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Paul Misener, Amazon's vice president of global policy   (Source: indiatimes.com)
Smaller online retailers believe Amazon is using sales tax standards to crush smaller competitors

Amazon asked Congress to set federal standards for states' online sales tax collection in a House Judiciary Committee hearing earlier this week.

Amazon spent a lot of time battling the collection of online sales taxes over the past couple of years. If forced to collect sales tax in a particular state, Amazon would simply pack its bags and move on to another state. This happened in states such as IllinoisCalifornia and Texas.

Amazon got away with avoiding sales tax collection because of a 1992 Supreme Court ruling that excuses Amazon and other remote sellers from having to collect taxes in states that do not have the company's employees or warehouses operating within their borders. However, Amazon said it would comply with sales tax collection of online goods if there was federal regulation instead of different states with different rules.

Now, Amazon is pushing Congress to set standards more than ever. Paul Misener, Amazon's vice president for global public policy, attended a House Judiciary Committee hearing on Wednesday to address the issue of federal standards for collecting state sales taxes online.

Some lawmakers are onboard with Amazon's request, such as Representative John Conyers (D-MI), who sides with brick-and-mortar retailers regarding online retailers' "unfair advantage."

John Otto, an accountant and state representative from Texas, is also onboard with the idea and addressed the concerns of Republican panel members regarding whether the sales tax collection would be viewed as a tax increase.

"This is not a new tax we're collecting," said Otto. "It's a tax we've been unable to collect."

Not everyone is cheering for Amazon's position on taxes, though. Smaller online retailers like Overstock.com believe Amazon is jumping onboard the tax wagon now because it's a chance to hurt smaller competitors. Amazon is so huge now that it can handle being taxed while smaller e-tailers like Overstock could largely be affected by such taxes.

But Misener doesn't see it that way. He said the sales tax collection wouldn’t be as burdensome as the smaller e-tailer's think.

"With today's computing and communications technology, widespread collection no longer would be an unconstitutional burden on interstate commerce, and Congress feasibly can authorize the states to require all but the very smallest volume sellers to collect," said Misener.

Sources: The Consumerist, BusinessWeek



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Agree with the taxing or not...
By aebiv on 12/2/2011 10:18:03 AM , Rating: 5
...all I see Amazon saying is "If you want to go this route, we're going to make *!$% sure it is fair for everyone on the internet."

Can't say I blame them.




RE: Agree with the taxing or not...
By Dr of crap on 12/2/2011 10:37:50 AM , Rating: 2
Agreed,
And now that a hugh amount of sales is online, there should be a uniform way of paying these state sales taxes. The way is sounds now I'd hate trying to figure out each states tax.
It should be easy for the retailers to collect and send the money to the states. But I'd like a million dollars as well, so good luck with that!


RE: Agree with the taxing or not...
By KentState on 12/2/2011 10:50:48 AM , Rating: 2
There is plenty of software available that gives tax rates by state, county and zip code. I have seen this in place in the catalog and online retail industry for at least 15 years now. The biggest issue is dealing with all of the municipalities on the back end.


RE: Agree with the taxing or not...
By bah12 on 12/2/2011 12:45:44 PM , Rating: 2
quote:
The biggest issue is dealing with all of the municipalities on the back end.
Exactly calculating and collecting it is no big deal, but how do you pay the rural ND county tax office (or worse the city office)?

What they need is and IFTA type federal regulation. A central authority that the merchants submit funds to, then it distributes it to the members. Problem is even IFTA only goes to the state level. Sales tax can be split up all the way to the township (ie X% to State, Y% to county, Z% to city). So it is much more complex to get everyone paid correctly.


RE: Agree with the taxing or not...
By Cypherdude1 on 12/2/2011 3:28:01 PM , Rating: 3
quote:
And now that a hugh amount of sales is online, there should be a uniform way of paying these state sales taxes.
It was reported that Cyber Monday sales were up 22% from last year. That's a huge increase. In comparison, retail sales were up 7% , good but not incredible. I can't really blame online buyers. Most people, including myself, don't want to wait in line, tussle with all the other shoppers, etc...

Anyway, my question is, how does this affect people who live in states where Amazon does NOT have a physical presence? Does this mean those people still do NOT have to pay taxes or is everyone now going to have to pay state sales taxes? One of the main reasons why shoppers can go online and get great deals is because they only have to pay shipping. If shoppers have to pay shipping plus taxes, it's not going to be such a good deal anymore.


