Amazon has cut a deal to lay down its arms in its battle with Californian legislators over the introduction of a sales tax for online retailers in the state. The deal would postpone the imposition of a sales tax on Amazon until September 2012 and in return, the retailer would agree to stop spending its millions fighting the tax …
Moving The Target
There are already plenty of laws that require the consumer to pay taxes on items purchased online, but they can't be enforced. The States enacting these types of laws are just outsourcing their revenue collection points to retailers without having to pay for it. Sales taxes are silly anyway and ought to be done away with, but that'll never happen here because everyone prefers having their money eaten away 15 cents at a time.
Good One, California
'Outsourcing revenue collection points' in the same way as every bloody bricks & mortar store already has to do it. Amazon come across as chiselling thugs in this case - hope they get costs & penalties assessed against them.
Sales taxes silly?
On the contrary, consumption taxes have a lot of benefits, though they do have one drawback, which is that since they tend to be regressive in effect.
Not just sales
In most states it's a sales and use tax meaning every state expects you to pay a sales tax when you buy it in their state and an equivalent use tax when you buy it in a neighboring state, many times without concern for the fact you paid a sales tax in the neighboring state. The benefit is clear, it gives the pols more money to drive state sponsored SUVs and the other important things like lifeguards (which here in SoCal don't come cheap at $200k / year + benefits).
Amazon proposes that they get an extension to their tax holiday for 1 year, and in the mean time they will stop spending money trying to get the politicians pulled from office?
Does this not strike me as insane?
FIrst, the fact that Amazon knew about the tax laws and requirements and has not paid their taxes since July, they owe the state of California $$$$. And by extending the no tax time, the $$$ that they already owe goes away, they have more time to save $$$ before they have to decide what they want to do. Nothing stops them from moving their warehouses out of CA, cutting ties to local sites in CA, and then flipping off CA telling them to Go FSCK themselves.
Note: This means CA doesn't collect funds already owed to them and they get nothing in the future.
Second, Amazon admits to spending $$$ in the state of California in an effort to get people motivated to apply pressure to their government officials. Now if I were a guvment official in the state of Kalifornia, I'd be happy that $$$ was being spent and tell Amazon to bring it on! The odds are that Amazon will strike out and still owe my state $$$ and they are creating jobs and spending money in my state! Yee Haw!
Or am I missing something?
I'd guess that Amazon are betting that there will be a Federal solution (thus trumping the states solution) before they have to start paying tax. The longer you can delay paying a large penalty then the longer you have to collect interest on the cash that you put aside to pay the bill.
Sounds dumb? Ask Exxon how the Exxon Valdez payments are working out for them...
Yes you are missing something
Amazon is not a California business or corporation. Amazon has no physical location in California.
Why should Amazon be subject to California's laws?
If I owned a shop in North Carolina and you walk in to buy something I am required to collect the sales tax. I as the business do NOT pay the sales tax, you do. The purchaser is paying it and they are the ones required to pay it, but the state requires that I act as their agent in collecting it from you. That's fine. I'm in their jurisdiction and beholden to their laws.
If you order it from California, I am not their agent, nor in their jurisdiction. Legally I am not subject to their laws, but you are. You still legally owe what they say you owe. If they passed a law saying anyone sending a letter owes us a dime, should I send a dime to the CA state every time I send a CA resident a letter? Hell, no.
This is just CA and the other states pulling these shenanigans trying to get illegal laws enforced because they know their residents won't be honest.
In fact let's flip the idea. What if NC passes a law saying I must collect sales tax from anyone making a purchase regardless of where they are. Would you be fine with paying NC a sales tax for an online purchase if you lived in France?
NC has no Amazon affiliates because of NC pulling this shit. I know two people who were making $10k+ a year as affiliates and paying income tax on that. Now NC has not sales tax and no income tax on any of those purchases? Bravo to the folks in Raleigh.
I suggest you do your homework.
Outside of the 'affiliates' which are in California, Amazon has some of their software development being done in both Orange County (Los Angeles) and San Francisco.
"Software development centers
The company employs software developers in centers across the globe. While much of Amazon's software development is in Seattle, other locations include Slough (England) and Edinburgh (Scotland), Dublin (Ireland), Bangalore, Chennai, and Hyderabad (India), Cape Town (South Africa), Iaşi (Romania), Shibuya, Tokyo (Japan), Beijing (China), Orange County (United States), and San Francisco (United States)."
