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Calling B.S. On Amazon's Taxation Arguments 762

Posted by kdawson
from the didn't-do-it-nobody-saw-me dept.
theodp writes "Over at the Center on Budget and Policy Priorities, Michael Mazerov carefully picks apart Amazon's arguments against collecting sales taxes, arguing that they simply do not withstand scrutiny. While Amazon officials say collecting sales tax in every state would be excessively burdensome, Mazerov notes the e-tailer already collects sales tax in virtually every state for numerous other companies that sell on its website. Mazerov also finds it disingenuous for Amazon to argue that it should not have to help support public services in states in which it has no physical presence when the company fails to support public services in most of the states in which it does have a physical presence. Finally, Mazerov isn't buying Amazon's argument that its opposition to collecting sales tax is not driven by a desire to gain a price advantage over competitors, which he finds at odds with the company's own actions and SEC filings. By claiming sales-tax immunity, says Mazerov, Amazon has enjoyed an unfair 5%-10% price advantage over local retailers, while also depriving states and localities of hundreds of millions of dollars of legally due revenue each year."
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Calling B.S. On Amazon's Taxation Arguments

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  • Use Tax (Score:5, Insightful)

    by FredFredrickson (1177871) * on Tuesday November 17, 2009 @03:58PM (#30133594) Homepage Journal
    It's already the law in some states to report purchases that you have not paid sales tax on, called a Use Tax. If you purchase something and Amazon does not collect sales tax, you are supposed to report this directly and pay it directly to the government.

    I think the real problem is that since nobody does this, they expect Amazon to do the legwork.

    Realistically, it is a businesses' job to collect tax for the state it currently resides in. It would be an undue burden for just about any business to get the workings of every other state's tax just to do business, say, like a phone order!

    Sure, amazon is big enough, but that still crushes the little guys with a hefty start-up capital requirement, and a full time tax guy to figure this out.

    What they need is a disclaimer telling customers that they may need to report the use-tax, and give a hyperlink to more info on that.
    • Re:Use Tax (Score:5, Insightful)

      by DoofusOfDeath (636671) on Tuesday November 17, 2009 @04:01PM (#30133638)

      I think the real problem is that since nobody does this, they expect Amazon to do the legwork.

      I actually do pay use tax, and the fact that no one else does really makes me feel like a chump.

      • Re: (Score:3, Funny)

        by travdaddy (527149)
        I actually do pay use tax, and the fact that no one else does really makes me feel like a chump.

        I'm sure the IRS does a little happy dance every time they see that someone actually paid their use tax! At least you should never ever be audited.
      • by commodore64_love (1445365) on Tuesday November 17, 2009 @04:40PM (#30134348) Journal

        How's that for an argument. I sell a lot of stuff on Ebay (used games, videos, et cetera that I no longer want), and New York State has the gull to tell me I should collect taxes when I sell items to New Yorkers. And then file a tax form with NY and pay the money due. I say:

        "No Taxation Without Representation"

        I am not a New York citizen and never plan to be. If New York wants to give me and the other ~250 million non-NY Americans representation in their Legislature, then okay tax us. But until that happens, we shall consider ourselves foreigners. We owe neither allegiance nor taxes to any foreign government. The New York Legislature can go get fucked.

        • Re: (Score:3, Insightful)

          by bws111 (1216812)
          You are not being taxed, the purchaser (in the state where he has representation) is. All you are doing is collecting the tax and forwarding it to the state. Yes, you are being asked to do work for the state, but you are not being taxed.
          • Actually he IS being taxed..

            He's being taxed by the amount it is costing him to record keep, collect, and forward the tax to the state in question.

            Brick and mortar stores are taxed in the same amount, but it's very easy to record-keep, as you program up the cash registers and load the (small) exception table for the items you have to deal with. In some cases, as in prepared food at supermarkets, this adds a requirement that the person making the purchase be asked whether or not they intend to eat at tables

          • by maharb (1534501)

            HAHAHA. I am guessing you fall into the category of people who that think higher corporate taxes are the best way to fund government because you are not being taxed. Guess what... EVERY tax falls back on the customer. You think oil companies pay the gas tax? No, the price of gas just goes up and you pay the price of the tax even if it was levied on the company. Taxes are always shared with the customer, of course politicians love to make you think otherwise.. so they can raise taxes and make you happy

        • Re: (Score:3, Insightful)

          by kalirion (728907)

          But until that happens, we shall consider ourselves foreigners. We owe neither allegiance nor taxes to any foreign government.