RE: Agree with the taxing or not...
By bah12 on 12/2/2011 4:47:32 PM , Rating: 3
Physical presence does NOT determine if you owe sales tax. Most physical presence ONLY determines if the merchant is required to collect and pay that tax on your behalf. Most states are quite clear that anything you've purchased where the seller did not collect the sales tax, you have to fill out a a form and send in payment.

Simply put the BUYER is always responsible for the tax.


By tastyratz on 12/5/2011 11:59:54 AM , Rating: 2
Right on the money
and good luck getting ANYONE to fill out a form for collecting taxes on their online purchases. States know this and is why we have all the bustle.


By Solandri on 12/2/2011 1:27:43 PM , Rating: 3
quote:
There is plenty of software available that gives tax rates by state, county and zip code.

All of that software indemnifies itself against errors. If they screw up and tell you the tax rate is 5%, and you collect 5%, and oops it turns out to be 7% and you're $5000 short for the year, YOU have to pay for THEIR error.

Having this handled by private industry making tax rate software is stupid. Tax rates are set by the government, it should be the government's responsibility to publish said rates in a timely and easily accessible manner. That way if they screw up, THEY pay for it with lessened revenue, not the merchant with an unexpected tax bill.

Ideally, the Federal government would set up one big website where every municipality has to report their tax rates, updated every night or every week. If that one website goes down, the Fed is on the hook for any lost tax revenue. If a municipality fails to update their tax rate, then their lost revenue is their own damn fault. And if a merchant fails to get the updated tax rate, then it is his fault and he is liable for the uncollected taxes. Everyone pays for and is responsible for their own mistakes. None of this stupid passing the buck under the current system.


RE: Agree with the taxing or not...
By xcergy on 12/3/2011 12:11:00 PM , Rating: 5
There are 10,000 tax districts, and NONE are defined by zip code. 9 digit zip is close, but is designed for mail delivery, not tax codes.
Is cotton candy food, entertainment, or sugar? Why should I know or care when my State has no such definition. What about shipping? In CA, it gets taxed, in SC, it's not. What of Tax Holidays and those weird definitions? While fine for one store w one location and one tax rate, it's unreasonable for online to know (or be liable) to know remote laws.


RE: Agree with the taxing or not...
By ebakke on 12/2/2011 11:59:18 AM , Rating: 4
quote:
And now that a hugh amount of sales is online, there should be a uniform way of paying these state sales taxes.
Not necessarily. Alternatively, states could pursue a different means of taxation. There's no reason states with sales taxes have to keep going down that path. If a particular state's elected officials think in the era of ecommerce that sales tax isn't the most effective mechanism, they can and should pick another.


RE: Agree with the taxing or not...
By bah12 on 12/2/2011 12:58:25 PM , Rating: 2
I like your thinking, after all if the states are truly suffering enough and need these taxes, there are other ways of meeting those budget goals.

As usual it is a spending issue really, if TX for example suddenly got a bunch of sales tax from online sales, do you really think other taxes would suddenly drop? Probably not the greedy politicians would just find a new "economic stimulus" to spend it on.

At the end of the day, a state spends X amount, and needs to collect X amount of tax to cover that. How they get it makes no difference to me (and they MUST get it or go bankrupt). What I really care about is what they are spending on.


RE: Agree with the taxing or not...
By jonmcc33 on 12/2/2011 11:57:06 AM , Rating: 3
Lack of sales tax is the incentive to buy online. If they add sales tax then online sales will suffer. Why? Because in most cases you pay for shipping online. So why pay tax and shipping?

It's just more of the states trying to get money out of whatever they can. I already pay city AND state taxes from my paycheck. Taxing things I purchase just encourages me to be content with what I have and rarely buy anything new. That will just harm the market in the long run.


By KentState on 12/2/2011 12:43:53 PM , Rating: 4
Even without Amazon Prime, most of the products I order offer free shipping. The internet also offers information and product comparisons at my finger tips which is much harder to accomplish at a store. Also, customer feedback is a huge benefit of online shopping. Try going to Best Buy and finding 20 people at once that own the TVs you are looking at to give you a review.


RE: Agree with the taxing or not...
By bah12 on 12/2/2011 12:49:31 PM , Rating: 2
The flaw in your logic, is that generally speaking you are already required to pay the tax for online goods. In most states you are required to pay the tax regardless, the merchant is just not required to collect it on your behalf.

So the only way your reasoning works is if you are OK with tax evasion (like 99.999% of us are).


