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Will Amazon Get a Visit From the Tax Man?
Posted by
ScuttleMonkey
on Fri Jun 27, 2008 12:03 PM
from the cat-and-mouse dept.
from the cat-and-mouse dept.
theodp writes to tell us that according to the Wall Street Journal, Amazon.com has raised a few eyebrows with their strategy to avoid paying sales tax in eight states where they have warehouses or distribution centers. "As an online retailer, Amazon can avoid collecting sales tax in states where it has no presence, at least until Congress changes the law. But in states where a company has actual facilities, such as warehouses, states tax officials can require the company to collect sales tax. Despite operating hundreds of thousands of square feet of distribution facilities in the eight states, Amazon says it doesn't have any presence in them. The company argues that it doesn't operate the plants, its wholly owned subsidiaries do."
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Of course it will (Score:4, Interesting)
Re:Of course it will (Score:5, Insightful)
I disagree, they should be paying property tax for these services (which I am sure they are). They should only be paying sales tax on retail sales not on products that are merely being distributed and since this is a warehouse not a storefront, state sales tax is not the answer.
Really though, sales tax is always a regressive tax and I don't think it is a great idea in general for that reason...
Parent
Re: (Score:2, Insightful)
Agreed about Amazon owing property tax and not sales tax.
But defining a tax as "progressive" or "regressive" carries the underlying assumption that every tax is an income tax. There's no particular reason to compare the amount paid via sales tax to a person's income; compare it to the amount he consumes. It's not regressive. It's perfectly flat.
Re:Of course it will (Score:5, Insightful)
There's no particular reason to compare the amount paid via sales tax to a person's income; compare it to the amount he consumes. It's not regressive. It's perfectly flat.
Of course there is a reason, and it is that a person with a lot of income spends a lower percentage of that income on consumption.
The result: a sales tax is regressive.
Parent
Re:Of course it will (Score:5, Insightful)
So.. you're saying the rich should pay more? Why exactly?
With a sales tax, the rich tend to buy more non-necessities, and more expensive ones like cars and homes. So they naturally would pay more in sales tax than a lower income family.
True, they would only pay a smaller percent of their income if they tend to save and invest that income. Rather than spend it. But how many rich people do you know who don't go out and buy fancy cars and big homes?
Progressive taxes (income tax which increases in percent as the principal increases) are nonsense. Why should someone who works harder, innovates, starts their own business, or pursues a higher-wage career be penalized? It is not 'unfair' that some people have higher salaries than others.
Parent
Re: (Score:3, Insightful)
Socio-economic stability is a prerequisite for business success. The rich benefit more from programs that help create such stability. Therefore, they should pay more.
Re: (Score:3, Insightful)
And they do pay more under a flat tax as well. In case you flunked math, 15% of $1,000,000 is a lot more than 15% of $20,000.
Re: (Score:3, Informative)
In order to have any sensible discussion of tax systems with regard to income, you need to learn to think at the margins (especially considering that US income tax is actually calculated at the margins). For those who don't know, the marginal value of a good is the value of one more of those goods. For instance, if you are hungry, the marginal value of a pizza is pretty high but after you have had 9 piz
Re:Of course it will (Score:4, Insightful)
No, I think that everyone should be taxed at the same rate. I never said anyone should pay less or more than anyone else; that's your arguement. You make more, you pay more because x% of a larger pie means more taxes. The overall rate should be flat. Progressive tax rates are regressive.
On more thing, back to the issue of sales tax. It also manages to collect from underground economies that pay no income taxes at all(under the table workers, illegals, drug dealers, prostitutes, etc.).
Parent
Re: (Score:3, Insightful)
You figured out how to get blood from a stone? Sweet! Can you show me how?
Re: (Score:3, Funny)
You wanted an argument? Oh, I'm sorry, but this is abuse, you want room 12A, just along the corridor.
Subsistence crime (Score:5, Interesting)
Why should someone who works harder, innovates, starts their own business, or pursues a higher-wage career be penalized?
It is in the interest of the people to provide a safety net for those who cannot earn enough to feed, clothe, house, and educate their families. A slight subsidy to lower-income families helps keep them out of subsistence crime.
Parent
Re: (Score:3, Insightful)
They get greater access to government members, why YES I will see the CEO of GM, even though he did not have an appointment.
They get greater benefits from the government (if you own bear stearns and go bankrupt, you get a bailout. If you own a deli, you get nothing)
You get more use of police and fire men - i.e. if someone robs you of /burns down 50% of your net worth and it is $100 the police say "We'll call you." If the s
Re: (Score:3, Insightful)
Because they get more. Someone that's a minimum wage worker at two jobs barely supporting a family will be paying taxes. They support "social infrastructure" (I'll use that to describe stability added through welfare programs for the poor, handicapped, and elderly). They support the military. Those are the two largest expenses. As long as they manage to work two minimum wage jobs (pretty easy, since no one wants them McDonald's is always hiring
Re:Of course it will (Score:5, Insightful)
It's a strawman (and not a clever or subtle one) to claim that advocating a progressive tax means that one thinks different salary levels are "unfair".