          So basically you're a smuggler avoiding tariffs?

        • by badasscat (563442) <basscadet75@@@yahoo...com> on Tuesday November 17, 2009 @05:03PM (#30134804)

          Strangely enough, I agree with this. I'm definitely not against taxes in general and sales tax specifically, but it doesn't make sense to me that a retailer should be required to lift a finger to help a state government from which it gets nothing in return. Those taxes are not going back to Amazon; those taxes are going to pay for things like police and schools in the community in which the *buyer* resides. And yes, the buyer is the one actually paying the tax, but it is ridiculous to expect a company outside of the state to pay any of their own money (in time and effort) to do the work of collecting that tax when they have no say over whether and how that tax is collected.

          The states' beef is with the buyers, the actual payers of the tax, who then see the benefits from those taxes. They should be the ones required to collect their own taxes, not the retailers who will never see a dime of the money they spend collecting the tax come back.

          This is really no different than what the RIAA is doing. It's the same mentality; if you can't get recourse with the people who you actually should be going after, then just go screw somebody else somewhere up the chain instead.

      • Re:Use Tax (Score:5, Funny)

        by bitt3n (941736) on Tuesday November 17, 2009 @06:14PM (#30136000)

        I think the real problem is that since nobody does this, they expect Amazon to do the legwork.

        I actually do pay use tax, and the fact that no one else does really makes me feel like a chump.

        I hope you're paying the chump tax, otherwise you're nothing but a scofflaw.

    • How does the use tax work for things like yard sales or local craigslist? Not trolling just wondering.
    • Re:Use Tax (Score:4, Informative)

      by shawn.fox (461873) on Tuesday November 17, 2009 @04:13PM (#30133850)

      It is unrealistic for every company to figure out what sales tax applies in every state, that is why there is a company that does it for you: Vertex [vertexinc.com]. I recently worked on a project to implement this software for a large retailer. Amazon has far more technical knowledge than the average bricks and mortar retailer, this is no reasonable excuse as to why they cannot pay local sales tax. It is long past time for the online retailers to start paying sales tax just like every other business.

      Not having to pay sales tax is one of my primary reasons that I often buy products online. Online retailers already have a lot of advantages for many types of products, there is no reason that they should be subsidized over local retailers.

      • Re: (Score:3, Insightful)

        by plague3106 (71849)

        So do you imdemnify customers if they collect the wrong amount of tax? I don't see any pricing on your site, so I'm going to go with "it's fucking expensive." Or, an undue burden.

      • "there is no reason that they should be subsidized over local retailers."

        Yes there is actually, Amazon doesn't use the facilities and services that said taxes go to pay for, which is the primary justification for collecting taxes from business in the first place.

    • Re: (Score:3, Interesting)

      by Sandbags (964742)

      TRUST ME. We have such a field on our state tax forms. I know 3 different people who were audited in recent years. One of the things the auditors did was rifle through their creidit card purchase history. Any transactions from entities know to not collect sales taxes for the state automatically were flagged, and any amounts the persons had failed to enter on their taxes, they got NAILED for, roughly 7 times the ammount they would have paid in sales tax. It seemed the sate was QUITE INTERESTED in gettin

    • Re: (Score:3, Insightful)

      by LWATCDR (28044)

      The real problem is that it wouldn't be so bad if it was just state by state. It really does get down to the county level and sometimes even down to the town.
      So suppose I work in one county and live in another. If I order something online does my home county or my work county get the money? Suppose I order it from my cell phone when I am in a different state?
      Okay you could just say that I pay the tax where it is delivered? Suppose I guy a game on Steam while I am on trip?
      Frankly it is just a HUGE mess.

