Greg Laden alerted me to a surprising message that I then found in my spam mail: Amazon has unilaterally terminated their contract with associates in Minnesota. They have a program called Amazon Associates which bloggers could take advantage of: we registered with Amazon, they gave us a little personal code to imbed in links to books, and in return for promoting Amazon with our linkage we got a little gift certificate every month, a small percentage of the profit. It wasn’t a lot of money, but it was a handy revenue trickle. For instance, I cashed out a couple of months worth of certificates from them and the money is being used to buy all the widgets (many of them through Amazon!) for the laboratory fish facility we’re building here.
So when you click through a book link here and it took you to Amazon, and you bought something, you were actually contributing a few pennies to undergraduate research at the University of Minnesota Morris.
But no more. Here’s the letter I got.
We are writing from the Amazon Associates Program to notify you that your Associates account will be closed and your Amazon Services LLC Associates Program Operating Agreement will be terminated effective June 30, 2013. This is a direct result of the unconstitutional Minnesota state tax collection legislation passed by the state legislature and signed by Governor Dayton on May 23, 2013, with an effective date of July 1, 2013. As a result, we will no longer pay any advertising fees for customers referred to an Amazon Site after June 30 nor will we accept new applications for the Associates Program from Minnesota residents.
Please be assured that all qualifying advertising fees earned prior to July 1, 2013, will be processed and paid in full in accordance with your regular advertising fee schedule. Based on your account closure date of June 30, 2013, any final payments will be paid by August 30, 2013.
While we oppose this unconstitutional state legislation, we strongly support the federal Marketplace Fairness Act now pending before Congress. Congressional legislation is the only way to create a simplified, constitutional framework to resolve interstate sales tax issues and it would allow us to re-open our Associates program to Minnesota residents.
We thank you for being part of the Amazon Associates Program, and look forward to re-opening our program when Congress passes the Marketplace Fairness Act.
Sincerely,
The Amazon Associates Team
So…all the Amazon links scattered throughout my site will still be contributing to Amazon’s revenue stream, but I no longer get any reward for them. That’s fai…wait, no, that’s totally unfair. Is this the kind of treatment we can all expect when the New World Order of Amazon achieves complete domination of the planet? That’s worrisome.
Hey, legal people: if I were instead to have my daughter, who lives out of state, set up Amazon Associate status, and then replace the code in my links to redirect income to her, would that be reasonable? I have no interest in evading state taxes and would happily pay those, but I would be interested in evading Amazon’s punitive behavior.
On the face of it, this seems legal, but remember that free legal advice is worth less than what you pay for it. If you plan to do this, you’d be better off consulting with a tax attorney or CPA who is licensed within your state. An audit can be a real pain in the ass, even if it finds your did nothing wrong.
States are trying to catch up on tax revenue of internet commerce, which has been a gap in tax revenue for some time. It looks to me that Amazon is trying to do a punitive measure of their Associates to stir up a lobbying effort to pass laws that Amazon wants.
“Unconstitutional”? LOL. Bunch of babies.
Yeah, good idea. Any revenue would still be reported (as it was on my last tax form!), but I wouldn’t want my daughter to get hit with additional taxes, nor would I like the income being double-taxed if it were transferred.
Another possibility is just signing it over to a worthy organization. I know NCSE welcomed Amazon Associate dollars.
AHA! PZed Ngmhjuds, I KNEW you were only in it for the money with your manufacturing of outrage. Why women have it easy, Teh Gheyz have an agenda, biology reduces to physics anyway and liberals are always up in arms about something to do with placental basket weaving or what not. You’ve just found a way to monetise it you hideous capitalist whore you.
Teeech Teh ContROVersee!
Louis
P.S. Big corporation? Doing evil? To further its own agenda? Say it ain’t so!
It is odd that they would use this excuse: they were supporters of what seems to be the same legislation in Washington. (Then again, Amazon in based in Washington, so they had to collect sales tax regardless.)
It should be possible to make a javascript to disable all links to amazon, or replace their code to your Daughter’s.
Amazon’s position is that it shouldn’t be responsible for collecting and administrating sales taxes in states that they have no business presence in – they had the same argument with California a while back. By terminating the Associates program in your state, they are no longer a target for the sales tax. Their basic argument is that the compliance costs are too high for the program to be viable – and they probably are; Amazon’s margins are razor thin (they rely on volume), and even small overheads can make it unprofitable.
They’re probably also killing the Amazon WebStore and reseller programs in your state for the same reason.
It’s completely legal – their terms and conditions allow them to end the program as long as they pay you out (which they are), and the links on this site become ordinary links as if they didn’t have your affiliate program with it.
You could, of course, get another person to be the recipient, as long as they lived in a qualifying area; or you could incorporate in a state like Delaware; or you could give it to a charity.
My copy of the U.S. Constitution seems to be missing the part that makes it illegal to collect state sales taxes.
Simple solution: contact other former Amazon Associates in Minnesota and boycott Amazon- keep track of purchases of the group and of products that otherwise would have been bought from Amazon and give them a yearly statement of direct revenue lost.
I do purchase from Amazon- but the solution to government policies they disagree with should not be to punnish there best customers (i.e. those that promote there goods and services).
The razor thin profit margin has to come from somewhere – so it comes (at least in the large part) from state sales taxes. It also gives Amazon a competitive edge especially when the cost of the item relative to its shipping cost and tax makes it a no-brainer for the consumer. The consumer avoids the sales tax and the seller obtains the market-share. It looks like tax-avoidance is built into their business model.
The other dimension to this comes from the fact that Amazon does nothing more as a bookstore than a brick-and-mortar bookstore, only on a larger scale and exclusively by mail order: it’s a special order service which every bookstore ever can and does do for its customers. For years I have expressed my disgust with Amazon by going to my neighborhood bookstore then asking them to special order a book I want which they do not have in stock. It takes as long or less time than Amazon’s “Super-saver” shipping and maybe costs a dollar two more. Less if I paid Amazon for the shipping. It supports your local economy and helps pay for schools, teachers, roads and bridges, etc.
Makes a difference to here in the UK, where Amazon have decided it is too much effort to actually pay any tax.
Yikes! html italics fail. Sorry about that.
Gregory in Seattle:
Not odd at all if their competition is based outside of Washington. Not odd, but sleazy.
I think you’re confusing income and sales taxes. A quick google search told me that the laws going into effect July 1st in Minnesota broaden state sales tax applicability, including requiring sales tax on business to business transactions, including services, as well as “digital downloads.”
My guess is that Amazon’s lawyers told them that the tax laws in Minnesota would require either Amazon or you to collect sales taxes on affiliate sales. Amazon probably did a cost benefit analysis and decided that implementing a system to collect sales taxes was more expensive than the program, so they terminated the program.