RE: Agree with the taxing or not...
By FITCamaro on 12/2/2011 3:38:20 PM , Rating: 2
It's a moot point. Fact is that even though they don't collect the tax, YOU are still REQUIRED to pay it. Now most people don't. But that doesn't mean you aren't supposed to be.

States trying to enforce their tax codes is completely understandable and completely justifiable.


By Reclaimer77 on 12/2/2011 7:15:27 PM , Rating: 2
Fit I'm kinda let down that you're taking that stance :(

State sales taxes on online purchases are illegal and unconstitutional. Calling it a "use tax" is just a sales tax with another name. The fact that they don't even bother to enforce this is proof that it's on questionable legal ground.

The Constitution makes it clear. Only Congress has the power to pass tax legislation on out of state goods. I believe in States rights, but this is one thing they do NOT have a right to do.


RE: Agree with the taxing or not...
By Motoman on 12/4/2011 9:46:21 AM , Rating: 2
quote:
Lack of sales tax is the incentive to buy online.


No it's not. Because, after all, we all pay the use tax we owe on out of state purchases for which sales tax isn't collected at the POS right?

Besides, it is eminently clear that the sales tax "benefit" is the least of all other online benefits. Namely...

1. The price of the products themselves are generally considerably less than in B&M stores. Sales tax or not on top of that price is a moot point - still saving lots of money either way.

2. Nearly infinite product selection online.

3. Nearly infinite product information and reviews online.

4. Better customer service from online vendors.

5. Nearly infinitely better convenience shopping from home than getting in the car and driving to a B&M.

And you can go on, of course. In the end, the assertion that the collection of sales tax at the POS makes the slightest difference is asinine. Looking at it from a total cost perspective, purchase price + tax, it's still way cheaper to buy online - ergo, there will be no difference in the preference to buy online vs. going to a B&M store if online vendors are required to collect a tax at the POS. People will still save lots of money online, therefore they will still shop online...and continue to enjoy all the other benefits of online shopping as noted above as well.


RE: Agree with the taxing or not...
By LRonaldHubbs on 12/2/2011 1:44:09 PM , Rating: 2
Agreed. And as a consumer I'm fine with that. I fully understand that I owe sales tax on my purchases, and I accept that, but I refuse to keep track of it myself. Standardize the collection of online sales tax and I'll gladly pay it.


By seamonkey79 on 12/2/2011 5:15:37 PM , Rating: 2
Doesn't remove the incentive for me... I don't care if I have tax added at the time of purchase, for most things it's just easier not to stand in line behind the whining two/three/six/twelve/eighteen year olds complaining that they want Pokemon cards...


By pixelslave on 12/5/2011 9:19:37 PM , Rating: 2
People, Amazon has an evil agenda behind it. Let's say you are a merchant on Amazon, having a DVD for sale fulfilled by Amazon. Do you know how much Amazon would charge you (the seller) when someone buys your DVD, for a first-class level shipping service? How about 1/4th of you normally would pay? Amazon is not likely to absorb the shipping cost for you, so imagine how much it actually cost Amazon to ship that DVD?

How can this be done? I don't know, but may be it has something to do with Amazon Prime. But the thing is, the shipping cost of Amazon is much lower than almost everyone else. So, it can cut its price further even when it has to charge buyers sales tax, while everyone else can't do the same. Now that the Kindle Fire is released, which will only be at its full potential when someone joins Amazon Prime, it will only make Amazon's position stronger.

So, of course, Amazon won't object to this sales tax bill.


Still Not Fair
By lightfoot on 12/2/2011 12:01:29 PM , Rating: 2
So basically if I, as a consumer, live close to the border between a high tax state and a low tax state, but live in the high tax state I will pay the high tax rate on all my online purchases, but will pay the low tax rate on at least half my brick and mortar purchases because I cross the state line.

This still isn't fair. ALL businesses should have to comply with the same laws. It should be charge the tax of where the business operates OR where the consumer lives - not one standard for online businesses and another for B&M stores.




RE: Still Not Fair
By mherlund on 12/2/2011 12:40:19 PM , Rating: 2
By the logic you posted, you should be paying the higher tax rate since you live in the higher tax state (even if you decide to make your purchase across the border.)


RE: Still Not Fair
By Solandri on 12/2/2011 1:47:04 PM , Rating: 4
The problem is states with high sales tax generally have lower taxes elsewhere. The perfect example is probably Oregon and Washington. Oregon has an income tax but no sales tax. Washington has a sales tax but no income tax.

