Rocket Bomber - article - business - retail - Amazon and Taxing My Patience

[Please also read the preceding post, Cheaters Prosper]

I’m a bookseller—not a lawyer—and I don’t pretend to know all the ins and outs of tax law, but a couple of Google searches can pull up most of the information you need to know why Amazon should be collecting the tax. I’ll leave you to your own conclusions on why they fight so hard against it.

First up:

http://www.newrules.org/retail/rules/internet-sales-tax-fairness

“In a 1992 decision, Quill v. North Dakota, the U.S. Supreme Court ruled that retailers are exempt from collecting sales taxes in states where they have no physical presence, such as a store, office, or warehouse. (The legal term for this physical presence is ‘nexus.’) Although the case dealt with a catalog mail-order company, the ruling has subsequently been applied to all remote sellers, including online retailers. The Court said that requiring these companies to comply with the varied sales tax rules and regulations of 45 states and some 7,500 different local taxing jurisdictions would burden interstate commerce.

“In its ruling, the Court specifically noted that Congress has the authority to change this policy and could enact legislation requiring all retailers to collect sales taxes without running afoul of the Constitution. ‘Congress,’ the Court declared, ‘is … free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes.’

“Today, software has largely eliminated the difficulty of calculating and remitting sales taxes for the country’s many state and local jurisdictions. Indeed, Amazon.com, which opposes extending sales tax to online retailers on the grounds that it would be ‘horrendously complicated,’ collects sales taxes nationwide for Target as part of its management of the chain’s online business.”

So, first: the argument presented by mail-order and online retailers against their obligation to collect the tax [19 years ago!] has been made irrelevant by technology.

Second, the Supreme Court took the time to point out Congress could reverse their decision at any time with simple legislation.

Most importantly, though,

“[W]hile remote sellers are not required to collect sales taxes, the tax is still owed by the individual who made the purchase. Individuals are suppose to keep track of these purchases and pay an amount equivalent to the sales tax as a ‘use’ tax on their state tax returns. Few people do, however, and the use tax is almost impossible to enforce, which effectively exempts these purchases.” [emphasis mine]

Hear it again from another source: http://www.nolo.com/legal-encyclopedia/sales-tax-internet-29919.html

“Consumers who live in a state that collects sales tax are technically required to pay the tax to the state even when an Internet retailer doesn’t collect it. When consumers are required to pay tax directly to the state, it is referred to as ‘use’ tax rather than sales tax.

“The only difference between sales and use tax is which person — the seller or the buyer — pays the state. Theoretically, use taxes are just a backup plan to make sure that the state collects revenue on every taxable item that is purchased within its borders.”

And from Wikipedia: http://en.wikipedia.org/wiki/Use_tax

“A use tax is a type of excise tax levied in the United States. It is assessed upon otherwise ‘tax free’ tangible personal property purchased by a resident of the assessing state for use, storage or consumption of goods in that state (not for resale), regardless of where the purchase took place. The use tax is typically assessed at the same rate as the sales tax that would have been owed (if any) had the same goods been purchased in the state of residence. Use tax applies when sales tax has not been charged. Purchases made over the Internet and out-of-state are the most common type of transactions subject to a use tax.” [emphasis in original]

also: http://en.wikipedia.org/wiki/Sales_tax#Enforcement_of_tax_on_remote_sales

“In the United States, every state with a sales tax law has a use tax component in that law applying to purchases from out-of-state mail order, catalog and e-commerce vendors, a category also known as ‘remote sales’. As e-commerce sales have grown in recent years, noncompliance with use tax has had a growing impact on state revenues. The Congressional Budget Office estimated that uncollected use taxes on remote sales in 2003 could be as high as $20.4 billion. Uncollected use tax on remote sales was projected to run as high as $54.8 billion for 2011.” [emphasis mine]

It is not that internet purchases are “tax free” — they’re not. It’s a matter of who collects the tax. If you want to argue that internet purchases shouldn’t be taxed, well, take that up with your elected representatives — but as noted above, this went all the way to the Supreme Court and the ruling came back that tax is still owed even if it is not collected at time of purchase — in both the 1992 case, Quill Corp. v. North Dakota and the earlier 1967 case cited as precedent, National Bellas Hess v. Illinois Department of Revenue, no one was arguing that the tax was not due, only that making out-of-state companies collect the tax constituted an unfair burden. The tax due is not a matter of where the company headquarters is located, or which warehouse it ships from: it’s a matter of where you, the purchaser, live.

When you buy a book from a bookstore, we collect the tax at the register (It’s listed on your receipt). We send a check to local and state governments monthly, and the sales tax revenue is an important part of what keeps your local municipalities running: it would be very hard to make payroll (for say, firefighters and police officers, and to be fair, also the really awful people at the DMV – but they deserve a paycheck too) without this stream of income. If these sales tax revenues weren’t available year-round, your city or county would have to borrow the money, and then wait until April (or later) to pay the loans back, incurring interest and fees that eat into already small budgets.

Amazon’s continued resistance to collecting taxes has nothing to do with the internet being tax free. [in case you missed it: the internet is not tax free]

Amazon doesn’t have to advertise the tax when they list prices — just like they do not currently list shipping costs. They can still sell a 500 page hardcover book for $11.37. They can still beat us on price, and force bookstores into bankruptcy by doing portions of our job better than we ever could. These fundamentals would not be changed if Amazon added one more little line item, between the price they charge and the shipping fees. Amazon would make no less money.

Well, Amazon might make marginally less money. Like, one-millionth less. But it’s still cheaper to pay for lawyers than it would be to actually collect the tax and forever burst the myth that Amazon is tax free.

When I pointed out that Amazon cheats, I was referring to the near-universal [incorrect] perception among shoppers that Amazon “will always be cheaper” by whatever percentage equal to that tax. It is such a widespread belief that I encounter it at the bookstore every day, and I even get “corrected” by well-meaning people on the internet.

When retailers cry foul and ask for equal treatment under the law, we’re not asking that a ‘handicap’ be imposed upon Amazon because we just can’t compete. Almost the exact opposite is true: We’re asking Amazon to stop cheating and play by the same rules. We’re asking Amazon to stop abetting widespread tax fraud. We’re asking Amazon to disclose to their customers the actual costs of purchases, including the tax, and customers’ obligations under the law.

I’m just trying to sell you a book. *I* didn’t come up with the sales tax, I don’t “charge” tax [retailers collect it on your behalf], and Amazon will beat me in most (but not all) cases purely on price whether they also collect the tax or not.

But let’s stop perpetuating the myth that internet purchases are free of tax.
Also, allow me to correct the perception that asking Amazon to do the right thing [morally if not legally — and also the right thing for their customers] is ‘sour grapes’ from grumpy retailers over losing sales to the internet.

I can provide intangibles at the bookstore that Amazon can’t. I’ll compete on that. But I’d appreciate a level playing field without the de facto tax-subsidy that allows Amazon to advertise an additional discount that doesn’t really exist.

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Full disclosure:

I work full time as a bookseller at Barnes & Noble. I’m a manager at one of their many, many stores.

I’m also an Amazon affiliate, and earn a small sum from linking from my book reviews to the Amazon site. [I’m also signed up for 3 other affilate programs I use on a regular basis, so my relationship with Amazon is not unique.]