One can advocate a progressive tax based on the Rawlsian argument, namely, why should someone who is naturally smarter or stronger benefit over someone who, through no fault of their own, was born crippled. These arguments beg for a tax on natural gifts. Unfortunately, income tax is the best stand-in.
Alternatively, one can use two economics arguemnts. The first is that the rich consume more goods then the poor. They have more possessions that require protecting, make more use of air traffic controllers, recieve higher unemployment beenfits, etc. etc.
The second is that law and order are worth more to the rich. Someone $300,000 dollars in debt, about to lose their house, car and all worldly possesions, might value a continuing rule of law at a very low, or even negative rate. They have little to lose, and can probably gain if they are limited to whatever they can hold in their hand. The rich on the otherhand have vacation homes, yahcts, etc. They have a lot more to lose.
Progressive taxes also result in higher salaries for those at the bottom, as the allure of the future raise is lessened, making it cheaper to give people at the bottom each a smaller raise. That, combined with the lower tax burden, increase the freedom to attempt to become an entrepuner. Progressive taxes increase the number of people who will attempt it, while only hurting those who succeed.
There's a practical argument. If you insist that everyone pay the same amount, people would quickly become bankrupt with their 1/300,000,000th of the national budget. The rich have to pay more taxes because, well, the top 1% owns 98% of the country.
There is also a question of original aquisition. The original obtainment of any good is never fair. The first farmer gets the best land. The strongest evil warlord stole the diamond mine. The money that you get paid with was never entirely yours, because the person who paid you never entirely owned it, etc. etc. back to when it was originally aquired. Hence, redistribution attempts to correct that in an ongoing fashion.
Parent
Re: (Score:3, Insightful)
Why should someone who works harder, innovates, starts their own business, or pursues a higher-wage career be penalized? It is not 'unfair' that some people have higher salaries than others.
This is total bull. You think Bill Gates works harder than a factory worker or construction worker? Had Bill Gates been born to a poor slum family, he'd just as likely be a petty criminal. Its asinine how the rich think they work harder, and thus their rewards are greater. Its all luck, as far as I'm concerned. The rich no more deserve their wealth than the poor deserve poverty.
Re:Of course it will (Score:5, Insightful)
Define Rich.
That's easy. Someone who has a lot more money than you.
Parent
Re: (Score:3, Insightful)
Re: (Score:3, Insightful)
Most states do not tax food.
they do tax non food and sometimes this means paying tax on your soda.
but most FOOD isnt taxed
Re: (Score:3, Interesting)
A regressive tax will take a larger proportion of a poor person's income than that of a rich person in any particular exchange. If you are buying a stick of butter for $1 and there is a 10% sales tax (hey...it is almost that high he
Re:Of course it will (Score:5, Informative)
Sales Tax is a tax the consumer pays not the company... Amazon is already paying for property taxs, revenue tax, employee wage tax.... Paying sales tax is a tax that We pay as a consumer to the company who then resends it to the apporprate state/county/city on your behalf. So if they are based in Delaware but not in New Jersy they are not paying taxes for their services in Deleware they are paying New Jersey because they want the income from that person.
Parent
How is Sales tax regressive? (Score:3, Informative)
Really though, sales tax is always a regressive tax and I don't think it is a great idea in general for that reason...
Sales tax is flat, it is only implied to be regressive because we assume, for example, the first $50,000 a person spends must be on necessities, and since that was all they had to spend as a $50,000 earner it was regressive when compared to a person spending 50,000 from a 100,000 in earnings. If the person earning 100,000 spent other 50,000, they would pay twice as much in sales tax as the 50,000 earner. The fact is that they both spent the same amount in taxes at the same spending level. That is not reg
Re:How is Sales tax regressive? (Score:4, Insightful)
It's actually progressive, since necessities are usually excluded from the sales tax. Thus people with more expended disposable income are taxed more.
Parent
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The loophole has to exist (Score:2, Insightful)
Re: (Score:2, Insightful)
Re:The loophole has to exist (Score:5, Informative)
Parent
Re:Nope (Score:5, Insightful)
Why are you upset about that? If they hadn't charged you sales tax, then you would have been required to file use tax, which would have cost you the same amount and taken you a few extra minutes, whereas Microcenter saved you all the effort.
Let me guess, you don't file use tax and so you will single out and punish companies who don't aid you in your attempt to evade taxes.
Parent
Re: (Score:3, Insightful)
Re: (Score:2, Informative)
They only have to pay one tax for each transaction in a state where the buyer is a resident. There are 8 different states. Each transaction involving a buyer and a seller in that same state is subject to the tax of that state.