Any time there's a difference like this, it can result in inherently unfair outcomes (and given people's propensity to figure out ways to exploit the system, it will result in unfair outcomes). Some people who live in Washington will have to pay more taxes because of the way their purchases work out. Others will have to pay less tax because of the way their income works out. Meanwhile in Oregon the reverse happens, so there is no way to equalize the two, short of harmonizing all taxes across all states.

You'll see this problem rear up as this national sales tax idea moves along. The obvious way to do it is to average the sales tax of all the states, and divvy it up accordingly. But states with high sales tax will complain that that's not enough and that they're losing revenue, while states with low sales tax are gaining new revenue. States with low sales tax will complain it's too much, and hurting their business. Washington will complain that a 5% Internet sales tax doesn't come close to matching their 8% sales tax, especially since they have to split half of it with the other state in the transaction. Oregon will complain that 5% is too much, and that the move from 0%->5% hurt their etailers, while the move from 8%->5% helped Washington's etailers.

It's a huge nest of vipers with no logically fair solution. So to solve it you have to put logic aside, come up with one system which seems like a reasonable compromise to everyone's position, and just implement it. The primary goal here isn't fairness (which is impossible to achieve), it's standardization.


RE: Still Not Fair
By lightfoot on 12/2/2011 2:17:14 PM , Rating: 2
The problem is that the current system is already standardized and they are complaining that it is unfair so they are trying to change it.

If they can't make it fair, then there is no point in changing it.


RE: Still Not Fair
By bah12 on 12/2/2011 3:19:17 PM , Rating: 2
Amazon may be complaining about fairness, but the State's argument is not that it is unfair but that the current system is not enforceable.

Legally speaking Amazon has no unfair advantage in the system today, because in the majority of states YOU the buyer still owes that tax. The problem lies in the fact that we simply don't pay it. The idea of "no sales tax" is an illusion, there is in fact a tax (in most states). Thus the argument that it is unfair is completely bogus.

Take it from another angle is it unfair that B&M stores suffer shoplifting losses, where online retailers suffer far less theft? Both "unfair" advantages are a result of criminal behavior, it just so happens that the sales tax crime is perpetrated blatantly by the majority.

Now I personally accept that it costs money to run a state, and that as such a certain dollar amount is needed via tax. So I'd rather they come up with a better system to insure a more realistic playing field. The other option is to start getting court orders for resident's amazon history, and start suing the offenders for the tax they rightfully owe. A redesign makes far more sense.


RE: Still Not Fair
By lightfoot on 12/2/2011 7:06:43 PM , Rating: 2
A redesign DOES NOT make sense.
States should have NO power to regulate or tax business that operate OUTSIDE of their borders.

The correct course of action is to ENFORCE the existing USE taxes on the state's OWN citizens.

If the state tax is unenforcable, it should NEVER have been passed in the first place. Changing FEDERAL LAW regarding INTERSTATE COMMERCE is NOT THE CORRECT SOLUTION to a STATE TAX ISSUE.

And again - the B&M retailers are the ones pushing VERY hard for a change in the law specifically because of the fairness issue. States are on board only because it they are starved for revenue. If the economy was booming, the states would not be pushing for this change.


RE: Still Not Fair
By Reclaimer77 on 12/2/2011 7:38:28 PM , Rating: 2
quote:
States should have NO power to regulate or tax business that operate OUTSIDE of their borders.


They don't. It's Unconstitutional for them to collect sales tax on purchases outside state lines. So they concocted something called a "use tax", where they tax you for "using" something you bought online in the state. Which is just a sales tax in another form. It's as transparent as it is dishonest legalese mumbojumbo.


RE: Still Not Fair
By bah12 on 12/5/2011 9:23:16 AM , Rating: 2
quote:
They don't. It's Unconstitutional for them to collect sales tax on purchases outside state lines.
Last I checked only the the Supreme Court can rule something Unconstitutional, so your opinion of right or wrong doesn't really matter now does it? The argument really isn't about if you agree with the law, and just because you don't doesn't make it any less valid. Fact is these laws have been in place for quite some time, and have NOT been ruled invalid by courts. Thus they are valid, sorry that's the way our system works.


RE: Still Not Fair
By bah12 on 12/5/2011 9:27:54 AM , Rating: 2
Despite all your CAPS LOOK AT ME I'M RIGHT!!! You are in fact wrong. The federal government CAN create a tax, and use that tax revenue to fund the states, which is what a redesign would mean. It would be a new federal tax collected at the federal level and funded back to the states.

This is all perfectly legit in our current system. I do tend to agree that the states should solve this themselves though. If they don't have the sales tax revenue, raise property/income tax. Pretty simple fix.


