Desperate Amazon tries to buyoff California

Parent Cafe
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No, it doesn’t. As BCEagle correctly pointed out, these transactions have never been tax exempt. It’s just been easy to cheat because enforcement is difficult if the retailer doesn’t collect the tax at the point of sale. I know you think all taxes are bad, and I respect that as an opinion. But what you’re arguing for here is that if someone offers you an easy way to cheat on your taxes they should be rewarded for doing so.</p>

<p>If this is about innovation and a new business model, let it compete on a level playing field. As I said before, I was OK with the de facto exemption when online retailing was in its infancy. But it’s not anymore. If Amazon is more efficient it should be able to compete without the extra help from the government.</p>

<p>Amazons California affiliates “are disappearing” because Amazon cancelled their contracts. <a href=“http://www.mercurynews.com/breaking-news/ci_18420735[/url]”>http://www.mercurynews.com/breaking-news/ci_18420735&lt;/a&gt; That was bare-knuckles economic gutter fighting by Amazon designed to pressure California, not the function of a free market.</p>

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<p>spidey, I respectfully disagree with your use of the word “innovation”. Sure, Amazon was a pioneer in Web-based sales and the first successful dot com company. But that is the past. There is nothing innovative about reselling someone else’s goods now - it is being done by many.</p>

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<p>BB, you can’t argue with the fact that Amazon came up with an innovative business model, and that this is a game changer (and is thus harmful to business in general). Kluge, Amazon was following the rules, and they never failed to collect taxes that they were responsible for collecting.</p>

<p>I do not think all taxes are bad, and never said that.</p>

<p>I love how you characterize the government allowing companies or individuals to keep more of their own money as “helping them”. You have got to be kidding me. It’s like a robber going home and being all proud of himself because he stole a guy’s wallet, but let him keep his watch. What a hero.</p>

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<p>Amazon still rocks for customer service - I bought and returned TWO cellphones for DD2 (HTC Freestyle, thank you :-)). They handled it with amazing efficiency and professionalism. And, as I said, the sales tax was not the deal breaker. Not when they sell it for $20 versus $100 at AT&T or Best Buy.</p>

<p>Ultimately, Amazon will separate into order and fulfillment ops, and still get around.</p>

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<p>Technically this would be a new tax at the Federal level. That the aim
is to redistribute the amounts to the states does not mean that it
isn’t a new tax. The collections would probably be subject to all of
the other temptations to grab the money or borrow it that other
Federal honeypots are. I imagine that one of our branches of
government could put strings on the cash too.</p>

<p>I’m not necessarily against new taxes but I’d prefer more efficient
implementations of current taxes.</p>

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<p>Amazon is an innovator in engineering the supply chain and in warehousing.
In many ways, Amazon is like Wal-Mart, one of the first companies to use
very sophisticated just-in-time deliveries to stores based on computer
telecommunications. Amazon tries to locate warehouses near their customer
bases while WalMart does the same - only you can go into WalMart’s
warehouses called shopping centers.</p>

<p>Amazon has also done a lot of interesting stuff with delivery services
resulting in hybrid deliveries with UPS or FedEx doing part of the
delivery and the USPS doing the last mile resulting in much lower
delivery costs at the potential expense of delivery time and loss of
tracking detail.</p>

<p>Amazon does an amazing amount of innovation with their cloud services.</p>

<p>There are lots of startups, phone and tablet app companies and larger
online stores using their cloud services to deliver their services.
They innovate in running servers, virtual machines, etc.</p>

<p>The regular delivery of household staples using ultracheap shipping
is relatively new.</p>

<p>Kindle is relatively new. It (along with the Nook and iPad) have
really changed the publishing world in hard books vs digital books.</p>

<p>Amazon has made it far easier for me to get college textbooks with
their optimized logistics system without me having to pay for premium
shipping.</p>

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<p>Pretty good deal on that phone - difference of $70 without a contract.</p>

<p>I had a look at charts of tech stocks and AMZN is one of the strongest around. I think that it even looks better than AAPL’s chart.</p>

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<p>Amazon wants to have physical presence in States via warehouses and still be exempt from collecting the tax. Once they open a warehouse in a State if that State has a sales tax they should collect it. A trickier question is the affiliates that link to their site. There are already significant court decisions that nexus can be created by agents, manufacturer reps and other such relationships. The question is do these affiliates meet the standard. It seems Amazon feels they do or else they would take the battle to court and not through lobbying the legislatures.</p>