I may well be completely wrong, but I’d be very surprised if you’re accounting for sales taxes (or even sales taxes on internet purchases which some states require you to voluntarily pay) on your tax return. If so you have a far more sophisticated accountant than I use.
Not qualified to offer any advice on whether a relative could recieve the associate benefits and direct the money to you. If she’s recieving them in a different state, the sales taxes wouldn’t apply, but no clue how the tax would change from her to you, and the state could possibly still consider the whole thing tax avoidance.
@mothra I am not entirely clear how Amazon is the “bad guy” here. As was noted above, they operate on razor thin margins, and trying to comply with the vagaries of every single local tax code might just be cost-prohibitive. They are making a business decision – one they have previously made in California and Texas, as I recall.
The idea of collecting these taxes does get very close to the regulation of interstate, not intrastate commerce, and the Constitution is pretty clear that the former is the sole province of the Federal government, not each individual state. SCOTUS has been all over the place on its rulings on the ICC, however, so it isn’t a slam dunk to state the Minnesota law is unconstitutional.
Amazon has come around to the idea of a Federally imposed sales tax rate that is collected by each state on the business conducted within it, and that is the law they are pointing to in their message. That seems to square the circle of collecting a fair tax against the legal complexities of the hundreds of local tax codes that are out there. In some states, figuring out what tax needs to be charged can’t even be tied to a unique ZIP code – you have to go down to the damn street address to determine if they are in a given county or city with its own taxes.
The only thing that really bothers me is they keep saying it’s “unconstitutional.” People don’t even know what the fuck that word means nowadays. I have visions of little republicans being raised by their parents arguing that potty training is unconstitutional.
Pay your taxes Amazon, like the rest of us do, and shut the Hell up.
Or you could stop linking to Amazon. Let Amazon finally fail the way it should have decades ago. There are other online sellers that you could like your books to. Though I must admit that I know nothing about any other seller’s ethics.
For all those who haven’t read the constitution in ages: Article I, Section 8, Clause 3. It’s called the commerce clause, and is what Amazon is referencing when they say “unconstitutional.” This clause has historically been what prevents a state from collecting taxes on business which have no physical presence in that state. If your copy of the constitution is missing that section, you were sold a bad copy.
State sales tax collection of internet sales is tricky. Typically, you’re obligated to collect sales tax if you have a brick and mortar store where the purchase can be made. So for example, if you buy something online from best buy, they’ll usually collect sales tax, because its almost certain you could go to a store and get that item, and states have quite sensibly said they don’t want you evading sales tax by simply purchasing things from the internet that you would otherwise just drive down the street to get.
I’ll quote it for you.
“[The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes;”
If congress has express power to regulate commerce “among the several states,” Federal Courts have long held that states do NOT have the power to regulate interstate trade. That is, it is unconstitutional for Georgia to impose a tariff on goods coming from South Carolina. These cases are known as “dorman commerce clause” cases.
One long standing part of Dormant commerce clause regulation is an effective rule that states cannot tax business in other states, because that is a regulation of interstate commerce. Rather, states are only allowed to tax activity within their own borders. It is far more complicated than this, but that’s the basic point.
Here, Minnesota has passed taxes which Amazon apparently interprets as regulating its interstate commerce, and rather than develop the technical means to record and pay these taxes, it has chosen to simply cease business in minnesota.
Given the increasing share of internet commerce, it is clear that the Federal government will eventually have to pass a law regulating how states should tax internet transactions.
If I have a business, and the government passes regulations that make it difficult for me to make any money in that business, I’m very rationally not going to be inclined to keep plugging away at it.
@James #19
How does that part of the Constitution apply to mail order companies who send people catalogs to order from via phone or USPS? I think it would be the same case right?
Also thanks to E=MC2 having an internet site accessible in a state means you have a small physical presence in that state, ergo you should pay taxes.
OK I admit that’s weak reasoning, but when the Constitution people were only doing business in physical stores. IMHO there’s no real difference between going to a store to buy something, ordering it over the phone, mailing a check and order form, and ordering it online.
It does look like Amazon’s business plan does incorportate tax avoidance and I’ve had enough of businesses doing everything they can to avoid paying for the very things they rely upon. Remember, the internet was built by the government.
@Ben P #22
If someone is using your services and not paying for them, one would rationally want to find a way to either have them pay or stop them from using your services as well. Remember you have no “right” to make money. You have the privilige to fairly and legally earn a profit.
They pulled this same stunt in Colorado a few years ago. The legal issue here is derived from a Supreme Court ruling that goes back to the days of catalog sales. Technically, sales tax applies to everything sold, but the question is who has to collect it and send it in, the buyer or the seller. The court ruled that the seller has to do it only if they have a “substantial business presence” in the state that levies the tax. In the age of the internets, this is a meaningless distinction.
So Amazon is pretending that they have no presence in states that are now taxing internet sales and thereby claiming that they have no obligation to collect the tax. It’s basically a total dick move to maintain an unfair advantage over brick and mortar retailers and deprive states of needed revenue.
I don’t really think that if I stop linking to Amazon, they’ll collapse and go bankrupt.
I also stopped shopping at WalMart, and I’m amazed that they’re still around.
If you stop linking no, if everyone stops, yes. There’s no particular reason to keep giving them money. (Of course, since I prefer the other evil corporation for my ebook buying, my statements are not disinterested.)
“If I have a business, and the government passes regulations that make it difficult for me to make any money in that business, I’m very rationally not going to be inclined to keep plugging away at it.”
If Amazon cannot turn a profit after tacking on the same sales tax rate as what physical stores charge, then they have a lousy business model. If this is the case, then physical stores are more economically efficient and deserve to win out. Giving a sales tax break to online retailers is tantamount to subsiding them with state funds. This is very expensive and serves no public interest.
I don’t blame Amazon for trying to avoid paying taxes and gain an unfair advantage over their competitors. It’s what businesses do. But their pretense of being the victim here is ridiculous. They’re the ones taking from others.
It is unconstitutional because the Supreme Court said it was back in 1992. That’s why some Congresscritters and the states are trying to change the law with the aforementioned Marketplace Fairness Act. Fore reference, see http://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota
Holy crud, I just realized I have 1,300 CDs on my Amazon wish list. That might have gotten away from me a bit…
Amazon just aren’t the kind of company I would want to be contributing to anyway, so I would probably have avoided your links. They evade taxes, they treat independent authors (and their associates) like shit, but actually, that’s nothing to the way they treat their employees. The field is wide open to any company that wants to pick up customers who care.
