US Supreme Court says 'no sale' to Amazon's New York sales tax appeal The US Supreme Court has declined to intervene in a long-running spat between Amazon and the State of New York over collection of sales tax for online purchases, Bloomberg reports. The decision means the web retail giant has exhausted its legal options, and the law requiring it to add sales tax to purchases by customers in the …
These aren't taxes that Amazon pays, these are sales taxes added to the bill to the customer.
Amazon mostly doesn't want to pay them because without them it makes their price 10% less than a local store.
But also because they are a nightmare to collect. You know how complex and stupid VAT regs are? Now imagine that where every village can set their own VAT rules!
And you have to set up a system to collect the correct amount from the affiliate and register with every town council to pay the fractions of a cent into their account.
Some states handle it better than others. Where I am, the state collects all of the sales tax and then they distribute it to the county and city level. This way a business only has to send one check and the state handles the rest. So we have a state, county and city tax. What is interesting, if I buy from Amazon, the only tax is the state portion. The county and city are not included. The state did go after Amazon which is why Amazon collects the sales tax but yet the state has left the county and city out of it. Probably because they don't know how to distribute the money either as then the state would need the address of where it was being shipped too. This is when you know the system is broken.
Agreed they are a nightmare to collect, but that only matters for a small firm. Walmart, Best Buy, McDonalds, Starbucks and all manner of big companies already do this, so I don't see how it is much of a burden on Amazon.
No, the reason is exactly as the previous poster gave. It is all about avoiding collecting sales taxes so their goods have a competitive advantage over these from non-Internet based retailers. Had Amazon been required to collect sales taxes from day one, they would never have achieved the size they did because their prices would have been 5-10% higher in most states due to the addition of sales tax.
And no, you can't claim "they wouldn't have fully passed those costs onto the consumer" because they've made so little profit since their inception they couldn't afford to drop their margins 1%, let alone 5-10%.
All the big firms you named are brick and mortar stores. They've always had to pay sales tax.
I've generally found that when I buy over the internet the shipping costs equal the price differential for brick and mortar stores. So I don't see it as a competitive advantage. The competitive advantage is the ease of locating and purchasing something I already know I want. This is specific to Amazon. For other operations like large screen tvs there is an advantage to the online vendor.
Also it is a SALES tax. There is no way to NOT pass it to the consumer.
Also it is a SALES tax. There is no way to NOT pass it to the consumer.
Sure there is. If you charge $10 for an item now and don't have to charge sales tax, and are later required to charge sales tax and still charge $10 for it, you are eating the cost of the sales tax, not the consumer. The seller collects the sales tax on behalf of the consumer. If you buy that item from your distributor at $7/each, you can probably afford to do that.
Go to a bar and ask to see a beer menu and a food menu. You see a beer for $5 and a burger for $10, how much is your bill if you buy first one, then the other? Answer: $5 for the beer, and $10.60 (assuming 6% sales tax) for the burger. One is advertised with the sales tax included, the other isn't. I'll leave it up the reader to realize why that is.
Agreed they are a nightmare to collect, but that only matters for a small firm....I don't see how it is much of a burden on Amazon.
Yes and no. I feel, and it would seem that the court agrees, that there is a matter of fairness in that if you sell something in a given jurisdiction you should have to pay taxes on it. However, the fact that Amazon (and other large retailers) is so widespread is a burden (undue or otherwise). Having to keep track of all of these different tax laws and changes to them takes people, which in turn eat into the overhead. It also increases the liability the company faces as there are moving parts and thus more opportunities to make mistakes.
Simplifying the tax code for online and catalog sales make a lot more sense as online sales have been a big economic generator recently. Catalog sales laws dating back to the 1800s do not seem to work well in today's world.
This isn't really a problem for them as Amazon makes hardly any profit. Their ridiculously inflated stock price is based upon hope that in some far off future they'll have killed off enough of the competition that they can finally raise prices and collect much higher margins than they do today.