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<p>You may want to google the Streamlined sales tax agreement to see how States are trying to deal with this.</p>

<p>spidey this is not about Amazon keeping more of their own money. It is about should they be required to collect sales tax from their customers. No one is asking Amazon to pay more.</p>

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<p>We’re a low-tax state but Amazon (to my knowledge) doesn’t have a presence here. They do have a presence in MA - my guess is to serve the colleges in MA, NH, RI, CT and VT and I assume that they collect sales taxes in MA. I’ve never heard of it being an issue and I assume that they feel the benefits of having warehouses in prime college markets outweighs the costs in collecting sales taxes. I’d love to see their warehouses in NH (I could order the cheapest 5-8 days delivery and get my books within two days) but I can’t see it happening - the logistics wouldn’t make sense.</p>

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<p>Important Tax Cases: Scripto v. Carson and the Agency Theory of Nexus</p>

<p>Long before the Supreme Court decided that retailers had to have physical presence in a state before it could be required to collect sales or use tax, the Supreme Court ruled that it didn’t take much to establish physical presence. In Scripto v. Carson, decided thirty years before Quill v. North Dakota, the Supreme Court had to decide whether a Georgia retailer with no offices in Florida could nonetheless be required to collect use tax on sales made in Florida. The Supreme Court ruled that the Commerce Clause nor the Due Process clause stood in the way of such a requirement, meaning that retailers could be physically present in a state through those acting on their behalf (i.e. their agents).</p>

<p>Scripto, a maker of writing utensils, used 10 wholesalers (or brokers) to solicit sales from within Florida. These brokers were not full-time employees of Scripto, but were independent contractors paid on a commission basis. The state of Florida tried to assess Scripto for uncollected use tax on sales made by the brokers in Florida. Scripto, naturally, challenged the assessment, arguing that it had no plants, employees, or offices in Florida, and thus insufficient nexus with Florida to obligate it to collect use tax on Florida sales. Scripto lost at the trial and appellate level in Florida state court.</p>

<p>The U.S. Supreme Court agreed with the rulings of the Florida courts. Justice Clark, writing for the Court, held that the difference between regular employees and independent contractors was “without constitutional significance.” If the Court permitted such distinctions, Justice Clark argued, it would be opening the states up to a flood of tax avoidance techniques. Rather, he wrote, “…[t]he only incidence of this sales transaction that is nonlocal is the acceptance of the order.” The functional reality was that Scripto had a very real (and regular) presence in Florida that required the collection of Florida use tax on its sales.</p>

<p>The Scripto case is important because it revealed that the Supreme Court, in tax cases under the Due Process and Commerce Clause, will care more about function rather than form. In other words, the activities conducted on Scripto’s behalf by the brokers were more important to the Court than the fact that the brokers were not technically employees of Scripto. This ruling continues to impact retailers today, with the California Court of Appeals recently relying partially on Scripto to rule that Borders Online could be forced to collect California use tax because its sister organization, Borders Books and Music, performed certain functions on its behalf. Understanding Scripto is crucial to understanding the agency theory of nexus.</p>

<p>BC Amazon does not want to charge tax in places they have warehouses.</p>

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<p>Spidey, sorry, I do not agree with your statements. Amazon used to be an innovator. As in the past tense. What it has done in the beginning was revolutionary, what Amazon is doing today is simply evolutionary.</p>

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Letting Amazon sell goods at what amounts to a 6 -10% discount compared to other retailers is “helping Amazon.” </p>

<p>But I actually think you’re savvy enough to have understood what I was saying when I said it the first time. Which makes me think you probably didn’t want to address that, so you trotted out the old stolen watch chestnut instead. C’mon, Spidey! If you’re going to deflect, at least get some new material! :)</p>

<p>BCEagle, you’re right - but we’re talking about two different things here. I was responding to Spideygirl’s post arguing that Amazon should be allowed to have an advantage over its competitors under current law. I actually agree with you to an extent - I think sales taxes are not a good way of raising government revenues. I’d do away with all of them. Of course, the shortfall would have to be made up somewhere else, and there’s the rub. Sales taxes are regressive, which makes them popular with investors, who pay a very small percentage of their income in sales tax, but a larger percentage of their income in income tax. If you eliminated all sales taxes and backfilled with income tax with no net increase in revenue, the result would be that our tax system would become somewhat more progressive. That would be unpopular with more affluent people. So I doubt it will happen.</p>