@Alverant #22:
I wasn’t making comment on whether the clause was a good one, just that this is the world we currently live in.
Should that particular clause be revisited in the modern age? Of course. And while 1992 does not seem that long ago, it’s ancient history in terms of technological advancement and use. The states are trying to come up with ways to generate revenue in fiscally difficult times, and that’s laudable, but the Constitution is what sets out the laws we govern by and unfortunately, the interstate commerce clause is absolutely relevant here.
The saddest and most unfortunate thing, is that as long as the Supreme Court has the idea that business in state A selling goods in state B is inter-state (regardless of how that transaction took place), then short of a Constitutional Amendment, no regulation, whether state or federal, is going to change that.
This is precisely backwards.
Sales tax is not collected from online retailers because online retailers are not present in the state. The state has no jurisdiction to collect sales tax from people in other states. You are purchasing the item in their state, and they are shipping it to you. The fact that amazon has severs in California, and your computer has the ability to go and download information from those servers, doesn’t magically mean Amazon has a business in Minnesota, you’re just purchasing something from a business in California.
Per someone’s question about catalogs, it works exactly the same way. If you called a catalog number and ordered an item, you would not pay sales tax on it. The exception is that if say, sears, had a substantial business presence in your state, they would have to collect it.
Many states get around this by requiring you to collect your own sales tax. Do you live in any state other than Alaska, Delaware, Montana, New Hampshire, and Oregon and have you bought things on the internet?
Did you keep track of the sales tax you owe and pay it on your state tax return? What, no? That means you’re a tax evader.
And the efficiency argument is a red herring. You can justfy absolutely anything by complaining its not “fair,” and suggesting that if companies can’t operate “fairly” they just shouldn’t be in business.
You would say that Amazon, based in Washington, should take note of the address of every customer for every transaction, devote resources to interperting, creating guidelines, and creating systems for calcuating sales taxes for each of the 50 states, adding those sales taxes to the transaction, keeping track of the collected sales taxes seperately for each of the 50 states, remitting those taxes seperately to each of the 50 states, and filing returns in each of the 50 states.
That’s a burden hugely heavier than a brick and mortar store applying and collecting a single tax.
And the cost of implementing all this is added in addition to the shipping costs buyers pay to purchase something over the internet.
There’s absolutely a reason to be concerned that an ever increasing share of the economy is functionally exempt from sales tax. But that’s a matter for federal legislation, not being petulant about whether companies doing something is “fair.”
#24
I would say if send a lot of orders to a given state then you have a “substantial business presence” in that state. Now the problem is determining what constitutes “a lot” of orders.
To everyone else, what alternatives to Amazon are there? I’d like to check them out and see if they have stuff I want to buy for a decent price.
Ben P, since Amazon does send a lot of packages to all states in the US, then it has a substantial business presence in each state, ergo it should pay taxes. We the people should not be forced to support a business model that depends on avoiding paying taxes.
That’s a burden hugely heavier than a brick and mortar store applying and collecting a single tax.
That’s their problem. Either they find a way to make it work or they go out of business. That’s how capitalism is supposed to work and there’s no point in a corporation, the one entity that depends on capitalism to survive, whining about it.
In Illinois, you either provide receipts for internet purchases without a sales tax being collected, and you pay the state what you would if the items were purchased in-state or the difference in sales tax if some was paid to the state where the item was purchased. Since this a bureaucratic nightmare, they also have the option of use tax based on income, which for me last year was $57.
Welcome to my world. I can’t set up the account because Arkansas was long ago cut off, for pretty much the same reason.
As a resident of MN, I just received the same email. I’m disappointed, but not surprised over Amazon’s decision. In my mind, they’re not at fault.
The more I think about it, it seems to me that the issue here is that the affiliate counts as a party in the transaction. Therefore, MN sales tax applies to an affiliate sale but not, say, a sale coming from a Google search result. This means that people would have to pay more just for following an affiliate link. Not exactly a fair thing to do.
The only way to still pay the sales tax and keep the price the same is to take all of it out of the affiliate cut (since they are the only reason tax has to be collected at all). Here in Hennepin County, sales tax is north of 7%. I don’t even think it’s possible to do enough volume to get into a commission bracket that would even offset these taxes.
As much as I hate to say it, Amazon is doing the right thing here. The laws are at fault, here… not Amazon.
This is the functional equivalent of putting your fingers in your ears and going “lalalalalallalaalala”
Presume for a moment that all of Amazon’s operations are based in Washington. Where they have distribution and call centers matters, but that’s a slightly different issue.
They have their servers in Washington, they have their products in Washington, they have their employees in Washington, they take orders in Washington, they process orders in Washington, they have all their packaging in Washington, then when they’ve completed an order, they put the products in a box, and give it to Fed Ex. Fed-Ex takes it to a specified address.
How it again that this is equivalent to them having a store in Minnesota? They own no property in Minnesota, have no employees there, have don’t have any product in their possession there.
Beyond that, suppose that Minnesota says “Amazon, you have to pay sales taxes, and we’re going to sue you in state court for past-due taxes.”
What assets in Minnesota is Minnesota going to take from Amazon to enforce the judgement? Because the Court in Minnesota certainly doesn’t have jurisdiction to seize assets in Washington.
In the for what it’s worth department, Michigan does not collect sales tax on out-of-state purchases from a business, but does have a use-tax which citizens are supposed to pay 6% (the sales tax rate) on any out-of-state mail-order items which are normally taxed under the Michigan sales tax.
Citizens are required to track their purchases and include the amount owed on their MI-1040 tax form. This use-tax was put in place many years ago when mail-order catalog sales were costing the state sales tax revenue.
This doesn’t seem to be well known even in Michigan and while I keep track (mostly) and pay my share every year, I don’t know of anyone else who does. I’m not a big fan of sales taxes, they are slightly regressive, but the loss of revenue to the states from citizens purchasing goods on-line is significant.
And I find that because I’m still working while I’m trying to type a response, Ben P has already mentioned what I was saying. Teach me not to refresh before posting.
But there is another problem with having an internet retailer collect sales tax. Consider the following scenario:
My residence is in Michigan, but I’m on vacation in Florida, and while I’m there I go on-line to a retailer in Washington State and use my credit card issued by a bank in Delaware to purchase a book to be sent to my Aunt in Kentucky because I just realized it was her birthday.
Who gets the sales tax?
The state where I’m a resident?
The state where I am while making the purchase (and how does an internet retailer find that out)?
The state where the merchant is located?
The state where it is being sent to?
“Sales tax is not collected from online retailers because online retailers are not present in the state.”
