Amazon.com sales-tax issue taken up by Congress

Jul 30, 2011 By Marc Lifsher, Los Angeles Times

Congress is weighing into the roiling dispute between states and giant Internet retailer Amazon.com over collecting sales taxes on online purchases.

On Friday, Sen. Dick Durbin, D-Ill., is expected to introduce legislation that would require Internet-only retailers to add sales taxes to customers' bills, just as their competitors with brick-and-mortar stores do. Rep. John Conyers, D-Mich., plans to introduce a similar measure in the House.

The congressional effort is aimed at closing a legal loophole created by a 1992 U.S. Supreme Court decision that freed online and catalogue sellers from the obligation of collecting the sales tax if their businesses had no physical presence in the state where a buyer lives.

"Government shouldn't be picking winners and losers by giving a handful of companies a competitive advantage over everyone else," said Katherine Lugar, vice president of the Retail Industry Leaders Association. The Arlington, Va., trade group includes major national chains including Wal-Mart Stores Inc., Target Corp. and Best Buy Corp.

Introduction of the Durbin bill comes as California and other large states, such as New York, Illinois and Texas, are attempting to enforce new laws that would require Amazon and major electronics retailers to collect billions of dollars in sales taxes that are legally owed to the states. Seattle-based Amazon is suing to overturn New York's law and has started a referendum campaign aimed at invalidating a California statute that took effect on July 1.

Amazon has said it will not collect sales tax on purchases by California customers. But the company on Friday wrote to Durbin and Conyers saying it would support a national effort to create "a simple, nationwide system of state and local sales-tax collection, evenhandedly applied to all sellers, no matter their business model, location or level of remote sales."

States have been working on a federal solution to the Internet sales-tax collection for more than a decade, said Neal Osten, director of the Washington office of the National Conference of State Legislatures. As and the president struggle to cut the federal budget deficit and reduce support for state-run programs, collecting every dollar from the sales tax is a high priority for local leaders that "will not raise one dollar in new taxes," he said.

Osten said there is bipartisan support for the so-called Main Street Fairness Act, which would require states to sign a "Streamlined Sales and Use Tax Agreement" before they could require retailers to collect the Internet sales tax.

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dogbert
1.3 / 5 (6) Jul 30, 2011
The Democrats control the Senate, so Senator Dick Durbin bill may pass the Senate.

The Republicans control the House, so Representative John Conyers' bill is unlikely to pass the House.

As is painfully apparent from the debt ceiling negotiations, the Democrats are dead set on raising taxes at every opportunity.
frajo
4.2 / 5 (5) Jul 30, 2011
As is painfully apparent from the debt ceiling negotiations, the Democrats are dead set on raising taxes at every opportunity.


That's ok for those who evade taxes at every opportunity.
"In 2004, the corporate lobby got together and major employers like Cisco and Apple and GE begged congress to give them a one-time tax holiday, arguing that they would use the savings to create jobs. Congress, shamefully, relented, and a tax holiday was declared. Now companies paid about 5 percent in taxes, instead of 35-40 percent.
Money streamed back into America. But the companies did not use the savings to create jobs. Instead, they mostly just turned it into executive bonuses and ate the extra cash."
[RollingStone: Corporate Tax Holiday ...]
Y8Q412VBZP21010
5 / 5 (2) Jul 30, 2011
The US retail association is in favor of taxing internet transactions. Retailers like Wal-Mart and Target have to pay sales taxes and they argue that Amazon.com has an unfair competitive advantage by what amounts to a "tacit subsidy" by the government. Given that analysis shows Amazon could still win on high volume and low overhead even with sales taxes, it's getting hard to defend current practice.
dogbert
1 / 5 (5) Jul 30, 2011
Y8Q412VBZP21010 (what a handle!),

There is an issue you did not address. Why should New York be able to collect taxes from someone or some business in Texas? (Insert any states in the above statement).

How can one state argue that it should have the power to regulate the citizens of another state?

Some states recognize this and see opportunities. For example, the state of Tennessee has reached agreement with Amazon that Amazon may build distribution centers in Tennessee without incurring any obligation to collect Tennessee taxes. It is a win win situation.
Y8Q412VBZP21010
5 / 5 (1) Jul 30, 2011
There is an issue you did not address.


I simply point out that the current system gives
Amazon.com a "tacit subsidy" that gives it the firm a competitive advantage over brick-and-mortar firms like Target and Wal-Mart.

