Amazon's bosses have their fingers crossed in hope that the US government will come round to their way of thinking on sales tax for online retailers after winning a year's reprieve from legislators in California. A new amendment to AB155, the so-called Amazon Tax law that will allow California to collect sales tax from online …
"sales tax in California, which can be as high as ten per cent"
VAT, which is the European equivalent of sales tax, is around 15% in most of Europe and can go up to 21% is some countries. So why is 10% implied to be high?
Calling it the "Amazon tax" is also misleading, since the tax is paid by the consumer, not by Amazon. Amazon is just passing this extra take on to the state government (which needs it desperately since they're, to use the technical word, skint).
It's unlikely that such a tax will significantly hamper Amazon since including sales tax just puts them on the same regulatory playing-field as a high-street retailer. Amazon still has the volume purchasing power to be able to offer prices that undercut the high street.
ALL YOUR DATA BELONG US
Agreed - it's unlikely that charging the customer sales tax is going to put much of a dent in Amazons sales, particularly since Amazon would then have an incentive to put a distribution center in California which would mean next day delivery of most items. This could do even more damage to the local bricks and mortar stores than the current arrangement - but they probably haven't figured that out yet.
The complexity is that applying the sales tax in this way means that the tax rate depends, not on where you purchase the item, but where you live - different towns, cities, counties, school districts and fire protection districts may all impose taxes on their residents and they will want to receive their own portion of the sales tax ... and of course the tax can vary depending on the day of the month. Some communities have sales tax holidays on certain types of merchandise (eg hunting supplies at the start of hunting season, school supplies the week before school starts etc) so Amazon will need to keep track of all of that.
You'll have to trust Amazon to get all the calculation right of course - but the State does not have to trust Amazon because the State will require Amazon to keep records of everything that they sell, whom they sell it to, and where they live ... and the State will audit Amazon regularly to ensure compliance with the tax code - which means that Amazon will be handing all of this information about everything that you purchase, what you paid for it, and where it was delivered to each State for which it is collecting sales tax.
Not True (Not Practical...)
10% is crazy high sales tax. Here in the States most people pay a Federal Income Tax and a State Income Tax, with sales/use tax on top of that. We don't even get health care out of the deal but the real cost via taxes is HUGE. We just suck at math.
The problem is that sales tax in California is a giant pain in the arse and is totally screwed up since basically every two horse shit hole gets to set their own rate. How bad is it? When you buy a car the dealer collects the tax based on where the car will be registered. If one person writes down the wrong information you get tossed into a nightmare.
Case in point, I live in Orange county but bought a car in Los Angles county. I was charged the wrong sales tax because the finance guy wasn't smart enough to record the right county. Mind you he got the right city sales tax but totally screwed the county part. Now I've been trying to straighten it out since April when I bought the car so I can get back what amounts to slightly more half a monthly payment. Oh yeah, do you think anyone actually knows whether the money went? The answer is no, it either went to LA or Orange but they either don't know or don't want to part with the extra few hundred dollars. I see a trip to the dealer and making a giant stink until I get a check and let them deal with the gubbermint. It was their mistake after all.
Does anyone wonder why Amazon is so eager to avoid a constant state of flustercuck?
The staggering complexity created by the state sales tax mess is why "out of state" sellers don't need to collect sales tax-- they can claim they don't have a presence, so they don't know what the laws are. (indeed, you can go from brick store to brick store and find a few items that are taxed in one and not in another in the same state.... so even the locals don't know how to categorize every item).
Why not cut to the chase in America and jump past the tax monkey (all 100K pages in America last I heard...), repeal the income tax amendment and implement the Fair Tax-- just a giant VAT tax (except, on everything with no exceptions) with no idiocy with the income tax. A pure consumption tax. Sadly, Washington cretins can't keep their grubby paws off the tax code.
Besides, it would never pass in America, since less than half the voters pay direct income tax anyway....
No New Taxes!
I'd expect that the Republican, Tea Party controlled members of congress will have a problem voting for a "new tax" and since their position is that even voting to renew an existing tax is the same as voting for a "new tax", Amazon is probably figuring that this issue is dead in the water at this point. Added to which, California reliably returns Democrats to the Congress and Senate which is another strike against them in the partisan politics of the day.
If Amazon bankrolls enough politicians of both parties then they could probably get a complete exemption of on-line retailers from out of state taxes. Let's see how many politicians suddenly become Kindle users ...
Cry me a river.
Amazon should suck it up and pay taxes just like the rest of us. Bunch of whiners.
Amazon wouldn't be paying the taxes. Their customers will.
That's what always gets lost in these debates on corporate taxation: Corporations never pay taxes, of any kind, themselves. They factor taxation into their cost of doing business and charge their customers accordingly.