This is just a restatement of how current law is supposed to work, which we’re all familiar with by now. The whole point is that this is a stupid standard that absolutely, positively costs states money.
“Did you keep track of the sales tax you owe and pay it on your state tax return? What, no? That means you’re a tax evader.”
True, if you’re the buyer, you’re technically supposed to send in the tax payment yourself if the retailer doesn’t collect it for you. I believe this happens zero percent of the time, there is no enforcement mechanism, and it would be wildly impractical to implement one. This is why states quite reasonably require the seller to collect the tax. Why should online retailers should be exempt from this? “Because they aren’t physically there” is not sound reasoning.
“And the efficiency argument is a red herring. You can justfy absolutely anything by complaining its not “fair,” and suggesting that if companies can’t operate “fairly” they just shouldn’t be in business.”
A red herring?! The whole point of a market based economy is that businesses should operate on a level playing field, otherwise you misallocate scarce resources. If you make one business levy a tax on its customers but not another, you are effectively taking money from one and giving it to the other. Can you explain what public interest this serves? And why on earth is “fair” in scare quotes. Do you not believe in the concept of fairness?
“That’s a burden hugely heavier than a brick and mortar store applying and collecting a single tax.”
No, it’s not. The technology exists to do it cheaply and effectively, and any store with outlets in multiple states already does so. And at any rate, if it’s a burden for Amazon to collect the tax, that’s their problem. It’s not up to the rest of us to subsidize them because they don’t want to pay their own costs.
The state where you’re a resident.
See, that wasn’t so hard.
Area Man wrote, “The state where you’re a resident.”
Ah.
But that’s not how it’s collected today. Today if I buy something from a brick-and-mortar store in Florida, then Florida gets the sales tax, not Michigan. I suspect that if I’m making the purchase while I’m in Florida, then Florida would really like to still get the sales tax.
Further, what would stop a business from registering credit cards in a non-sales tax state so that according to the information that the retailer gets from my credit card I’m in Alaska, but I get it shipped to Michigan and avoid Michigan sales tax?
Or another scenario, someone in Alaska starts making purchases and sends the goods to another state. In a place where the sales tax is about 10% they could charge 5% and save the buyer money while making a profit themselves. And the state still loses.
For all those who haven’t read the constitution in ages: Article I, Section 8, Clause 3. It’s called the commerce clause, and is what Amazon is referencing when they say “unconstitutional.”
And they are wrong. Amazon has directed economic activity into the state, selling their products there. It is perfectly permissible under the Commerce Clause precedents to collect sales taxes on a transaction between an out of state vendor and an in state customer so long as the vendor has at least an “indirect” nexus with the state. There is nothing unconstitutional about it at all. It is so common that most state taxing authorities provide instructions for out of state vendors on what taxes are applicable, how they are to collect them, and how to submit the amounts.
Once again, my copy of the Constitution is missing the part where it is illegal to collect state sales taxes. Don’t point to the Commerce Clause and pretend that is the issue, because it isn’t, and if you do, I’ll know that you are simply full of shit on this issue. i already know that James and Ben P don’t know what the hell they are talking about. You shouldn’t join them in spouting useless bullshit.
@Ben P #39
“How it again that this is equivalent to them having a store in Minnesota? They own no property in Minnesota, have no employees there, have don’t have any product in their possession there.”
Wrong, I once placed an order on Amazon and it came from their warehouse in Minnesota. I’ve also gotten packages from Indiana, Kentucky, Texas, and other states. Ergo the do business in those states and should pay taxes.
“That’s a burden hugely heavier than a brick and mortar store applying and collecting a single tax.”
Man, if only someone could incentives a machine for keeping track if large amounts of data and processing data while calculating sums.
Because then corporations could tracking billing locations. I mean I work for a utility company that spans 11 counties, each of them having a different sales tax. If not for the team of abacus workers we could never know what to pay.
What assets in Minnesota is Minnesota going to take from Amazon to enforce the judgement? Because the Court in Minnesota certainly doesn’t have jurisdiction to seize assets in Washington.
Except they do. Getting jurisdiction over a company is easy, especially if they have engaged in commerce in the state. If a company intentionally sells something in a state, then that state’s courts will have jurisdiction over it, even if that is all they did. Once the Minnesota court has rendered a judgment, then the state could domesticate that judgment in Washington using the Full Faith and Credit clause and seize Amazon’s assets. Despite their fit of pique, this is a fight that Amazon is highly unlikely to win.
“But that’s not how it’s collected today. Today if I buy something from a brick-and-mortar store in Florida, then Florida gets the sales tax, not Michigan.”
False. Oregon has no sales tax. Oregon residents only need to show their State I’d and Washington state sales tax is waived.
You’re not only wrong, you’re silly wrong. See Quill v North Dakota 504 U.S. 298 (1992) and National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967)
Was that so hard?
“But that’s not how it’s collected today. Today if I buy something from a brick-and-mortar store in Florida, then Florida gets the sales tax, not Michigan.”
True, perhaps a better version would be to split the tax between states. But that’s impractical, so we don’t do it. For online sales, the obvious thing to do is to send the tax to your state of residence. You’re the one paying it after all.
“Further, what would stop a business from registering credit cards in a non-sales tax state so that according to the information that the retailer gets from my credit card I’m in Alaska, but I get it shipped to Michigan and avoid Michigan sales tax?”
I’m not sure how a business “registers” a credit card. Your residence is kept on file by the credit card company, and the address you give the business has to match what the company has, otherwise the transaction doesn’t go through. Credit card companies have a keen interest in knowing where you live.
At any rate, while there may be some room for fraud, those are solvable issues. It’s not a reason to exempt an entire sector from taxation at the expense of everyone else.
“Or another scenario, someone in Alaska starts making purchases and sends the goods to another state.”
This would require the guy in Alaska to somehow avoid collecting taxes for the state in which he’s selling the products. Adding an extra middleman doesn’t make a difference here.
http://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota
This is the Supreme Court decision that Amazon references. It has not been overturned. Merely “directing economic activity to the state” is insufficient.
Now, in the case of affiliate programs, you can argue that the presence of the affiliate in the state is enough of a “nexus” to make the Minnesota statute Constitutional, which is why I said the process is not a slam dunk.
When arguing law, precedent is everything. The precedent for imposing sales tax collection on an outside business for shipping products to customers in the state is not only non-existent, it is directly contradicted.
Yo aaronpound, you don’t get to dismiss people without some evidence to back it up. I provided the commerce clause as the reason Amazon is calling Minnesota’s tax law unconstitutional. No where did I say they were right in doing so. Don’t argue about case law that has been established since the sixties and reaffirmed in the nineties without some kind of evidence to back it up (like some case law you can find that others are unaware of).
