Amazon Pushing National Sales-Tax Bill, a Victory for its All-or-Nothing Stance

11/9/11Follow @curtwoodward

Looks like Amazon’s pugnacious bet on national sales tax reform is paying off.

The Seattle company (NASDAQ: AMZN) says it is strongly supporting a proposed national law that would force online retailers to collect local taxes on more of their sales, ending a longtime loophole originally meant to help catalog businesses. The National Retail Federation, which has battled with Amazon on the sales tax issue, also is on board with the bipartisan Senate proposal announced today (the federation represents lots of brick-and-mortar retailers).

So how’s that a win? Amazon has gone to some pretty extreme lengths to avoid being deputized as a tax collector for state and local governments, insisting that its shipping centers are different companies and even shutting down entire networks of third-party sellers when state lawmakers pass “Amazon tax” bills.

That behavior has caused a lot of turmoil for the ecosystem of smaller businesses that rely on Amazon. One example is the story of Shopobot, a comparison-shopping startup that relocated from the San Francisco Bay Area to Seattle earlier this year specifically because Amazon axed its affiliate program in California.

But Amazon has said for a long time that it favors a national solution, rather than a hodgepodge of different state rules. Specifically, the company has supported something called the Streamlined Sales Tax project, in which states agree to a common set of sales tax definition and practices.

The common standards are important because each state taxes things differently—sometimes wildly so.

Cue up today’s bipartisan Senate bill, which uses the Streamlined Sales Tax program as a centerpiece of any national tax system for online sales.

So, while any retailer would certainly enjoy the fact that it didn’t have to act as a big tax collector, and could price its products a little better to boot, Amazon clearly knew the days of tax-free Internet sales weren’t going to last forever. It placed its bet on a national system, and made some pretty belligerent moves to reinforce that preference.

And it looks like that strategy is paying off.

There’s no guarantee that this bill will actually become law, of course—the federal lawmaking process is both arcane and volatile, and any tax vote will be a tough one in this economic climate. But it’s got a lot of the hallmarks of something that could pass.

An interesting side note: Shoppers in Washington state already pay sales taxes on Amazon purchases, because the company’s headquarters are here. But the state also says it’s only collecting taxes on about half of the online and mail-order purchases by people living here, and that adds up to some big numbers.

If the new Senate proposal becomes law, Washington officials estimate that state and local government treasuries could raise about $242 million annually. That comes at a time when the state has been cutting billions from spending on education, health care, and other expensive government programs.

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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  • SWilson

    Technology today can calculate shipping costs in seconds for almost any location in the world. Ebay, Overstock and many others including NetChoice all maintain that multi-jurisdictional interstate sales tax calculation is too difficult, however all maintain vast computer infrastructures capable of keeping track of millions of global transactions including commissions, cost of goods, and even incredibly complicated Value Added Taxes, Provincial Taxes and many other taxes and fees across many different country borders. I assure you sales tax calculation, collection and remittance for online sales tax legally due is easily accomplished.

    The Marketplace Fairness Act will assist many businesses of all sizes to realize unknown profits making them more competitive. The online component of my business is in its infancy. After examining possible avenues of growth I was immediately confronted by the tremendous burden of tax collection and remittance in my own state as well neighboring states. I said to myself, “there has to be a better way!” So I turned to the Internet.

    There is a simple solution: TaxCloud.

    The statements by large Internet merchants and others continue to confuse me. My company now utilizes a PayPal checkout button seamlessly integrated with TaxCloud.net. Now my business is enabled to calculate, collect and remit sales tax for any jurisdiction in any state. It is simpler in most cases for my business to calculate and remit sales tax than to deal with shipping. If my business can manage to collect legally due sales tax simplifying my customer’s lives, why is it so hard for Ebay, Overstock and their affiliates as NetChoice claims?

    Technology available freely on the Internet (like TaxCloud) is more than capable of seamlessly handling sales tax calculation and remittance. Sorry everyone, the “too burdensome” argument carried merit in 1967 and in 1992 (when SCOTUS last ruled on this matter), but in the era of modern computing where Ebay maintains a dominant position, multi-jurisdictional sales tax calculation and remittance is easily accomplished.

    So what is the real reason Ebay and other companies choose to evade supporting our schools, hospitals, infrastructure, libraries, public parks and so much more by refusing to easily collect and remit sales tax legally due?

    It is clear that the real burden of sales tax falls upon the consumer, and there is no burden to business of any size. Any business can easily calculate, collect and remit sales tax legally due utilizing modern technology while simultaneously realizing greater efficiencies and profit. Consumers truly benefit by eliminating the burden of having to track and remit sales tax due on Internet purchases.

    The Marketplace Fairness Act enables states rights to collect sales tax legally due while maintaining states individual rights to tax independently is long overdue. Remember the Boston Tea Party. Origin based sales tax fails to maintain state’s Constitutional autonomous taxing authority.

    Unrealized to most consumers are the true costs of permitting and embracing the illegal practice of tax evasion. This year Connecticut enacted the largest tax increase in it’s history. The increase included eliminating clothing exemptions, raising the sales tax rate %.35, %1 on all luxury goods over $1000 and tax on alcohol went up %20. CT is not alone. West Virginia now taxes groceries to make up for lost sales tax revenues resulting from increasing convenience of online shopping. Rhode Island as well as doubled, that’s right a %100 increase, on all park entry and parking fees. Property taxes in states such as NY have increasing at an alarming rate to maintain funding primarily for education.

    Lower income wage earners are actually the hardest hit. Without the means and available credit to participate in online sales their only option is to shop locally paying increased sales tax rates, such as in CT, paying the tax bill for those who selfishly continue to evade their tax obligations. More interesting is the fact that for every million dollars in sales a brick and mortar company provides 3.8 jobs, while large online merchants provide only .8 jobs for the same amount of sales. Tax policies are not created or imposed to provide segregation of businesses. The passage of Federal legislation will level the playing field benefitting many businesses and workers in every state.

    Sales tax is a fair and impartial tax billed directly to the consumer and in no way harms businesses when applied fairly and equally. Mall vacancy rates are now over %20 nationally and increasing as more brick and mortar stores continue to close their doors. As more stores close jobs are lost, homes are lost and…. you get the picture. The real burden is now upon the millions of small businesses who provide many more jobs and opportunities to find ways to compete with the large Internet retailers.

    The real burden today is upon the consumer and the many small to medium sized businesses being consumed by misinformation. I discovered that by progressively employing modern technology my small start up business is now able to compete in any state without fear of nexus laws or affiliate relationships, and is more efficient and profitable. Federal Legislation will enable states rights to collect sales tax legally due providing much needed revenue, create and save many jobs, and most importantly permit states to eliminate other harmful taxing methods while simultaneously removing the many burdens confronting businesses today.

    I applaud Amazon for their Integrity publicly supporting the Marketplace Fairness Act.

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