The legalities of changing things are of course complicated. But giving Amazon a "tacit subsidy" is clearly an inequitable business practice supported by the government.
dogbert
1 / 5 (2) Jul 30, 2011
But it is not a "tacit subsidy". States have the right to tax their own citizens. They have the right to require businesses operating in the state to collect those taxes at time of sale.

A state has no right whatsoever to require an out of state business to collect taxes on the state's citizens.

The courts recognized this fact when they affirmed restriction of state control to businesses with an actual retail presence in the state.
Y8Q412VBZP21010
3.7 / 5 (3) Jul 30, 2011
But it is not a "tacit subsidy".


Tell that to Wal-Mart and Target. If you maintain that it is perfectly fair that they be charged sales taxes while Amazon.com can compete with them without having to pay sales taxes ... they won't agree.
Now if the mindset is "screw them", what can I say?

Obviously there are complicated legal issues here. But it is very hard to argue that the current system supports fair business practice.
dogbert
1.3 / 5 (4) Jul 30, 2011
Tell that to Wal-Mart and Target.

Wal-Mart and Target are only required to collect sales taxes in states which levy sales taxes and where the store has a retail establishment.

Amazon is required to collect taxes in states which levy taxes and where the company has a retail establishment.

Currently, Target says they have no stores in Vermont. So Target is not required to collect sales taxes on Vermont citizens. Wal-Mart has a retail presence in all 50 states and so must collect sales taxes in all 50 states which have a sales tax.

Since the requirements apply to all -- Wal-Mart, Target and Amazon, it seems fair to me.
Y8Q412VBZP21010
5 / 5 (1) Jul 30, 2011
Wal-Mart has a retail presence in all 50 states and so must collect sales taxes in all 50 states which have a sales tax. Since the requirements apply to all -- Wal-Mart, Target and Amazon, it seems fair to me.


Wal-Mart must pay sales taxes everywhere; Amazon.com gets money from customers from all the exact same localities and generally doesn't pay sales taxes.

It may seem fair to you. It may seem fair to Jeff Bezos. There's no need to ask if it seems fair to Wal-Mart, because they've made it clear that they don't think it's fair. I don't think it is either.

Now there's one hell of a complicated legal argument underlying this -- but whatever the law is, Wal-Mart's getting screwed, and if you want to call them up and tell them they can get screwed for all you care, they're probably not going to be very happy with you.
dogbert
1 / 5 (2) Jul 30, 2011
Wal-Mart is very successful. They have spread to all fifty states and to most of the rest of the world. Everywhere they have gone, they must meet the legal requirements to do business in that place.

They are not "getting screwed". They can leave any state that they don't want to collect taxes for. Amazon has ceased to do business with affiliates in states which wanted Amazon to collect taxes where thy did not do business. Wal-Mart has the same options.
Y8Q412VBZP21010
3 / 5 (2) Jul 30, 2011
They are not "getting screwed". They can leave any state that they don't want to collect taxes for. Amazon has ceased to do business with affiliates in states which wanted Amazon to collect taxes where thy did not do business. Wal-Mart has the same options.


Let me get this straight ... if Wal-Mart doesn't like the fact that they have to pay sales taxes while Amazon.com doesn't ... they can just stop doing business.

OK, I'm done here. If you can say something that silly and say you're serious, you need to start taking your meds again.
dogbert
2 / 5 (4) Jul 30, 2011
Be done then. You believe that a company must collect taxes for a state in which it has no retail presence. I don't. The courts have agreed that a company can only be required to collect taxes for a state if the company has a retail presence in the state.

You essentially want to penalize Amazon for Wal-Mart's success. The courts say that is not reasonable. I do too.
FrankHerbert
0.8 / 5 (52) Jul 30, 2011
The solution is not to tax Wal-Mart or Target either DURRRRR !!!!!

(sarcasm)

Go away dogbert.
Y8Q412VBZP21010
1 / 5 (1) Jul 30, 2011
The solution is not to tax Wal-Mart or Target either DURRRRR !!!!!


"ANARCHISTS OF THE WORLD UNITE!"

"SEZ WHO?!"

Yes, I recognize a gag and am making one as well.
Doug_Huffman
1 / 5 (2) Jul 30, 2011
Retail Industry Leaders Association, the Arlington, Va., trade group includes major national chains including Wal-Mart Stores Inc., Target Corp. and Best Buy Corp.
Not bad, two of three whose doors I will not darken. Shop Mom & Pop. Eschew Bigbox Stores.