However, I did say “The saddest and most unfortunate thing, is that as long as the Supreme Court has the idea that business in state A selling goods in state B is inter-state (regardless of how that transaction took place), then short of a Constitutional Amendment, no regulation, whether state or federal, is going to change that.”
Please see the case law Ben P cited before you call us “simply full of shit.”
You’re the one who is responsible for paying sales taxes on your purchases. I assume you’ve been making a point of sending your state a check every year for stuff you bought online from out of state. Obviously, Minnesotans have not been, or this legislation would have been superfluous.
They did. They canceled their affiliate contracts in Minnesota. Instead of whining because you don’t like their solution, maybe you should do something constructive and support a rational national sales tax system that takes the reality of 21st century commerce into account. That’s what Amazon has been doing.
It’s hard to pay the consumer sales/use tax. They don’t really expect it and aren’t really set up for it. They screw mine up every year, accusing me of being a seller and needing a business license. It’s like they’ve never seen a citizen pay taxes on their out of state purchases before.
There is a wonderful thing called nexus,
Which at times can seem to preplex us,
And some seem to think,
They’re going to sink,
But I think they’d rather forget us.
But since the Commerce Clause gives the federal government the right to regulate interstate commerce, then a federal law can indeed change it. I believe that SCOTUS specifically pointed out that legislation could moot their ruling. That’s the whole point of the Marketplace Fairness Act. It’s nice to see Amazon supporting it; while I suspect they’re doing it as a purely defensive move, it makes them look slightly less douchey.
This is the interesting part.
Under Quill and Bellas Hass, congress could theoretically establish a system for the collection of sales taxes on interstate commerce. However, they’d have to be reasonable careful in drafting to avoid falling afoul of the 10th amendment which prohibits the Feds from “Comandeering” the states. \
Its coming eventually. The question is what it will look like.
The “marketplace fairness act” referenced in Amazon’s email looks like an interstate compact. Where congress, pursuant to its own regulation of interstate commerce, authorizes the states to collect sales taxes on “remote sales” but only if they agree in turn to simplify their procedures for identification and collection of those taxes.
In my state, businesses already keep track of their online purchases (that weren’t taxed) and pay sales tax to the state after the fact. I know several individuals who do this as well.
Area Man wrote, “This would require the guy in Alaska to somehow avoid collecting taxes for the state in which he’s selling the products”
Well, Alaska does not have a sales tax, so no tax avoidance problem there. And if I was unclear, the fellow in Alaska doesn’t actually sell the products, he simply gets them shipped to him, and then ships them on. He would have to be creative about how he charges, but if his charge is 5%, and he collects sales tax on his service, he might have to collect 10% of the 5%, so the seller would be getting a good for a 5.5% effective markup rather than their 10% sales tax. A middleman can find an arbitrage.
Now, don’t get me wrong. The mail order and internet companies do have a some advantages over the brick-and-mortar stores, and one of the those advantages is the avoidance of sales tax. And the states are losing revenue which has historically come from sales tax (they are also losing revenue because of increased fuel economy, but that’s a different issue albeit an interesting one).
The current sales tax situation has evolved to the point where it is no longer as effective at revenue collecting for the states and also creating an inequality in the business environment. It would be best to change it. There are a number of possible paths to take, but they all are going to have problems in enforcement unless the federal government enforces compliance.
One possibility is to require businesses to collect and distribute sales tax based on the billing address of the credit card (or other form of payment) used. Individual states would not be able to enforce this, states which try may well find that the retailer will refuse to ship to those states, counting on the residents of those states to make a large enough stink to repeal the law.
Another possibility is for the federal government to place a internet sales tax on all purchases, which would level the playing field for business somewhat, but it would be a rather heavy-handed approach. If you set it at 6% people in California will be inclined to purchase goods over the internet, people in Michigan would have the same incentive to go to brick-and-mortar as internet sales, and people in Alaska would avoid internet sales as much as possible. Not really leveling the playing field.
Another possibility is for states to abandon sales taxes as a form of revenue, and find replacement sources.
This is not quite as simple an issue as it looks.
Bastards! They punish We The People for a decision made by Our government?!
That’s UnAmerican! well, except for, y’know, when it’s not.
We Are All Cuba Now
PZ, Amazon is a horrible company. I worked in academic publishing for many years, and I had to deal with them firsthand. To put it bluntly, they engage in extortion with publishers. I’ll explain.
Most publishers take part in coop advertising; it’s money we pay to retailers and distributors for featuring a book or line in a special way in their store and/or on their website. For example, Barnes & Noble would let us know that they had a special parenting promo coming up in some month–did we want to include our new trade book on parenting on their special table at the front of the store, or have it featured on a special shelf in the parenting section? Distributors expect publishers to take part, but it is not required. We always took part in those promotions that we thought would be good for our books (as most publishers do), and we had a nice relationship with all of our distributors.
The company I worked for is small but very successful. We set our coop advertising budget at about 2% of what the distributor sold (we followed the lead of most of the major publishers). So, if a particular distributor sold a million dollars worth of our books in a year, we would usually spend 20K on coop. But only if the promos they were offering were appropriate–and distributors understood that. Amazon, on the other hand, demanded that we spend the entire amount every year. Not only that, but they fought tooth and nail to get bigger discounts from us AND a higher coop percentage (which is really unfair to other retailers and distributors). We fought back really hard, but they threatened to remove ALL our books from their website if we did not give them everything they wanted. Since Amazon was our biggest client, we had to capitulate. The owners of our company hated doing that, but they cared more about the people who worked for them (they didn’t want the company losing money, which would affect everyone who worked there) than winning this battle. No publisher talks about this publicly because everyone is scared. (I’m even a bit paranoid writing about it here, and I’m no longer in publishing.) I think Hachette in Europe fought back, but I don’t remember.
Amazon also treats their warehouse workers like slaves. Here’s one
story ; you can find many more with a simple Google search.
PZ, I realize that cutting Pharyngula’s links to Amazon won’t affect their business in any way, but I urge you to do it all the same. They are a shitty company. Link to a store like Powells (or your own local amazing bookstore), or even B&N–anything is better than Amazon.
I see what you mean now, but I still don’t see how it would work. Sales taxes are levied on the total price of the good or service, not on the seller’s markup. The buyer is still going to have to send full payment to the guy in Alaska, and so the tax his home state levies will be based on that. Maybe there’s some way to pull it off, but I suspect it wouldn’t be worth the trouble.