    • by meburke (736645) on Tuesday November 17, 2009 @04:59PM (#30134710)

      Thank you. Yours is the best answer I've seen. I recently met a woman from Louisiana her is Houston who had a list of people who bought boats and planes in Louisiana. She was "bounty hunting" use taxes for the State of Texas. My biggest argument against Amazon (or any other company) collecting taxes on out-of-state sales tax is that it increases the cost of doing business without compensating the business for the trouble. Essentially, it is a tax on the business by a government that has no jurisdiction and provides no services to the entity required to comply.

      If taxes are too high, that is something that should be resolved by the residents of the individual state. Taxation needs to be revisited. The best thoughts I've seen so far have been provided by the Fair Tax people http://www.fairtaxplan.org/ [fairtaxplan.org] . It probably makes too much sense. Tax collection does nothing about the out-of-control spending and unneeded "services" that cause high taxes.

  • by metaomni (667105) on Tuesday November 17, 2009 @03:59PM (#30133614)
    "Sales" tax is still being levied in the form of "use tax" that consumers are supposed to pay on their state tax returns. Just because most consumers are committing tax fraud doesn't make Amazon a guilty party here.
  • by mi (197448) on Tuesday November 17, 2009 @04:01PM (#30133636) Homepage

    If there is an article about virtues of taxes on Slashdot, you can bet, it was posted by kdawson...

    Just saying...

  • by eldavojohn (898314) * <.moc.liamg. .ta. .nhojovadle.> on Tuesday November 17, 2009 @04:02PM (#30133660) Journal

    Calling B.S. On Amazon's Taxation Arguments

    Who the hell cares what Amazon claims? If you think it should be taxed, write your representatives and demand they do something about the bill that's been renewed through 2014 [wikipedia.org].

    And why are we singling out Amazon? Why not Dell or Newegg or even ThinkGeek? Is it because Amazon is doing too well?

    Things just don't add up in Mazerov's posting. He levels charges that sound trivial to prove and prosecute--charges that would result in a lot of back taxes paid to a state. Why doesn't he call one of his colleagues up in any of these states and give them all they need to make a name for themselves? The only reason I can think of is that it's a not a cut and dry clear win for the state. Or there are simply too many companies they'd need to prosecute alongside Amazon -- like Best Buy or Walmart who have a presence in every state and run an e-commerce site.

  • Legally due (Score:5, Insightful)

    by j00r0m4nc3r (959816) on Tuesday November 17, 2009 @04:03PM (#30133672)
    If it was legally due then states would sue and win. It's not legally due. Yet.
    • Re: (Score:3, Insightful)

      by bws111 (1216812)
      'Legally due' makes it sound like Amazon is being taxed. That is not what this is about. This is about collecting taxes from the residents of a state when they purchase something, and forwarding that to the state. The residents (of some states anyway) are supposed to pay this even if Amazon doesn't collect it, but many don't.
  • alternative (Score:5, Insightful)

    by kimvette (919543) on Tuesday November 17, 2009 @04:05PM (#30133722) Homepage Journal

    I'd like to propose an alternate solution

    I know, most politicians won't go with it, but here it is: How about cutting spending, not only making the additional revenue unnecessary, but enabling the cutting or even elimination of many taxes and "user fees?"

    • Re: (Score:3, Informative)

      by mpapet (761907)

      How about cutting spending

      Okay, where would you begin?

      Let's just get rid of Public Health altogether. Never mind it's *far* cheaper to have public health services than not.
      How about law enforcement? Second Amendment is all I need.
      How about Welfare? Those lazy SOB's need to get to work.
      How about Child Services? Kids are young. The sooner they learn to be on their own the better.
      How about jails? Stack em' higher!

      Finally, the culture of 'starving the beast' *never* works. Why? Because the 'starve the b

  • by mi (197448) on Tuesday November 17, 2009 @04:09PM (#30133780) Homepage

    while also depriving states and localities of hundreds of millions of dollars of legally due revenue each year

    Paying sales-tax is the buyer's responsibility. The seller is merely charged with helping the State collect. I find it worryingly hypocritical of kdawson — and people like him — to accuse retailers like Amazon of "depriving" States of sales taxes, while defending pirate bays and napsters against charges of piracy, in which the end-users engage.

    Maybe, this is because Amazon's stand harms the Government, while the napsters harm private enterprise?

  • by Anita Coney (648748) on Tuesday November 17, 2009 @04:09PM (#30133788) Homepage

    When you buy something online or via a catalog, you should pay the taxes from the place it was shipped.