Re:The loophole has to exist (Score:4, Interesting)
This is why if you're a smart businessperson, you should avoid putting your headquarters and facilities in states that have both sales tax and large populations. The best way to keep costs to a minimum is to pick states with no sales tax, followed by states with low population. So Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon have no sales tax at last count, though not all of them are ideal location-wise. So here's what you do:
By setting up a company in this way, you can basically cover the entire U.S. comfortably while charging sales tax for less than 1% of the population of the U.S.
Parent
Monkey see, Monkey do (Score:2)
Re: (Score:2)
Back when they were around, Good Guys tried to avoid sales tax the same way, spun off their e-commerce site to a subsidiary with "no presence" in the state. It didn't work.
Amazon for 1000 (Score:5, Funny)
That will close a distribution center... (Score:5, Insightful)
Let's see a state with an Amazon distribution center tax it, and then let's see Amazon.com close it down. That which happened to Ohio and Michigan, will happen again.
Re: (Score:3, Informative)
Re:That will close a distribution center... (Score:5, Interesting)
It's not that big companies get to make the laws... It's that governments need to realize that their decisions have consequences.
Why shouldn't a company move their operations to an area where the local authorities are going to take a smaller cut of their profits, or impose a lower overhead on their operations? Those other governments seem to do just fine without the additional revenue...
Parent
Re:That will close a distribution center... (Score:4, Insightful)
But businesses have consequences to their decisions, as well. Amazon doesn't have those warehouses and distribution centers spread across several states just because they liked the scenery -- it offers a business advantage to them, in lower labor costs, faster shipping times, whatever. Sure, they could just shut them all down to "punish" the states, but they risk losing business if shipping takes longer or they have to raise prices to reflect higher local wages.
Parent
I'm already paying tax on Amazon purchases (Score:3, Insightful)
Move at least one center to Oregon? (Score:5, Interesting)
...or any other state that has no sales tax.
(just random thoughts here.)
They could then threaten to move the distribution centers to other states, and fire everyone there unless they relocate. Yes it's cold-blooded and etc.
But, it would make most states (esp. states where jobs and money are tight) stand up and take notice that you're about to cut a chunk of jobs (and income tax revenue, property tax revenue, injection of money into the local and state economy, etc) out from under them. Call the state next door and say "I'd like to build a large distribution center and hire (n*1000) employees for it in your state... we'll pay all the other taxes, but please don't charge us for sales tax. If the benefits outweigh the loss of sales tax, I'm willing to bet the state (esp. hard-hit or not-so-large states like Mississippi and etc.) would happily take the deal.
IIRC, Wal-Mart does this all the time (at least with local governments) - getting sweetheart tax waivers in exchange for the locality getting jobs and other economic benefits.
Now sure, it wouldn't be easy to just pull up stakes and move, but distribution centers are warehouses, which means that it's not a very complex infrastructure to move... the hardest part would be shifting the logistics.
Has Amazon expanded inventory, again? (Score:4, Funny)
In fact, my first thought on seeing that explanation was "Wait a second, Amazon has started up a defence contracting department?"
Messin' with the Government's Income (Score:2)
Never a good idea. After all the government makes the rules and interprets the rules. Imagine if the government decides to seize the warehouses and their contents. Amazon will have a serious problem at that point.
Bezos and Taxes (Score:5, Interesting)
He talked with us for a while, basically hinting at us very strongly at what the kindle was, and showing us some prototypes that eliminated any doubt as to the devices nature. He also had his staff talk to us. One man, who had worked closly with Bezos said this (paraphrased):
"Jeff HATES taxes. The reason that Amazon has made as much money as it has is because Jeff carefully played the game to avoid paying as many taxes as possible. Lab 126 is a wholly owned subsidiary, because if it wasn't, every California resident would have to pay sales tax on Amazon.com."
And that was for a research lab that was actively developing a new product for direct sales from Amazon.com. Somehow, avoiding sales tax for warehouses doesn't surprise me.
Re:hey, isn't today Gates' last day at Microsoft? (Score:5, Funny)
It was his last day, but then Lumberg asked him if he could just go ahead and come on in on Saturday then too, mmmm'kay?
Parent
Re:hey, isn't today Gates' last day at Microsoft? (Score:5, Funny)
Bill Gates is spineless
He prefers the term 'flexible'.
Parent
Re:hey, isn't today Gates' last day at Microsoft? (Score:5, Informative)
Parent
Re:Oppsie for Amazon! (Score:5, Informative)
IANAL, *but* I know enough that you can't wiggle out of tax situations by simply creating new companies.
What you think you know, is flat-out wrong. One of the primary reasons for creating subsidiary corporations is precisely to deal with tax issues.
-jcr
Parent
How long? (Score:5, Funny)
There's a joke about lawyers. . .
A bad lawyer can let a case drag on for years. . . a good lawyer can make it last even longer.
Parent
Re: (Score:2)
You cannot evade taxes so easily. (Score:3, Interesting)
Then they just have that covered under another equivalent tax.