Take from the Wikipedia entry on Amazon.
So Amazon does indeed have a presence in California to the point that they have to charge sales tax and report sales tax to the state of California.
Yes I am aware of the laws concerning sales tax and the fact that the burden of paying the sales tax on good purchased out of state fall on to the consumer. So if I live in OH and purchase something from California, I owe sales tax on the purchase to the state of OH and there is no burden on the California unless that company had a business presence in OH.
The US courts have already determined that the affiliates program constitutes a business presence such that Amazon has the requirements of collecting and paying sales tax to those states where they have an affiliate program.
My point was that it would be insane for the state of California to even consider Amazon's offer.
We sort of have that in Europe, in that selling to a consumer in the EU means you have to collect tax on the sale. At least they're organised enough that you only have to pay it once even if you're ordering across national boundaries. The only way the US authorities are going to manage to get a coherent tax policy is for it to be a federal one, even if it mandates that the states get the money divided up in some manner. I can quite see that having to charge and account for fifty different tax rates would be somewhat expensive, especially for small on-line retailers.
"Why should Amazon be subject to California's laws?"
Well, because it's selling stuff to people who live in California. That seems like an entirely reasonable justification, to me.
"If you order it from California, I am not their agent, nor in their jurisdiction. Legally I am not subject to their laws, but you are."
That's an extremely black-and-white position, and I suspect unrealistic. There are many doctrines as to exactly what entities are subject to whose laws; I'd suggest you're overreaching in stating as if it were an utterly undisputable fact that anyone who is outside of a state's physical area can never be subject to its laws.
Note that at a federal level, the U.S. is entirely happy to claim that its laws apply to people who are not within the borders of the U.S. at the time and are not U.S. citizens in quite a lot of circumstances.
Basically, it seems like you're presenting one particular argument - quite a narrow definition of a state's right to impose its laws - as if it were an unarguable and universally acknowledged fact, which I don't believe is the case.
The deal would postpone the imposition of a sales tax on Amazon until September 2012^H^H^H^H^H^H^H^H^H^H^H^H^H^Hafter the end of the world!
This is the first I've heard of it, and one of the reasons for the sales tax is it's one of the few sources of revenue that goes directly to the state.
On the other hand, state sales tax is insane. There's 3 different tax rates in my county alone. That shit needs to be reined in before expecting some one-man shop to handle it. I'm sure Amazon can write/buy some expensive code to do it, but the guy hand-building bike stands in his garage can't.
It's called the Interstate Commerce clause
While this clause has been abused over the years, this is a legitimate use of it. Congress can say very simply that a company doing business in a state has to pay the base state sales tax. Makes it easy for everyone. Knowing this Congress the bill will be five hundred pages long.
At some point the USA is going to have to sort out it's tax policies and revenue streams - sadly this doesn't look like something that's going to happen soon.
It's worth noting that the states of Oregon, Montana and Vermont seem to manage just fine without any sales tax while California residents pay some of the highest sales and income taxes in the US.
To add to the various State, City, and County sales taxes you have the additional complication of "tax holidays" where none or only some of the purchases are taxed for a few days - locally in Louisiana we've had tax holidays for "Hurricane Supplies", "School Supplies", and "Hunting Supplies" over various different weekends in the last couple on months. During these happy times the state portion of the sales tax is not charged but the local (City / Parrish) tax IS charged.
The elephant in the room with collecting California Sales tax outside California is the Amazon will now have all their sales audited by the California Revenue Department - frankly, that's a nightmare!
Re: Federal tax?
The proposal in congress is not for a federal sales tax.
Instead it's just a quid-pro-quo for the states: whether to have a state sales tax is still up to the states, but *if* at least 10 states get their act together and sign up to consistent sales tax rules (no variation in what's covered, some predictable way to map an address to sales tax rate (e.g. zip code), etc.), then in return, retailers shipping to those states have to collect the tax.
Apparently such a uniform set of rules has existed since 2002. But the assumption has been that states cannot enforce this on their own because the Constitution does not allow the states to impose duties/tariffs on interstate trade (only Congress can regulate this). A new federal law would fix this.