    If I go to California to buy something, I have to pay California's taxes and not my own. If I pay someone to go to California to buy something for me, I'd have to pay California's taxes and no my own. But for some bizarre reason, when I pay FedEx to ship it to me, suddenly I do not have to pay California's tax but I have to pay my state's use tax.

    So to give an example, if I buy something from Amazon and it ships from California, Amazon should bill me California's tax.

    Here's why states hate this idea. Because it would allow the states to compete with each other to bring more shipping business into its state. For example, merely to get a bunch of shipping centers built in Oregon, that state could have no such tax. Amazon would then build their shipping centers there and the other states would get nothing.

    There's nothing the government hates more than competing.

    • by Experiment 626 (698257) on Tuesday November 17, 2009 @05:03PM (#30134792)
      If I buy something from a merchant California, you want me to pay sales taxes to California. So, suddenly I'm a taxpayer of California, but what services is the state government providing me? Roads, police, fire department, schools? Seems like it would be difficult to provide those things for people who live far outside the state, but if California is providing me with squat, the social contract rationale for why they are entitled to my money kind of falls apart. Do I at least get to vote in California elections, or is your plan also a call for more taxation without representation?
  • by CopaceticOpus (965603) on Tuesday November 17, 2009 @04:10PM (#30133802)

    To look at this another way, perhaps Amazon's 5-10% price advantage will pressure the states to drop their sales tax for the sake of local businesses. This is completely feasible - Alaska, Delaware, Montana, New Hampshire and Oregon already have no sales tax.

    The money that consumers use to purchase goods was already taxed, twice. First the government taxes their income, then the state takes a slice too. Do we really need to tax people's money as it goes into the wallet AND as it goes out?

  • ding ding ding (Score:4, Interesting)

    by SuperBanana (662181) on Tuesday November 17, 2009 @04:14PM (#30133858)

    Mazerov also finds it disingenuous for Amazon to argue that it should not have to help support public services in states in which it has no physical presence when the company fails to support public services in most of the states in which it does have a physical presence.

    Yep. Corporations relentlessly lobby town, county, and state officials to get tax breaks, "loans", grants, and more...all in the promise of "jobs", which is the staple of how politicians get elected.

    At least give a look-see to the website for the book The GReat American Jobs Scam [greatameri...bsscam.com]. The author cites case after case where companies get tax benefits, loans, grants, special public utility/infrastructure projects, you name it...and companies stick around until the well runs dry or the find a better deal elsewhere, playing governments off each other endlessly.

    Meanwhile, the math behind the "number of jobs" created/saved/etc is pretty dubious, and the author points out that most of them are temporary, contract, or otherwise low-income jobs. What's hilarious is when politicians claim they're helping the tax base- right after giving said company a giant tax break they'll never repay, because the company will jet as soon as the break is over!

  • by hellfire (86129) <deviladvNO@SPAMgmail.com> on Tuesday November 17, 2009 @04:16PM (#30133920) Homepage

    Just stop using sales tax. Most states already have income taxes of some kind, it's a simple matter of ratcheting down sales tax until it's eventually zero and ratcheting up income tax.

    Sales tax is unfair because it's a regressive tax. It's base on how much you buy, not how much you make, and the poor are taxed more percentage wise than a rich person. A $20 shirt with 6% sales tax costs the same if you make $10,000 vs if you make $1,000,000. Income tax is the fair way to go.

    **Commence flames from the other side of the political spectrum**

    • Re: (Score:3, Insightful)

      by DaveV1.0 (203135)

      Sales tax is unfair because it's a regressive tax. It's base on how much you buy, not how much you make, and the poor are taxed more percentage wise than a rich person.

      So, it is better to punish people for being successful rather than punish people for spending foolishly?
      How about the fact that people who make more, spend more?
      How about the fact that people who make more pay more in other taxes to the point they pay more taxes over all?
      How about the fact that people who are poor spend a greater portion of t

  • by MSTCrow5429 (642744) on Tuesday November 17, 2009 @04:22PM (#30134034)

    By claiming sales-tax immunity, says Mazerov, Amazon has enjoyed an unfair 5%-10% price advantage over local retailers.