I agree that sales taxes (and lots of others) are a clusterfuck and it wouldn’t be such a bad idea to scrap the whole system and start over. But that’s not going to happen, and since we can’t solve every problem, we may as well solve an obvious one.
actually something I know about
sales tax of items that are shipped are paid to the state/locality where the merchandise is recieved (so if I order something to be shipped to me while on vacation in Florida – I’d pay Fla tax regardless that I am a resident of NY or IL whatever)
Arleady on the books are a series of tax laws (federal regulations that apply to state/local sales tax) these use the term “NEXUS” to define companies that due business in more than one state and define what “significant business presence” is – Basically – Amazon would have to collect local sales tax (or pay local sales tax) in states where they had a “store” or a “field sales office” – Amazon doesn’t operate either of these so under the old laws they didn’t have to collect sales tax. (Customers were supposed to pay “USE tax” ) where this becomes a MESS is Amazon marketplace – many large and small companies/individuals sell stuff via amazon and in theory THEY would need to comply with nexus- but they don’t and Amazon doesn’t make them
Amazon could easily comply with collecting sales tax across USA – just maintain a database of zipcodes/taxrates – collect appropraite sales tax for “ship to” address – cut appropriate quarterly checks – move on – large BtoB resellers do this now (CDW, Grainger, etc)
the fact (as I see in comments ) is that Amazon doesn’t WANT to – they get a competitive advantage over local companies and BtoB’s by not collecting taxes (and the cost of accounting involved)
All seconded.
James @54 makes a good point – the Nexus problem for electronic transactions has been around since the 1960’s. My father’s time share business (for those old enough to remember, not real estate, but dial up over modems at 110bps from dumb terminals into computers) had this problem with sales taxes between different counties within Pennsylvania and across state lines to NJ and DE. Was the interaction (and service or work) at the computer in Philly or at the location of the terminal?
As for how to fix the problem, a ten years ago I had an idea for creating a company that would track every tax jurisdiction and offer a service to collect taxes (from sellers) and remit them (to jurisdictions). The fee for service could be minimal and borne either by the jurisdictions or the sellers. Money could also be made on the float (interest on the sales tax held in company accounts before paying monthly or quarterly). A lawyer/finance friend talked me out of doing it as he felt it wasn’t time, too messy and too much resistance for adoption. Now, I wonder about that choice. No matter.
The thing is Amazon has built an incredible programming cloud infrastructure and service (EC2) by taking their internal coding and storage systems and generalizing them for the sale to the public. I find it ironic that they haven’t considered building the above infrastructure for themselves then commoditizing it by making it available to every other retailer in a similar position. I imagine they could make a fair bit of money at it. Making money by collecting local sales tax for every transaction on the entire Interweb ought to more than make up for whatever slight disadvantage encountered on the sales side. Plus, they’d have transaction data for every internet sale from other internet companies going through their system. That’s some real market data there. Guess they could sell that data, too.
Tax jurisdictions would benefit from continued rate independence, internet sellers would have some slight fee increases to outsource tax calculation/distribution and lose some internet sales, local stores regain some competitive price advantage. Yes, consumers have to pay more, but that should be happening now, anyway.
I understand the Amazon dislike, but many of the attacks seem to be Ad Hominem when they aren’t frustration over the nexus debate.
PS: PZ, although your daughter may be too small of an entity to matter, she (and you) could be pursued for tax avoidance. Also, it may not be a good idea to involve a third-party corporation you don’t control or you might be giving them some tax avoidance headaches, too. Although I have had a lot of “field” legal, business and accounting training from the work I do, this is free advice from a non-lawyer/non-CPA.
notaandomposter wrote,
Which is already a mess. From my example above:
If your statement is correct, either my Aunt in Kentucky would have to pay sales tax when the package arrives, or I’d have to pay Kentucky sales tax on the purchase I made on-line in Florida with a credit card with a Michigan billing address. And if I had it shipped to an Alaskan destination, I wouldn’t pay any sales tax at all. I’d simply need someone to mail it to her from Alaska.
Area Man wrote,
I suspect I haven’t been clear enough about the arbitrage opportunity. I’ll try to be clearer with an example. I buy a book for $100 (including shipping, etc.) from an on-line retailer. If I had it sent to my residence directly I would pay $6 in sales tax. Instead I have it sent to Alaska to a guy who charges $5, including the shipping, to ship it to me (He is not marking up the book and re-selling it, he is simply providing a shipping service). He needs to collect 6% on $5 for the service he provides, or $0.30, so I get the book for a total of $105.30 verses the $106. Everyone pays the sales taxes necessary, but the state gets $0.30 sales tax revenue when it would normally get $6.0. The higher the sales tax in my state, the more attractive it would be to use his service, a 10% sales tax means a $4.70 savings.
Could you make a living doing this? I don’t know; maybe. If the numbers are large enough I suspect so. Would people be willing to wait an additional, say, 10 days, for their purchases to save $10? Again, I don’t know if there would be enough people interested. But the opportunity exists.
Okay, I was assuming that the goods would have to be shipped to you directly in order to get it to work. I am quite skeptical that you can pay to ship something twice, going first to Alaska, and pay less than you would if you just coughed up the tax. But who knows.
Again, I don’t deny that applying sales tax to online purchases will have wrinkles. I just see those wrinkles as minor, solvable, and not a good reason to exempt online retailing from tax. Sales taxes on brick and mortar retailing has its own inefficiencies and frauds, and we deal.
I think if you set up an account with an out of state daughter, and took the profits, that might be construed as trickery of some kind. Even if it was legal, there may be something in the gazillion word long agreement that we presumably signed at some point.
However, there is another solution, and I may do this. Get your out of state offspring to set up a blog, and post book titles on it, which are in turn links to Amazon with an associate’s code. Instead of pointing to Amazon, you point to that blog, run by an out of state person, out of state. Then, if the out of state offspring (or in my case, as good friend who is a poor graduate student in a different state) gets the fees, it is all very kosher, a bit of cash is being taken from Amazon, and in your case, think of the Father’s Day present you’ll get next year!!
For Amazon et al, this may be true. For small (or even microscopic, like me) businesses that do almost all of our sales via the Internet, not so much. The notion that my business (i.e. me, by myself, since i have no employees) would be capable of having the time, expertise, and resources to keep track of sales tax rates in 50 states (and countless counties, parishes, & municipalities) is, frankly, absurd. Any solution to the Internet tax issue will have to account for people like me (and Surly-Ramics, etc)
Powell’s City of Books (powells.com) has a partner program, but I haven’t actually made use of it because I don’t have a blog with significant traffic. That might be an alternative, though it would mean editing the Amazon links to point to Powell’s instead.
I hate to say it, but they’re not actually wrong.
When I order books from B&N online, I pay state sales tax because there are physical B&N stores in my state.
