We all know one of the benefits of buying from Amazon is that in addition to the discounts, we don’t have to pay sales tax. In California, that’s a significant savings with sales tax in excess of 10% in some counties. It is also patently unfair. The local businesses, and for purposes of this blog the local bookstores, can’t match the discount, let alone avoid paying the sales tax.
Whether or not a business is subject to a state’s sales tax depends upon its presence in the state. Have a store in the state, clearly the business is present and subject to paying sales tax. Having a warehouse in one state and only shipping items to buyer in another state doesn’t qualify as having a presence in the state and a sales tax isn’t charged. Technically, the buyer is supposed to track how much she spent and the appropriate sales tax and pay the state. I wonder how many people are doing that, I’m guessing I could count them on my fingers and toes. But what about the Internet seller who has people with a presence in the state selling its items (affiliates), should the Internet seller pay a sales tax? Arguably, these people are subject to income tax, but so are our small businesses. Moreover, given the changing shopping patterns of more people buying online and one seller, Amazon, comprising a majority of that business, should the laws change to capture a sales tax? The California legislature (along with other states, notably New York) said ‘yes’ and changed the law to capture sales tax from Amazon (although at a reduced 7.75% rate). A law change that arguably keeps up with the times and captures hundreds of millions of dollars in tax.
For better or worse, California has a quirky legislative history. In an effort to combat the power of the railroads over 150 years ago, our founders designed the initiative process. If enough voters sign petitions requesting an initiative be on a ballot, it will be, no matter what big business wants to control the government. It sounds good in theory, in practice it has been a bit of a nightmare. The latest example, since Amazon lost its lobbying campaign in the California legislature (there are several states where Amazon won and it is not subject to sales tax), it’s now heading to the people and gathering the signatures needed to put this issue to a vote. All several hundred million of us are going to vote on whether or not Amazon should pay sales tax.
I’ll be curious for all of five minutes about how Amazon will sell its right to avoid sales tax. Walmart, Target, and small businesses will be arguing that everyone should be paying their fair share of tax. What’s guaranteed is that we will be bombarded with commercials about who creates the most jobs and every voter will be grateful for his or her DVR.
So, before the avalanche, here’s my opinion, Amazon must be required to pay taxes like every other business, large and small. Don’t be snowed by their campaign, stand behind the small businesses in your community, the people who send their kids to your schools, who hire your neighbors, and who support your local government by paying taxes. If Amazon wants to do business in California, then it should pay taxes just like everyone else.
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I prefer the approach this side of the pond. In the UK we do not have sales tax on books (yet). So far all the politicians seem agreed on not introducing it – it’s considered a tax on learning! However – when we do have it on shopping, it is at the eye wateringly high level of 20%!
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With having thought about it for too long, I think I like the approach that all sellers of a particular item are treated the same. However, the 20% I could skip.
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Amazon and other websites should be subject to the same laws as catalog sales. Plain and simple.
A bunch of websites’ first act after the law passed was to end business with all affiliates in California, thereby removing revenue via personal income taxes. I would bet that was an unintended side effect of the law, and one that will probably not do much good for California in the long run.
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