This is not a tax that Amazon pays, it is a sales tax that they must collect from the customer. Amazon has benefited from avoiding sales tax collection over the years by asserting that they have no physical presence in most jurisdictions in the U.S. that have a sales tax. However, many U.S. states have been successsful in claiming that Amazon's use of "Associates" or click thru affiliates in a state gives Amazon the physical presence that is typically necessary to require a seller to collect sales tax.
Most U.S. consumers that have been able to purchase goods "sales tax-free" over the internet, are actually required to self assess the tax and pay it to the taxing authority, but only a small fraction of a percentage actual do. So the states want to plug this "loophole" in their view.
It's time for governments to change the system so taxes are based on the location of the customer, we have too many giant companies abusing the current rules, soon they'll all be claiming they have no presence anywhere other than a closet in a shack near the coast off the Bahamas.
Good idea. So when you order from Amazon they should have a box so that you can enter the sales tax for where you live. You know that your municipality just introduced a 2% tax on Lego figures but not on Playmobile - after all you voted for it - so you should be responsible for calculating it.
Oh, the sales taxes are already based on the location of the customer. What is broken is that currently, out-of-state businesses do not have to charge the sales tax to the customers; it is the customers who are supposed to report to the authorities the fact that they bought something from an out-of-state business, and that they want to pay sales tax on it.
Surprisingly, they quite often forget to do that.
Yes and it gets worse.
In states where there are no income taxes, this is an excuse for the state to try and get you to tell them what you have purchased, but not from within the state (where I suppose they can strong arm merchants).
I have already been getting not-so-subtle amazon "warnings" that I bought stuff in state X, I may owe taxes there. For about a year now...
Want to bet they use that information in some inappropriate way?
If Amazon would set up their Affiliate program to instead treat themselves as a distributor, and their "affiliates" as simple customers to them, then the affiliates would be the end-seller and therefore responsible for collecting all sales taxes.
That doesn't resolve Amazon's concern that the customer sees sales tax as part of the end cost, which makes it more difficult to compete with local stores, but it does eliminate the costs related to collecting and distributing sales tax monies on State-County-City levels.
So will Amazon have to pay back taxes ? They might claim that they should not because they did not collect them from the consumer in the first place - but the tax man could deem that 10% (or whatever) of what was paid WAS sales tax so please hand it over (correction: they would not use the word 'please').
That might be an interesting tussle.
Amazon doesn't owe the taxes. States in which they don't have representatives are dragooning them into acting as tax collectors on their customers.
I realize this isn't much of a distinction to you beaten down Europhiles, but it is an important distinction to some of us 'Merkins.
Actually Amazon does owe the taxes. (Technically)
The company selling the product is required to collect the tax and then pay it to the state based on their reported sales in that state.
NY State changed the law, and Amazon challenged the law and lost.
So Amazon would owe the state of NY what should have been collected on shipments to NY residents when the sales tax would have gone in to effect.
So lets say that the law was to go in to effect Jan 1 2012. Then Amazon would be on the hook for taxes since Jan 1, 2012.
Note that what will end up happening is that Amazon and the State of NY will negotiate a settlement less than what is actually owed.
Considering that you the buyer who purchases stuff over the net, owes the tax, be thankful that Amazon doesn't just give a summary data of NY residents and their total purchases and let the State of NY go after them directly. (Which is something that they could do.)
"But what Amazon really wants is a simpler tax structure that would allow it to collect sales tax at a single rate for each state. To that end, it has backed the so-called Marketplace Fairness Act (MFA), which would establish a new tax regime specifically for online businesses."
We all would like a simpler tax code. Good luck with that. ;-)
But lets get serious for a second.
We're talking about 50 states. Now I'm not sure if there are different sales tax rates by category of product or if those rates are just local... but the system would be the same.
For each state that wants Amazon and other online vendors who sell more that $$$$X dollars a year, they can poll each state from a published web service to determine what tax rate to charge a person. (Purchaser's billing address or ship to address will be known.) [Most likely the billing address]. They can do this periodically since sales taxes don't really change that frequently. Not to mention they will be known ahead of time too.