When I order from Amazon, I pay state sales tax because there is an Amazon distribution center/warehouse in Pennsylvania. Amazon has a physical presence in my state; therefore sales tax. I assume they got tax incentives of some kind to build the distribution center here. Also that the advantages of having the warehouse so close to a dense population center (Bosnywash corridor) outweigh the hassle of collecting and distributing sales tax. They are building another center in Trenton, so will have to pay in NJ, too, eventually.
When I order something from J&R Musicworld in New York, they don’t charge sales tax if I’m having the item shipped to me here in PA.
Are “Amazon Associates” a physical presence in a state, sufficient to prompt a need to collect sales tax? That’s a different question, though I can understand why Amazon might wish to avoid having to answer it. This is easily done through the simple expedient of ending the program in those states who try to collect it.
I am no Amazon apologist–my career is in publishing, and I regard them as The Enemy–but in this case they’re simply playing by the rules as they are currently laid out; rules that Amazon did not write.
Legislation may have to catch up with the technology, but the only difference between now and 15 years ago is scale. You could order things via telephone from catalogs 15 years ago. The internet in general and Amazon in specific have made long-distance ordering much more common. States are now starting to wonder if the advantage of scooping up so much sales tax revenue might outweigh the disadvantage of “interstate commerce regulation.”
@16 davidjanes. Amazon is the ‘bad guy’ not because they discontinued a program, but because they blamed collection of state taxes- taxes that protect their share holders from harm and provide their business a secure environment for opperations. They wish to profit from the freedoms provided by the business climate of the U.S. without contributing to its’ upkeep. They are the villian in that the way (for a coorporation) to contest a law is through the court system, for people it is through the ballot box. Their action is a ‘we are above the law’ action.
There’s some background that may be significant to those interested in this issue. I used to work in the property taxation field, and the job involved having a cursory acquaintance with tax theory. One important paper on the subject, possibly by Henry Aaron at the Brookings Institution, looked at the lifetime impact of the three principal kinds of taxes used in the US, viz. the property tax, the sales tax, and the income tax. These can be treated generically as taxes on wealth, outgo, and income. It was found that though each of these taxes is significantly inequitable, the three in tandem turn out to provide a fairly equitable taxation scheme over the lifetime of an individual.
When you’re young, you spend, building up your pile of stuff; when in middle age, you are drawing a good salary; when you are old, your income is down and you don’t buy as much, but you likely have real estate in the form of living quarters.
[As I write this, it’s clear that the analysis reflects earlier times before the hyper-rich absconded with the wealth of the country and when “job security” wasn’t a bad joke. Still, the conclusion shouldn’t be dismissed out of hand.]
The moral is that a sales tax is an important element of a good, equitable system for providing the revenue necessary to pay for public services. One concludes that the states without a sales tax don’t know what they are missing.
Damned “Submit comment” button got clicked prematurely!
Anyway, one of the difficulties with the sales tax, referred to in several other replies, is that the crazy quilt of local sales taxes makes it close to impossible for Amazon, or any other company operating nation-wide, to administer in full accordance with the law. It seems to me that the states with sales taxes have to provide some kind of simplified, broad brush approach for purchases made out of state by mail order or online. Michigan’s 6% use tax is the kind of thing I’m thinking of.
It’s very confusing. If I own a store in MN and sell shirts and some shirts have sports team logos on them – I would charge sales tax only on the shirts with the sports logos. In MN clothing sales are not taxed, but sports memorabilia is taxed. If I decide to sell the shirts on Amazon and use Amazon’s Fulfillment Center and a sale is made to someone in MN, the sales tax collection gets a little messy because sales tax in Minnesota is determined by the street address, not zip code. Then if an affiliate from Iowa has a link on a website to Amazon and a sale is made to someone in Minnesota, who would receive the sales tax and how much? And if the sales tax collected is incorrect or goes to the wrong state, I’m assuming penalties and law suits would come into play. There just has to be a simple way to apply sales tax without making it so complicated, time consuming and expensive (compliance expenses and issues). Also, not shopping on Amazon isn’t the answer. You won’t be hurting Amazon, you’ll be hurting the small, small business owner that sells his/her products on Amazon.
Here’s another issue. A few weeks ago I called MN Dept. of Revenue to ask about the new sales tax laws and if online sales would be MN 6.875% sales tax or if local taxes would be included. If local taxes were included, how was the location to be determined if digital (address of credit cards, etc.). The person at the Dept. of Revenue said she didn’t know. I said the deadline was the end of the month and businesses would need time to set up the systems to collect the correct tax. She said the Dept. of Revenue hadn’t heard from the MN Legislature yet and a statement from them was to be issued June 13th. I said that only allows 17 days for a business to figure out how to be compliant. She said it was a problem for them also. It is now June 18th and no word yet from the MN Legislature. It makes it very difficult for a business (including Amazon) to be compliant with MN laws when no one knows exactly what the laws are and within an impossible timeframe.
PZ: I’m sorry you’re having to contend with this.
As someone who grew up in a state with no Sales Tax (Oregon), I consider the concept to be Highly Concentrated EVIL. I loathe regressive taxes, and bizarre “patches” exempting this or that to try and make them slightly less onerous for the poor are nice, but akin to putting a nice hat on Cthulhu. Sales taxes are one very small step less repulsive and unfair than the poll tax, in my opinion. Thus, I cheer for anyone whose actions tend to press the idea that sales taxes are outdated, outmoded and need to simply go away entirely. For what it’s worth, I’m upset with Amazon for pushing that “Marketplace Fairness Act” nonsense. Amazon capitulated to collecting California sales tax recently – in part because they’re apparently planning on building distribution centers to provide next-day or even possibly same-day delivery – an interesting trade-off that may leave the B&M’s wishing they hadn’t pressed this point.
Now, all that said – some people have been proclaiming that Amazon must pay MN sales tax for the “costs” they inflict on the state. What “costs,” precisely, are those? Delivery trucks on the roads? Whoops, no, that’s the parcel companies that Amazon pays to deliver the package. Fire and police protection? Well, no, not if they don’t have a physical presence in the state.
Presumably, the companies that deliver Amazon’s packages in MN pay various state taxes that cover the costs their operations impose on the state – and which are not imposed by Amazon.
I haven’t stopped buying from Amazon because of their collecting CA sales tax – though I wish they didn’t, because sales taxes are evil. I continue to order from Amazon because the convenience of having things delivered to my door from a one-stop shop is worth it to me, compared to spending my time running all over town to get the same items, and probably spending more on gas in order to get them than shipping costs. (Ooh, wait – I purchased Amazon Prime and don’t pay for shipping per order. Never mind.)
