published Monday, February 4th, 2013

Amazon's baby step tax aid

The Chattanooga Volkswagen plant is seen in this aerial photograph taken in March 2012.
The Chattanooga Volkswagen plant is seen in this aerial photograph taken in March 2012.
Photo by Dan Henry.

Though Amazon finally agreed to begin collecting Tennessee's sales taxes in 2014, the company long avoided and aggressively contested that responsibility. So the notices that Amazon has begun sending its Volunteer state customers to remind them of their legal duty to send the sales taxes they owe to the state treasurer will likely come as a surprise to many. The company's interim step towards a fair tax policy may be wasted motion in too many instances -- many purchasers just won't pay a tax that isn't collected at the point of purchase -- but at least it points in the right direction.

Amazon, eBay, Overstock and other online retailers should always have been required to collect state sales taxes, just as their bricks-and-mortar competitors do. That they escaped that responsibility as they grew into marketplace giants is an anomaly. It was wrongly perpetuated, however, due to a myopic U.S. Supreme Court ruling in 1992 that said tax-collection duties only applied if online companies had a physical presence in their customers' states. Since most didn't then, and still don't, their sales surged on that unfair cost advantage. It can't be ended soon enough.

The tax-collection disparity is grossly unfair and harmful not just to brick-and-mortar retailers, but also to the communities which depend on local retailers' physical presence for jobs and state and local commercial tax revenue. Roughly 68 cents of every consumer dollar spent in local retail stores stays in the community and gets cycled through many local hands.

Distant online retailers, by contrast, contribute little if anything to these critical economic factors. Indeed, online purchases generally only send consumer dollars out of their customers' communities. The harm that does is counted in lost local jobs, reductions in local economic activity, shuttered stores, and declining state and local budgets.

State and local governments and consumers have at last begun to act to stanch the economic loss. Their advocates have built spreading support in Congress for enactment of the proposed Marketplace Fairness Act, which would authorize states to require online vendors to collect state and local sales taxes on purchases in their jurisdictions.

Such a national policy would help level the economic playing field for local retailers, and help state and local governments recoup vital lost sales tax revenue. Though the act, co-sponsored by Sen. Lamar Alexander, got stalled in election year politics in 2012, it is scheduled to be reintroduced in the new Congress.

In the interim, state governments have been persuading Amazon and other large online stores to agree to collect sales taxes. Eight states -- California, Texas, New York, Pennsylvania, Kentucky, Kansas, North Dakota and Washington -- already require Amazon to collect online sales taxes. Arizona, Virginia, New Jersey and Massachusetts will begin doing so this year; Tennessee, Indiana and Nevada will begin next year, and South Carolina will start in 2016. Georgia, Alabama and other states are sure to see the results, and begin promoting tax fairness for their own state and local businesses.

Consumers here, and elsewhere, would do their community a service to begin paying the state's use tax -- the equivalent of the sales tax -- on purchases from out-of-state vendors and online outlets. The problem is that too few citizens are aware of their states' decades-old use tax. And many states, including Tennessee, have not made a serious effort to enforce use-tax collections.

Amazon apparently doesn't intend to aid that cause here. Though it's sending out reminders to its customers that they owe the state use tax, the company is not sending the state a list of its customers and the value of their purchases. Without that vital information, Tennessee officials are not likely to be able to collect those outstanding sales taxes.

Tennesseans could help boost the viability of their local retailers even more by embracing the independent book store campaign theme: If you saw it here, buy it here, and help us stay here. That would curb "showcasing:" the practice of shoppers who want to see, touch and feel a product before they buy it, so they go to brick-and-mortar stores to see the product, and then order it online to save the sales tax.

That's an abuse of retailers and the jobs, convenience and economic vitality they provide. And it's certainly not worth the false savings shoppers think they get.

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nucanuck said...

Amazon has some pretty amazing robotization plans for their warehouses. Over the next several years they should be able to reduce staffing by a high percentage. At that point Tennessee will begin to wonder about all the subsidies that were given to Amazon to locate in Tennessee.

February 4, 2013 at 12:25 a.m.
EaTn said...

With Tennessee having one of the highest sales tax rates of any state in the country, on-line shopping has been more attractive to me the past few years. Why would I want to pay sales tax to an on-line company and often shipping charges then wait a few days to receive the product, when I can drive down the street and purchase it for about the same price? Our state's choice of tax revenue is short sighted.

February 4, 2013 at 5:52 a.m.
328Kwebsite said...

Our state's choice of tax revenue is supported by a Supreme Court decision from the 1920s. It is one of our greatest financial and legal advantages. Other states will end up with state income taxes for individuals. Those tax plans cause people to lose their assets in tough times. Our plan only taxes people when they advance economically. Wake up and get the facts.

While you're getting some facts, you might want to look at the article on Carey Brown. In it, we see a smoking pile of marketing phrases that imply severe consequences for Chattanooga's employees. For example, we see an attempt to get us to buy into the phrase "location based servers." As though "cloud computing" takes place on a computer that has no location.

Where are these cloud computers? Try Shanghai. If you are on a Microsoft Computer, run an instance of netstat and see if your computer is calling Microsoft's data center in Communist China. It's built into the operating system in Windows 7.

How does this affect you? Check-Into-Cash has a data center right here on Amnicola Highway. A Times-Free Press reporter's article directly states that they are "moving away" from "location based servers" at their Terenine facility.

When they pull the plug on those servers, where do you think local jobs are going to go?

Communist China. And, they'll go there all while cloaking themselves in good marketing phrases like "cloud computing." Know where your data goes. Your data is yours. You have a say in it. That's part of the reason why we pay taxes: we are the responsible owners of goods and services which include the information we use to get the transaction done.

Too bad about Check-Into-Cash's implication that they will engage in employee dumping. No programmer should have trusted those people anyway.

February 5, 2013 at 8:43 a.m.
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