    Then stop attacking the local retailers with taxes.

  • by Quiet_Desperation (858215) on Tuesday November 17, 2009 @04:35PM (#30134266)

    The sales tax is almost 10% where I live. Up yours, Mazerov, and three cheers for Amazon. And here's hoping a meteor hits Sacramento.

    • Hear hear! (Score:3, Informative)

      by bobobobo (539853)
      I'm right there with you. Ever since the sales tax has gone above 9%(for us) in this idiotic state, I've switched over to making as many purchases as I can online. That amazon prime fee, has more than paid for itself in the amount I've saved in not having to pay the state tax man.
  • by d34dluk3 (1659991) on Tuesday November 17, 2009 @04:39PM (#30134332)

    Why does everyone on /. always react with outrage when someone or some corporation does their best to avoid taxes? I personally hate taxes, hate the fact that the government basically steals a third of my paycheck every month. I have nothing but sympathy for someone who's doing their best to avoid them.

    Where does the outrage come from?

    Misguided moralizing about obedience to government?

    Irritation that someone else is avoiding taxes when you're not?

    Enlighten me, please.

  • by PhantomHarlock (189617) on Tuesday November 17, 2009 @05:23PM (#30135162)

    What ever happened to that bit about States not being able to tax interstate commerce? The 'use' tax is simple a loophole for that isn't it?

    There was that brouhaha with New York a year ago [forbes.com]

    "The U.S. Supreme Court's ruling 16 years ago in Quill Corp. v. North Dakota reaffirmed that a corporation must have a "substantial nexus" with a state in order to be subject to its sales and use taxes. When corporations lack physical presence in a state and rely only on common-carrier contacts or the mail to reach its customers, those corporations do not fall under the requisite "substantial nexus." Nor does a corporation's mere licensing of software to customers in another state fall under this requirement. "

    So why is this even being debated?

  • The Pesky Part (Score:3, Informative)

    by kilodelta (843627) on Tuesday November 17, 2009 @06:42PM (#30136412) Homepage
    Uniform Commercial Code pretty much says that only the Federal Government has the power to tax interstate commerce. Most states get around this by calling it a use tax which I thoroughly disagree with the concept.
    • Re: (Score:3, Informative)

      by butlerm (3112)

      The idea that only the federal government has the power to regulate interstate commerce is derived from the Commerce Clause of the U.S. Constitution, in Article I, Section 8. [cornell.edu] As interpreted by the Supreme Court in Gibbons v. Ogden (1824).

  • Backwards... (Score:3, Interesting)

    by dark_requiem (806308) on Wednesday November 18, 2009 @12:47AM (#30139784)

    Amazon has enjoyed an unfair 5%-10% price advantage over local retailers

    Wrong. Local Retailers have suffered an unfair 5-10% theft of their profits compared to amazon. If someone robs you, do you complain that your friends and neighbors weren't robbed to the same extent? You can wax poetic all you want about everyone paying "their fair share", but when party A takes money earned by party B, and uses it for purposes not approved of or supported by party B, it's called theft.

    • Re: (Score:3, Interesting)

      by salesgeek (263995)

      Local Retailers have suffered an unfair 5-10% theft of their profits compared to amazon.

      Not true at all. Sales tax is paid on top of the price of taxable goods and services. So a local retailer that charges $10 and $.50 in tax is not losing $.50 in profit to anyone. The out of state mail order merchant who sells the same item for $10 with no tax makes no extra profit. The state simply does not collect tax at the time of the transaction (the buyer should pay use tax on his or her state tax return).

      Allowin

  • Fuck the sales tax (Score:3, Interesting)

    by daem0n1x (748565) on Wednesday November 18, 2009 @07:05AM (#30141704)

    Simple, just abolish the sales tax. It's kind of stupid anyway. Income should be taxed, instead. If someone has more income, he'll buy more stuff so tax his income and sales tax is useless. If a company sells a lot, it has more income. Tax the income instead of the sales. The net result is the same with a lot less red tape.

    Sales tax is an invitation to fraud. In my country it's usual for contractors to offer two prices, one with a receipt including sales tax and another without receipt, without sales tax. This is illegal, of course, but it's common practice. Abolish sales tax and it's over.

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