't have an income tax and, unlike California, we're not bankrupt. Also, the unemployment rate [unemployme...ension.org] is pretty low - currently 5%.

      (We have high property taxes, but one of the lowest overall tax burdens [modernsurvivalblog.com], so having high property taxes isn't as important as you might think.)

      • Also very relevant to this is the direct democracy in much of the state at the local level, and one of the lowest constituent-to-representative ratios in the world in the state government. That makes it one of the most responsive governments you'll find anywhere, where you can in fact convince the powers that be to change policy if you're right.

        Other interesting fact: New Hampshire has the longest-serving Secretary of State in the country, who took office in 1976 and has stayed there ever since. The reason?

        • by J'raxis ( 248192 )

          We have 400 State Representatives, which currently works out to 3,291 constituents per Rep. We also have, rather than a lieutenant governor, a five-member Executive Council, which holds a check on virtually all decisions that the Governor makes.

          All towns in New Hampshire either follow the traditional "New England town meeting" style of direct democracy, or a two-stage system ("SB2 towns") where the town meeting just votes on what appears on the ballot, including the budget, and then the townspeople vote by

      • It's amazing what can be accomplished by not having an administrative-heavy government.

        For example, some are outraged that we just gave NH officials free tolls on NH turnpikes. The thing is, we have to reimburse them for travel expenses (and they're mostly volunteer positions anyway, making NH less crooked than other New England states) which is administratively heavy, so it's cheaper to just give them a free pass on in-state turnpikes. It keeps the overall costs down, gives legislators a little perk in add

        • by J'raxis ( 248192 )

          It's $200/term, which means $100/year---and I seem to remember a rep telling me it's actually about $93 after federal taxes.

      • by J'raxis ( 248192 )

        For those interested in the details:---

        New Hampshire has no sales or income tax, but does have a 9% restaurant/hotel tax, an "income and dividends" tax for capital gains over $1,200/year, and two business taxes---one is a typical business profits tax like you'll find in all states, and the other is a sort of "reverse" income tax, in that the business owner pays it rather than the employee. It's minimal though, something like 1/4% of the money paid to the employees.

        New Hampshire also has a lot of user fees a

  • by gerardrj ( 207690 )

    Merchants collect sales taxes, the government charges the taxes.

    And the tax is really on the buyer in most states; that way the tax isn't a cost of doing business.

  • A few more decades like this, and you won't be able to tell this nation ever had flesh-and-blood inhabitants just from looking at our statutes and caselaw!

    • Heh, that's actually a pretty good metaphor for it, "corporations terraforming or legal system", I like it. I mean, I hate that it's happening, but that's a great way of putting it.
  • This is Ridiculous (Score:5, Insightful)

    by Anonymous Coward on Friday November 01, 2013 @07:49PM (#45307489)

    Amazon fights local sales tax because they don't like the notion that any municipality with 3 pigs and a mayor can impose their own laws on Amazon despite Amazon having no physical presence there. If you were running a website, would you want to care about every law that some nut job five states over dreams up?

    • That's basically the problem in a nutshell.

  • by sometwo ( 53041 ) on Friday November 01, 2013 @11:06PM (#45308797)

    Have any of you attempted to build a professional shopping cart and tried to get accurate sales tax working for states like California, Texas, and New York?

    It's amazing how costly it can be because there's no easy way to map zip codes or any other easily looked up value to a tax rate. Zip codes can cross county lines and if a mall is built on a county line, there could be different sales tax rates within the same building. And yet, the states are no help in helping online stores to easily comply with the varying sales tax rates, even though they stand to make more money if people can more easily comply.

    Even Paypal, Amazon Payments, Google, and other payment providers will not calculate sales tax for you, likely because it's so easy to get it wrong- The liability of miscalculating sales tax must be huge- Amazon has the money to fight the state tax offices but not a mom and pop online store.

    There are several companies that exist solely to help shopping cart builders comply with the sales tax burdens of the different states, but the fees for using paid APIs can be high. One of these companies has map illustrating the problem [avalara.com].

  • (many states that tax Amazon don't tax other online retailers).

    This seems quite unfair. Should definitely be fixed. I call BS on a state that taxes Amazon ONLY and leaves everyone else alone. That's plainly unfair, surprised they can get away with that.

    Didn't think you could pass laws to tax specific business entities. Learn something new every day!

    • Actually, they do not tax Amazon. They get Amazon to collect the tax for them. They have been unable to get other online retailers to do the same. In most, if not all, cases, the reason they have been able to get Amazon to collect sales tax for them is because Amazon either has a clear physical presence in the state, has lost their argument in court about not having a physical nexus in the state, or cut a deal to avoid a costly legal battle over having a physical nexus in the state. Amazon is now pushing fo
  • I look at this like I look at Warren Buffett talking about incoming tax. When a rich company or person starts saying "Hey, hey I'm not being taxed enough. Why aren't you taxing me? I really need to be taxed more!" they have some scheme planned. They didn't get that way by paying more tax than they had to. (But hey, I'm completely cynical.)
    • They didn't get that way by paying more tax than they had to.

      Warren Buffett is Warren Buffett because of a ridiculously good track record of stock picks. Either he's very very good at it, or very very lucky.

      He's also at the same point as his buddy Bill Gates: Sure, he could pay fewer taxes and save millions, but when you already have enough to make somewhere around $300 million a year easily without any kind of chicanery, what's the point? These guys have realized that there's such a thing as "enough", and they already have way more than that, so they're trying to bu

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