<p>So, a sales tax system which is harder to “game” is the least economically disruptive means of raising revenue. I think Amazon does some cool stuff, too. And I’m no fan of WalMart. But WalMart is right on this one.</p>

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<p>kluge- So, a sales tax system which is harder to “game” is the least economically disruptive means of raising revenue. I think Amazon does some cool stuff, too. And I’m no fan of WalMart. But WalMart is right on this one. </p>

<p>That is why I would like to see a low rate say 2% but on every transaction -nothing exempt. No game playing and not a high enough rate to give a real advantage if you happen to game the system.</p>

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<p>A 2009 listing of Amazon warehouses lists one in the city where I work so apparently Amazon does have a warehouse here. I don’t know if I’ve ever received anything from it though. Most of my stuff comes from Southborough, MA. I was surprised to find out that Amazon does order fulfillment for Target, at least back in 2009. I guess that’s one way to build a quick online presence.</p>

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<p>It would be hard to have a uniform rate in MA as legislators like to tinker so much. There’s a luxury tax on garments over $175. Food and drink are exempt from sales taxes unless they are prepared. There’s some funny tax when you buy a car. There’s one tax for buying the plates for a car that is different from buying plates for a minivan, SUV or pickup truck.</p>

<p>I still prefer imputing sales taxes via income tax figures for those states with an income tax.</p>

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The Supreme Court ruled that this is unconstitutional back in 1992, in regards to mail order companies, where you either phone in your order or mail it in. These were ruled as insufficient to create nexus.</p>

<p>The MA Town Fair Tire case was interesting, but it is important to remember that the case was decided on statutory grounds, not state constitutional grounds. Meaning, the state could change the law to cover this situation, and the SJC actually pointed out this remedy in their full decision. The state has not pursued this option.</p>

<p>MA’s income tax form has a line to report Use tax, and it provides a safe harbor - rather than track all your OOS purchases, you just pay a small amount based on your income, and this safe-guards you from additional penalties in case you are audited. For most people it is less than $50/year. If you are cheating on your taxes by not paying your use tax, why should the onus be an a business that has no presence in your state to enforce this?</p>

<p>I don’t know anyone who shops on-line purely to avoid sales tax, I think this is a bogus argument. People shop on-line for the convenience, and because 99 times out of 100 the price is cheaper. So to say it provides an unfair advantage over B+M stores, I think is also a largely bogus argument these days. I find that shipping in many if not most cases is more than my local sales tax.</p>

<p>It is not easy to determine who to collect the tax for, either. A company based in state A with their servers in state B, customer service reps in state C, and a warehouse in state D sells to a customer who lives in state E but placed the order in state F and had it delivered to state G. Who gets the tax?</p>

<p>Throw in the fact that there are something like 70,000 sales tax jurisdictions in the U.S., all with different rules about what is taxable, how much the tax is, when something is taxable, how to register to collect the tax, how to remit the tax, who to remit it to, what the audit process/appeal process is, etc, and you have an unreasonable burden on a business. A company the size of Amazon can afford to have an army of people to deal with this if they have to; for a small business trying to sell on the internet, it would be impossible. I imagine there are software services to calculate the tax these days, but that is only one small piece of the problem.</p>

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The California law in question exempts small businesses. This is really an Amazon vs. WalMart scale issue. And I don’t think WalMart and other retailers with stores and online divisions should be penalized because they have physical stores in most states. Note: Walmart.com and other retailers with actual stores deals with all of those jurisdictions every day - and successfully, as far as I can see.</p>

<p>This really is pretty much about Amazon defending a governmentally bestowed advantage against its competitors, not a major philosophical dilemma.</p>

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I live in MA, and as far as I can tell by checking my past invoices, I have never paid sales tax on an Amazon purchase. If they do have nexus here, I don’t know why they aren’t collecting.

Individual towns can now add their own sales tax on meals - some do, some don’t. I could see this getting extended to other things at some point.</p>

<p>There are places where you can pay state, county, city, special purpose district, and transit authority sales taxes.</p>

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What’s their definition of “small”?

I would say it is a “constitutionally” bestowed advantage, rather than a “governmentally” bestowed advantage. I think there is a big difference.</p>

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<p>“the new California law excludes all non-California retailers who sell less than $500,000 to California buyers in a year.” - I thinks that’s a correct statement.</p>

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If it was constitutionally bestowed the law couldn’t be enforced. California is merely seeking to enforce its laws within the boundaries set forth in the last Supreme Court ruling. It is just that California cut them extra slack before.</p>