All high taxation on corporations - income tax, sales tax, what have you - does is increase the cost to the end consumer and decrease the corporation's global competitiveness.
The problem here is not with the amount of taxes being paid to the government. The problem is the amount of money being spent by the government.
Way to miss the point
It's a sales tax, which means Amazon won't pay anything, purchasers will.
"It's a sales tax, which means Amazon won't pay anything, purchasers will."
Way to miss a point back at 'cha!
With the sales tax, the net cost of the product goes up.
If this rise isn't an issue to the customer ALREADY, then Amazon would be charging the higher price already.
Get it? A business sells things at the highest price they can get away with balancing the higher price against falling sales.
Whatever way you look at it, this works out as a cost for Amazon (after all, with the tax, and the associated price hike, Amazon may have to reduce their original price of the product to remain competative.
"Get it? A business sells things at the highest price they can get away with balancing the higher price against falling sales."
Yes, that's true - in a theoretical monopoly. Out here in the real world, there's competition - and competition forces sellers to sell for as low a price as they can, so that they don't lose business to their competitors.
Amazon has many, many competitors.
When you tax a market segment, you force ALL the competitors within that segment to raise their prices. They don't care, because their competition is forced to raise prices by the same amount, so it doesn't hurt their competitiveness. The only one who gets hurt by such taxation is the consumer - who has to pay more no matter where he buys the product.
In this case, since Amazon can pull out of California, they are doing so in order to improve their competitiveness - if the Californian consumer can shop online at an outlet that doesn't have to charge the tax, and therefore can beat Amazon's price, they will.
Basic economic education is so lacking in our society. This ignorance is a cause of a boatload of social ills.
@tantiboh : Double fail
Fail right back at you.
""Get it? A business sells things at the highest price they can get away with balancing the higher price against falling sales."
Yes, that's true - in a theoretical monopoly. Out here in the real world, there's competition - and competition forces sellers to sell for as low a price as they can, so that they don't lose business to their competitors."
... which is what I said. See "against falling sales"
"In this case, since Amazon can pull out of California, they are doing so in order to improve their competitiveness - if the Californian consumer can shop online at an outlet that doesn't have to charge the tax, and therefore can beat Amazon's price, they will."
As I said, if they stayed the cost would be picked up by Amazon in that they'd lose profit on items sold to remain competitive to companies NOT in California.
"Basic economic education is so lacking in our society. This ignorance is a cause of a boatload of social ills."
Judging by your above comment and your total inability to understand what I wrote, I'd say that basic English education is a cause of a boatload of social ills.
At least be correct before making pretentious posts.
slight update as a CA observer
There appears to be some incorrect information out there.
1) Amazon already has a CA presence ... therefore, Amazon already pays CA taxes
2) Amazon affiliates are in CA and other states. Tax collection responsibility on behalf of the Amazon affiliates is the crux of the law.
Amazon affiliates almost never collect the taxes (by law, the individual buyers are supposed to report it and pay it. This law goes way back to the beginning of the Sears catalog, etc and was crafted for tax reporting on mail order goods that were sent interstate).
3) If the federal law is not passed, CA will not see one extra dime from their state law. Amazon will simply eliminate all their CA affiliates. Amazon already did this in NY, Texas, and the other 3 states that already passed similar laws. It is foolish in the extreme to this that Amazon will not do this again.
4) Lastly, the title "Amazon Law" harkens back to a similar NY law (NY was the first state to pass a similar law), and Amazon was the biggest retailer impacted. Therefore, the various news outlets started referring to it as the Amazon Law .. and the nickname stuck.
One minor problem
"1) Amazon already has a CA presence ... therefore, Amazon already pays CA taxes"
I don't believe they do have a presence here. I'm in California and Amazon has never charged sales tax for anything I've purchased from them. If they don't collect the sales tax from me do you honestly believe they pay it to Cali? I also buy from newegg and they have offices just up the road in Covina and they always collect sales tax.
NY Sales Tax
Amazon collects NY sales taxes.
Amazon is suing in the state of NY in attempt to stop collecting NY sales tax, but the judges are on the payroll (literally!) of the state, so how do you think the ruling will go? You got it in one guess!
Hasn't Amazon already cut off its CA affiliates?
And it's not as simple as "Amazon doesn't pay the tax, consumers do". It has more of a negative impact on Amazon than you'd think. Even a small dent in the quantities Amazon sells (> $34 billion/year in sales) is a sizable amount of money. And this is not even counting the extra administrative/building/tracking/filing costs for Amazon (as others have pointed out, figuring out all the appropriate city/county/state taxes in California is a big pain, and the rates are CONSTANTLY changing based on things like type of product sold), which due to their huge size is probably an additional significant cost for Amazon, a cost that your basic local business wouldn't have to worry about as much (unless they sold as wide a range of products as Amazon, and did a high volume of selling and shipping all over California, and had a lot of customer service staff answering questions about taxes.).