Good people ought to be armed as they will, with wits and Guns and the Truth.
FrankHerbert
0.7 / 5 (52) Jul 30, 2011
You forgot broomsticks for raping those you disagree with Doug_bert. A = A
dogbert
1.8 / 5 (5) Jul 30, 2011
FramkHerbert,

You might give consideration to participating in the discussion instead of merely trolling. You probably won't, but it is worth a try.
FrankHerbert
0.7 / 5 (51) Jul 30, 2011
I offer you the same advice.

A = A
Sin_Amos
not rated yet Jul 30, 2011
There is nothing complicated about about this. Businesses leech off communities, whether this good or bad is moot, as the idea of taxing them has to do with providing governance and services which benefits the local population, which is why you pay taxes. Now, we don't need other states or private entities siphoning money and not contributing. As a Californian, I say, get out of my state if you don't want to contribute to our populations' well-being. We don't need your business. That way, we can do business with California companies that create jobs for people here and pay taxes here. Hmmm. That simple. As 1/4 the US economy, I say, GTFO. We don't need LEECHES. We don't create markets for your benefit, so that you can take the money and run. Remember that idea of BUYING things MADE in the U.S. of A. It is the same thing, but on the state level.
ConcernedCitizen
2 / 5 (1) Jul 30, 2011
The issue is the collection of tax that is owed by the customers. In most states, if you purchase a product via the internet that would normally be taxable at the local grocer, you are legally oblicated to pay this tax directly to the state via filling out a form and sending the amount owed. However, most people don't do this.

This has had several effects, one of which is to reduce local tax revenues that would normally have been collected by the local merchant.

Understandably, companies don't want to become the tax collector for all the local taxing authorities scattered accross the US. Just trying to get the tax amount correct is horribly complicated, and the filing requirements for the company to remit the tax that was collected is equally complex.

However, large companies like Amazon can easily do this. They don't want to only because it makes them more competitive to the extent that their customers are not paying the local sales tax they should be paying anyway.
ConcernedCitizen
5 / 5 (1) Jul 31, 2011
No doubt this is a complex issue with many twists and turns and congress could certainly make life easier for all retailers.

As an example, the company I work for was sued by one state to pay for several years of customer-owed sales tax because we sent a trainer to a customer in the state. According to the state, this meant that we had extablished a 'physical presence' within the state and were therefore liable for collecting local sales tax even though we are only a 100 person company located in a single building in a different state.

Since that time, 10 other states have contacted us for the same reason. Needless to say, tax complience for our 100 person company has increased dramatically.

The final point to make here is that all of our customers were legally oblicated by their respective state to send the appropriate tax directly to the state. Most did not do this.

States are now getting more ruthless about going after those uncollected local taxes.
poof
1 / 5 (1) Jul 31, 2011
Dey turk ouurr taxes!
Baseline
3 / 5 (4) Jul 31, 2011
Is this right people are expressing concern that Walmart is at a disadvantage?

There are people here arguing to levy taxes on their fellow citizens?

Seems like a very bad idea to raise taxes during a deep economic recession. How about asking legislators to cut back on spending before coming for more revenues from all of us.

Add up your total tax burden already, which most people have never done, and you will likely be shocked because there are so many hidden taxes you pay. I find it disturbing that a great number of people think their tax burden ends with their pay stubb and property tax payments.
dogbert
1 / 5 (3) Jul 31, 2011
Excellent point Baseline.

It is a bad idea to raise taxes when the economy is so depressed.
pubwvj
not rated yet Jul 31, 2011
The simple solution is a national sales tax and then eliminate all the local and state sales taxes.

While we're at it, switch to a flat tax on income (capital gains and earned income treated the same) and eliminate all personal deductions and loopholes.

Make the tax code fit on a single sheet of paper, one sided, 9 point type with 1" margins.

Make the tax forms no longer than a standard post office post card.

K.I.S.
Y8Q412VBZP21010
not rated yet Jul 31, 2011
While we're at it, switch to a flat tax on income (capital gains and earned income treated the same) and eliminate all personal deductions and loopholes.


Flat taxes are actually fairly popular in Eastern Europe. In some of the countries the rates are kinda steep, however.
dogbert
2 / 5 (4) Jul 31, 2011
pubwvj,

I agree about the flat tax. I argued for that for many years. It is unlikely to happen because the government uses a complicated tax system to direct, control and reward. How can we get our representatives to give up their power?

I would not support a national sales tax. The federal government does not need more taxes and taking the state's tax base away just sends more power to the federal government.

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