Will Amazon Get a Visit From the Tax Man? 334
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."
Re:The loophole has to exist (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:5, Informative)
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.
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 regressive, that is flat.
The income system in the US regressive, the sales tax is flat.
Comment removed (Score:5, Informative)
Re:That will close a distribution center... (Score:3, Informative)
Re:Of course it will (Score:2, Informative)
Who cares if it should be encourages or discouraged, that's irrelevant to whether it is regressive or not.
You're the one who seems to be assuming that "regressive" is by definition a bad thing. Why?
Re:Nope (Score:2, Informative)
Re:Of course it will (Score:2, Informative)
Yes, I get that. But they should pay the same percentage in cases where they don't benefit any more because they are the ones making the money. I suppose you think the rich should be taxed less, because of how much good they must be doing society? If they want to operate within society and benefit from society, they operate by society's rules. If they didn't feel it was worth it, they would leave and start their own society. The reason the rich pay a larger percentage is because they reap a larger percentage of the gains.
Re:Of course it will (Score:2, Informative)
I'm not bitter, because I have everything I want. I'm not so weak that I have to go on accumulating material wealth after I have enough. Now that I'm successful financially, I can focus on family, friends, hobbies, learning, and self improvement rather than compulsively overcompensating for my shortcomings.
You seem to assume that if the same amount of wealth existed, but was distributed more equitably, the system would somehow not work. You haven't proved the necessity of having rich people, only the necessity that someone has money to invest.
Re:hey, isn't today Gates' last day at Microsoft? (Score:5, Informative)
Re:Of course it will (Score:2, Informative)
The necessity is having a system where hard work and risks are properly rewarded.
Exactly. Hard work and risks should be rewarded. That isn't how things currently work. What we have is a system that rewards the most brutal and ruthless. Where the guy who is better at screwing over others and getting away with it wins. That's bad.
Re:hey, isn't today Gates' last day at Microsoft? (Score:1, Informative)
Re:Of course it will (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 pizzas, the value of pizza number 10 is very low (maybe you would even pay NOT to eat it).
How does this apply to taxation? For the lower income person (we don't need to turn this into a rich/poor discussion as it applies just as well to middle vs upper-middle or rich vs ultra-rich) with an income of say $50k, the marginal value of their last dollar earned is going to be less than that of the higher income person's last dollar when they make $1million. The marginal tax rate can be higher at this level and the higher income person will only feel the same cost as the lower income person (their marginal tax rate is higher but they value that money less) and this is the reasoning behind why it is considered a fair system. Of course the opinion of the system will depend on how the government sets the rates--they could easily set rates that make the marginal cost at one income level significantly outweigh the marginal costs at another level.
The flat tax that you refer to (really a flat rate tax as opposed to a lump sum-style flat tax) is said to be fair since everyone pays the same percentage. This reasoning discounts the idea of marginal values which is acceptable as a policy decision (since fairness is very subjective) although I would personally not see it as being optimal. The big benefit of a flat rate tax is the simplification of taxes which proponents say might save enough money throughout the system to allow redistribution in a way that would have the same social effects of our current tax code without the pain of taxes.
Of course the simplification argument can be taken a step further. Most economists will tell you that a lump-sum (e.g. everyone pays $4000) tax is the so called "best tax." This is a result of mass simplification of tax codes as well as the fact that lump-sum taxes are not distotionary (I'm not going to get into this other than to say that it means they do not have an effect on earning/spending choices made by the agent...a thorough discussion of this should be in any intermediate calc-based microeconomics textbook). These do already exist in the form of some licensing fees out there (for instance a flat charge you might pay for title transfer/license on a car no matter the price paid). For it to be used in an income tax setting, there would have be be post-facto redistribution by the government for it to make any sense (like how do you charge $4000 to a part-time worker with a total income of only $4000). I include this mostly as an example of a tax scheme that doesn't get a lot of coverage but that actually has its merits and has strong proponents out there. People need to better understand that the concept of fairness is not universal--equity means different things to different people. Any taxation scheme has some sort of inherent unfairness; either someone is going to pay more than someone else or someone is going to pay a greater proportion of their income and in every possible situation, someone will complain.