Fuck Amazon and the Bezos it rode in on!
The current law being hashed out in Congress exempts any business with revenues less than $1 million a year.
I love reading all the posts from people playing lawyer for Amazon by using rhetorical tricks and obsolete legal frameworks in an attempt to say that Amazon is somehow on the right side of the argument.
I also love how literally no one has noted that this is part of an ongoing pattern of behaviour where large businesses attempt to water down or eliminate regulations and taxes in order to increase their profit margin.
It’s as if a lot of “skeptics” aren’t willing to question our capitalist society’s prioritization of profit over everything, including ethical practices. As if, despite our supposed commitment to skepticism, we refuse to be skeptical about the glorification of capitalism and concurrent demonization of socialism.
‘Cause, y’know, prioritizing the acquisition of limited resources never entices people to be utterly horrible and ruthless in order to acquire said resources. Not. At. All.
None of the profit margin comes from sales tax. Sales tax is calculated outside advertised prices and its collection and disbursement is already in the basic point of sale software be it a one click shopping cart or not.
Just to point out that they’re lying. But they’ve been lying since day one, when they said they invented one-click. My spouse was one of many who had implemented such techniques for companies before Amazon was even dreamed of.
Sales taxes are some sort of evil, although avoiding taxes by lying and cheating seems to me a larger evil.
Re: 32 Ben P 18 June 2013 at 9:25 am (UTC -5)
Actually, brick and mortar are (in some states) supposed to note where they ship or service to, and charge different sales tax when they deal with different customers. In California, if you change municipalities or counties; in Washington you don’t charge it to Oregon license holders; in most states you have to charge retail customers a different rate than wholesale; etc.
And if a brick and mortar has outlets in those municipalities? It has all those problems. Apple has an entire building in … Actually, I don’t know if it’s in Santa Clara or Cupertino, but I think Santa Clara … to deal with it; they have extra problems because they like to build to the very edge of what they’re allowed. Think of the problems Tesla has with selling! They’re not even allowed to let people touch the cars in their showrooms in some states.
It already exists as a problem for brick and mortar. Amazon is cheating. It got away with not charging in California for a long, long time while it fought the state in court. And it most definitely has a presence here and always has.
@Crissa –
The cost of compliance with every single state and local tax code is not trivial and not free. Some states consider certain items exempt from tax, while others do not. Some localities impose surtaxes to raise funds on top of the state tax. None of these borders follow anything easily automated – things like ZIP codes cross tax zones. Amazon is choosing not to offer low margin services in places where they consider the cost of compliance unprofitable. That is not cheating, that is business. Apple’s margins are higher than Amazon’s by at least an order of magnitude, if not two, because they are in the luxury goods market. Amazon’s affiliate business is not.
Alverant
Those probably weren’t Amazon warehouses. All of that stuff is outsourced. Amazon doesn’t actually own or package virtually any of the products they sell. That’s a third party business. There’s a great documentary on just that practice and the very low wage, seasonal and transient work that it creates …can’t think of the name right now.
I hardly mean to defend Amazon’s ‘business model’, but you are wrong about those being ‘their warehouses’.
Personally, the matter of Amazon being charged taxes within the US outside of states in which it has it’s physical holdings is rather silly seeming to me. I hardly expect Amazon to pay taxes in my province when I buy something through Amazon that comes from, say, China or the US and I certainly would be loathe to pay taxes myself, in my own province, on something I bring in from elsewhere. It seems silly to me because the problem, as I see it, is clearly not with the taxes, it’s with the matter of their enforcement and jurisdiction; it’s an unworkable mess. America deals with taxes very poorly. Very, very, very poorly.
@86 davidjanes: Yup, it’s a mess. I have to admit I wonder how these states would react if online retailers were to demand that the STATES insisting that online retailers remit sales tax provide and maintain their own up-to-date online databases of sales tax rates down to individual addresses; after all, they’re the ones demanding that everyone in the nation comply with their byzantine tax structures, why should they not be expected to make that information readily available? Why should every online retailer have to replicate that effort, when it realistically should be borne by the states (and the localities within) imposing those taxes? (Oh, and the API for accessing such databases should be consistent nationwide, of course.)
@87 Thomathy: There’s also the point that “Amazon Marketplace” vendors are not Amazon themselves; even now that Amazon proper is collecting sales tax in California – if I buy from a Marketplace vendor, the product is often shipped direct from that vendor (unless it’s marked “Fulfilled by Amazon” in the product listing) and that means that none of the physical facilities involved with that item belong to Amazon.
Sooo, they’re punishing the denizens of a state in protest against the behaviour of that state’s Governor and State Legislature (which totally isn’t said denizens’ fault), and using the opportunity to try and strong-arm the affected citizens into supporting this bill that they want to pass? Have I got that right?
The feds should regulate this. The biggest problem for Amazon isn’t the rate variances; even if those are by-county rather than by-state, they can build an address database.
The best choice for them is to charge sales tax based on the address that the package is dispatched to (yes, downloads are different – I’ll come back to them in a minute). That’s a pretty easy programming problem, and one that Amazon has already solved for EU VAT, where the rates vary by country.
The problem is that the rules on what goods are taxed, what is taxed at a higher rate, and which customers are exempt from paying the tax, vary hugely from state to state. Those would, unlike a rate table, be a very difficult programming and legal problem. It’s also something that isn’t an issue in Europe because the EU regulates VAT so the same rules and exemptions apply everywhere (with a couple of exceptions, which don’t change and there’s a rule that no new exceptions can be created).
Now, location of sale for purely digital goods, ie downloads, is a big issue; if it’s the location of the server, then Amazon will put a server in a no-sales-tax state and all downloads will be tax-free. If it’s the location of the downloader, then Amazon will legitimately say that they don’t know where they are. This isn’t as bad in the EU because the internet is built on national networks, so Amazon can work out which country you’re in by your IP address, and there’s an EU regulation that says that they don’t have to go hunting down people using proxy servers to pay less VAT by pretending to be in a lower-rate country. This means that when I take my Kindle on holiday to Spain, I pay 22% TVA instead of 20% VAT on any books I buy.
But identifying which state (much less which county) people are in by their IP address is nearly impossible. Lots of ISPs cross state lines. They’d have to do it by the credit card address, as the least-worst option.
But Amazon can’t unilaterally decide which state to pay sales tax to. The whole point of taxes is that they’re non-discretionary. The only people who can overrule the states and force them to standardise the sales tax regulations and force them not to create situations where two states claim sales tax on the same sale are the US federal government. I’m sure the specific law Amazon are promoting is one that favours Amazon and not smaller businesses; but the principle is good that the federal government should decide these things.