So they can get the rates in a common format. Does JSON work?
That's how simple it could be. If a state wants to charge tax online... they create a web service. No web service? No sales tax charged for that state.
How hard would that be to set up?
It's not just state, it's county and city (which here means anything village sized) as well.
In our suburb municipality we don't pay the local city sales tax but we do pay the part of if it that covers transit on some goods. An out of state retailer would have to know that for every address and every item.
Clueless people should not speculate on things.
1. Yes, each taxing jurisdiction sets up its own categories. Let's assume 5 taxing categories which is probably on the low side. Now let's assume a mean of 15 counties per state. And a mean of 10 cities per county. We're already up to 37,500 districts. Those are all conservative numbers. Particularly the county count is probably much higher.
2. Each of those taxing jurisdictions can change the rates at any time. Recently some have taken to enacting "sales tax holidays" to spur shopping at certain times of the year. One is right around the start of school in the name of saving parents money. Tax during that time and you are breaking the law.
It's not the size of the database that is the problem although that is huge. The problem is keeping up with the constantly changing tax laws and the movements of items from one category to another. When I go to the grocery store I think there are at least three categories of tax that apply: free because its a necessity (raw foods), beverage, and straight sales tax. I expect I might even have to pay the restaurant tax rate if I buy fully prepared food.
This is why the proposed federal law that would require e-tailers to collect tax everywhere would also require each tax jurisdiction to sign up to standard categories. If any jurisdictions did not, the retailers would not need to collect their tax. So the category problem, at least, should be solvable.
You still need an address-to-tax-rate database unless this works cleanly by zip code (which I think it does not) and, of course keep up to date with rate changes, so it's still not free.
But, it's also wrong that Amazon gets to put the physical bookstores out of business by not collecting tax, so they really should pay the tax if a workable scheme can be worked out.
First its just the state of NY collecting sales tax.
The reason why out of state businesses were not forced to collect sales tax was that there is a large burden on the seller.
Having said that... currently its only one bucket.
But if you want to go down that path...
If you go by zip code... (ZIP and not ZIP+4)
You would have a short list of taxes on goods sold over the internet.
State, County, CIty would be the break down.
This could easily be managed in a small data base run by each state.
Then a store would have to only download this database once a period. (quarter or annual)
In a JSON format, you could store the entire database in to memory. ( lets say 1K per zip)
44K zip codes == 44 MB or so? Lets round up... 256MB could contain the data.
Now if you're an online retailer or an affiliate of one... it would now be trivial to process sales taxes.
To your point. Buying prepared food over the net wouldn't incur a restaurant tax. If you want to, go to your local grocery store and buy a ready to eat prepped food.
Do they charge you a restaurant tax?
Now you and I may not like paying the tax, but you can't say we don't already owe it and we 'should' be paying that tax.
(Note: I seriously doubt anyone really does pay it on their own...)
"The problem is keeping up with the constantly changing tax laws and the movements of items from one category to another."
In addition,say I'm visiting Ohio (no online sales tax), buy something online from an Amazon affiliate who is in California (online sales tax) to be shipped to my home address in NY (now has online sales tax). What taxes are paid,by who and to whom? Better, yet, make that same purchase while outside the US borders.
The Court actually is upholding most of Amazon's contention...the tax upheld has to do with the activities of NY businesses, using Amazon in part as agent for collection, marketing, and/or shipping. Not with such Amazon sales as have no connection with a NY presence - if Amazon's 'own' sales were Amazon's ONLY sales into NY, the tax would not apply.
As to the principle, Congress probably ought to require sales taxes on interstate commerce to be collected uniformly at a State or Metro level at one rate, and then apportioned, but so far, Congress has not done this.
As to taxes in general, they are not the right of the Government to collect nor the obligation of the citizen to pay nor deserving in some fashion to support whatever the government supports. They are fees paid through the consent of the governed for services rendered. No in-state presence, no services received and no citizen representation either, so no tax. If it meant the total end of all non-voluntary payments, why that would be a darn good thing on its own.
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