Presumably if this gets in place, the one man shops can sign up to an address-to-tax-rate lookup service since only the rate would vary.
It's the old "if you owe the bank $1000, you are in trouble - if you owe the bank $Bn, the bank is in trouble"
If you owe enough tax it's worth negotiating !
Checks and Balances
Mailorder has been one of the few things keeping checks and balances on outrageous sales tax rates in the USA.
Today 10% is not unheard of, but not common. If sales tax rates are simplified and coordinated nationally we will quickly be in VAT-rate territory.
Don't owe sales tax in CA
@Ian Michael Gumby, except they don't owe any California tax, they severed any and all ties with any California-based retailers so they have literally no presence in the state (which really does nothing but hurt California further, since people there who were making money retailing stuff via Amazon now have that source of income cut off.) At this point they are apparently offering to un-sever these ties.
I'm with Amazon on this one, though, Gene Cash summarizes a reason pretty well. When you have a physical store, it's easy enough to figure the tax rate... well, except food... with these modern fully artificial "foods", the line between (non-taxed) food and (taxed) food-like substances can get really blurry. But still, there's hundreds or even thousands of tax rates in each state, based on the state tax, the regional (county usually) tax, the municipal (city) tax and any local option sales taxes they tack on (these always get voted down at least 8 times, and whoever wants the money just keeps putting it up to a vote until people can't be bothered to come out to vote it down and it passes.) Places that do collect will spend thousands, even tens or hundreds of thousands, of dollars on software that attempts to collect the right tax. Then of course all those various taxes have to be mailed out to various tax collection points. I know if I were retailing online, I'd simply refuse to even try to collect them. I know I'm not subject to California law either.
It ain't that difficult - in fact, it's a fairly simple logic - if condition x is y then charge z. European retailers and online businesses have been doing it for years (you see the requirements for the EC reverse charge and it can be more complicated). I'm pretty sure that the level of analysis they do on customer purchases etc is a lot more complex and difficult than assigning a tax rate...quite a lot of the rest of the world can deal with these complex tax issues fairly well (and different currencies as well!). I'm sure our American friends will be able to handle it...
I'm going to try that - write to HMRC saying I'll stop being awkward with my returns if I can get a free pass this year.
You do owe sales tax...
Strictly speaking its not a sales tax but a 'use' tax and it will be collected on larger purchases (over $5K in value). Its not been collected because of the cost of administration and because it was thought at one time that Internet based businesses needed the tax break to help them get off the ground.
Amazon are in the wrong here. Like everyone else I don't like paying tax but at the same time I do like to live in a functioning society so I grumble and pay up just like everyone else. Evading sales tax not only is unfair to the State but it's also unfair to the bricks and mortar companies that Amazon competes with.
They also need to think a little outside the box. Evading state taxes like this is paving the way for a Federal VAT. You're already getting screwed over big time by VAT in England -- 20% on everything, its a serious rip-off -- and the last thing we want to do in the US is encourage government to fix revenue shorfalls by national tax collection strategies like VAT. Its bad enough keeping spending under control at the local level. (...and how much of your hard earned money disappears into the EU, never to be seen again?)
Your tax levels aren't high enough. How many states are now in serious financial trouble? Americans don't seem to get that things like roads, sewers etc all need paying for but whenever a state or the government says that they need to bring in x amount of revenue to pay for it most yanks don't see why they should pay tax at all but then bitch and moan as things start to fall apart or projects are scrapped due to not enough money to pay for it.
The Interstate Commerce Clause was written at a time when it was not even imaginable that people would sit in their bedroom on a laptop purchasing every item to outfit their home and lives from companies as far away as the other side of the globe, in a couple clicks of a computer mouse.
The 'tax holiday' for internet commerce has been a big boondoggle that has helped to decimate the retail industry in this country in favor of a handful of big-box retailers and dumbed-down national chains, or buying everything online.
I'm all for e-commerce, but the tax revenues that states used to get from retailers don't just evaporate into thin air and then magically everything in that state runs the way it always did. Yes, Americans do want to have their cake and eat it too.
Amazon is in no danger of 'failing' in 2011 because they have to collect a few percent in sales taxes. (Which US citizens are supposed to pay anyway, of their own volition, and document this on their annual IRS tax returns)
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