Should they have to track and collect sales tax that similar businesses are tracking and collecting? Sure. But are there any? With that range of products, that volume of sales in CA, and the volume of customer service reps (and related costs) they would need to deal with questions about taxes? If the additional cost to Amazon is much more than the potential benefit, what do you think they're going to do?
It isn't that hard to work out
Collecting sales tax in California is not that hard. The rates do not "vary all the time". They are available on-line through the State Board of Equalization and the rules for their application are straightforward. The quarterly sales tax return is mildly headache making if done on paper, but anyone who runs an operation of any size in California will have a computer system that tracks all this. Sales tax usually applies at the point of sale, it doesn't vary except for cars and construction materials which are taxed by point of use. The rules for the application of sales tax are fixed throughout the state, it is only the actual rates that vary by local jurisdiction.
It is actually a sales and use tax. All Californian taxpayers have to declare all purchases they have made on which they did not pay tax on their annual state tax return. That currently would include anything bought from Amazon - they must then pay the state tax at the appropriate rate, so says state law. No-one ever does though, which is why they want to collect the money from Amazon and other online retailers instead..
So why is 10% implied to be high?
In the UK VAT is not the only tax. Neither is it in the US. Without knowing the full breakdown (such as national tax as well as state), your argument is one of ignorance such as politicians use - like lowering income tax and hiking NI.
The fact is, in CA you can pay 10% and in other states 0% as a kind of surcharge. Like buying a pint in London :)
But...... In the UK, isn't it true we don't pay VAT (sales tax) on books, which is a big chunk of amazons operations!
we do however pay VAT on eBooks, which if Amazon is to be believed is more of a chunk than the paper variety.
Amazon should respect laws and taxes like everybody else
I live in Australia and I purchase items through the Apple store. My invoices clearly show the GST taxes that I pay when I purchase things. I have never bought through Amazon, but they should also respect the laws and taxes of goods sold into wherever they sell their goods.
I buy online for convenience, but will continue to refuse to buy from Amazon until I stop seeing articles like this. Their greed may gain some customers, but their greed also stops some customers.
Its called being a good corporate citizen. And it is especially pertinent in that they are a US company, and that CA is a US state. They are competing with brick and mortar stores in the state they are selling into which employ people and paying all sorts of taxes there as well. Amazon are just being greedy in that they can try and increase market share by not applying the relevant taxes onto the price of the goods they sell.
Well, greed in the long term does not pay. Its called Karma.
Amazon does respect the laws just like everyone else - it's California that is trying to change the law to their own benefit by forcing companies outside the state to collect sales tax on sales delivered to addresses within their state.
Suppose I live in California and I buy a widget from you - would you charge me GST? No, because you are shipping the widget to me - because I live in California you will need to calculate the sales tax due to California - a rate that will vary depending on where I live and possible even the day of the week when I make the purchase. And then you have to remit the sales tax to the state of California.
Yyou'd better keep good records because since you are now a tax agent for California they have the right to audit your sales (all of them) to verify your compliance with California's tax code.
I guess you are right there. I wouldn't charge GST because it wouldn't apply in CA anyway, but I guess I wouldn't charge the relevant CA taxes either because I wouldn't know how to go about it anyway, and as has been pointed out, every jurisdiction would have there own laws and taxes - it indeed would be a nightmare to implement if you are an online retailer, since a physical store only has to worry about the one set of rules where it is located.
Work with congress they say? How about working with the private sector?
Amazon might as well be a government operated company if they aren't going to collect taxes.
There are numerous loopholes brick and mortar could use to do the same things amazon does but they would be tried for evasion.
Amazon has friends in high places.
Don't buy from them. If you are a business owner that collects taxes or work for a business that collects taxes you are only hurting yourself.
Until we are all treated equal, some will suffer.
That some is the rest of us.
In Australia the taxes for a product are the same across the entire country. Sure, there's the Luxury Tax, fuel, alcohol and cigarette excises, but the rates are consistent. I don't pay a different rate of tax in Brisbane to someone living in Ballarat.
I see your point though. We can always ignore them and let them strangle themselves in claim and counter-claim while we move forward.
What the law really means
It means that if you manage a brick and mortar store like Sears, Wally World then you only need to keep track of taxes in the one place where your store is. If there is another two towns over, the manager of that store has to deal with the taxes where his store is.
In the long run, all this law will do is become a hassle to the customer and Amazon alike while in the meantime some bright spark in Tennessee which, IIRC, has no sales tax is going to set up a business where all he has to do is slap a new label on the Amazon box that gets delivered and send it right back out to her "customer" in California. All she has to do be able to make a profit on a 5% margin. Hmm, who do I know in Tennessee?