It's Time
By jrpros on 12/2/11, Rating: 0
RE: It's Time
By Deaks2 on 12/2/2011 11:34:33 AM , Rating: 2
Agreed!

In Canada we've been paying feferal and provincial sales tax on Internet purchases for as long as I remember. Of course, we don't have local or municipal taxes to contend with here, so the system is relatively simple.


RE: It's Time
By Solandri on 12/2/2011 1:58:42 PM , Rating: 2
Interesting aside to this. It turns out Canadian companies shipping to U.S. customers don't have to collect any sales tax. They do have to pay import duties, but on some products there are no duties (e.g. software). So the implementation of a national sales tax would actually put Canadian online retailers at an advantage to U.S. online retailers. So really, this isn't a problem that can ever be solved (short of harmonizing all tax rates in all municipalities, states, and countries). Even if the U.S. implemented a national sales tax to take care of the problem of taxing interstate commerce, the same problem exists in taxing international commerce.

The cause of the problem here is that people are viewing this all backwards. They're seeing Amazon as having an unfair advantage because they don't have to collect taxes on interstate orders. If you view it that way and extend the reasoning to states and countries, you end up with the unsolvable problem I just described.

The correct way to view this is that states which charge high sales taxes are putting their own retailers at an unfair disadvantage. If you view it this way, then a self-consistent solution becomes obvious - if you want your retailers to be able to compete on a fair playing field, lower your sales tax.


RE: It's Time
By Salisme on 12/2/2011 12:00:22 PM , Rating: 2
How are jobs lost? Someone still has to fill the orders, package and ship it, invoice it, etc. If anything its a lateral move for jobs, as B&Ms consolidate, Internet sale warehouses boom, shipping industry pick up pace.

This is what capitalism is all about, survival of the fittest, may the best business win. No one is stopping the B&Ms from opening their own website and competing.


RE: It's Time
By lightfoot on 12/2/2011 12:09:00 PM , Rating: 2
Actually the "Nexus rule" does stop B&Ms from competing online. Because they have a physical presence in the state they are being FORCED to collect sales taxes. Online only stores do not have to collect the state's taxes because they do not have a physical presence. To compete on an even footing they would have to remove their B&M stores from that state. (In my opinion this is EXACTLY what they should do if they feel that they can't compete despite having a physical presence. The physical presence should be an advantage, not a disadvantage. If the state chooses to tax it into oblivion, it should leave the state.)


Meh
By Brandon Hill (blog) on 12/2/2011 10:49:06 AM , Rating: 5
As long as Amazon continues to undercut the competition by 10 to 20% (even with taxes) and provides two-day shipping with Prime, I really don't give a crap.

Come at me bro!




RE: Meh
By amanojaku on 12/2/2011 12:05:45 PM , Rating: 2
quote:
Come at me bro!
You sure? Cuz I got a taser... ;-)


RE: Meh
By Motoman on 12/4/2011 12:23:42 PM , Rating: 1
No one does. Which is why, if new country-wide taxation rules are passed, it won't make the slightest difference in the preference for online shopping vs. B&M.


By mherlund on 12/2/2011 11:40:05 AM , Rating: 2
quote:
Smaller online retailers like Overstock.com believe Amazon is jumping onboard the tax wagon now because it's a chance to hurt smaller competitors. Amazon is so huge now that it can handle being taxed while smaller e-tailers like Overstock could largely be affected by such taxes.

I don't think Amazon is doing it directly to hurt smaller competitors but to force an easy tax standard on their terms to prevent many different rules based on what each state calls for.




Paul Misener
By TGressus on 12/2/2011 11:46:15 AM , Rating: 2
So that's what happened to Ace Ventura...




ok, I'll pay them
By Rage187 on 12/2/2011 11:51:37 AM , Rating: 2
Yeah, figured it was inevitable. I'm willing to pay them now; although I might start using out of country suppliers if I can get it cheaper.




It's double taxation
By vision33r on 12/2/2011 1:00:48 PM , Rating: 2
Many small time sellers already paid sales tax on their goods since they are not big enough. Along with all the selling fees they have to pay.

It will crush small businesses and Ebay understands that and they will keep fighting for small sellers.




fantastic news!
By tekzor on 12/2/2011 2:22:35 PM , Rating: 2
already pay taxes in NYC for amazon. Making them less will be great. 3% ;)?




Internet Sales Tax
By xcergy on 12/3/2011 12:03:35 PM , Rating: 2
James Otto wants the feds to fix a problem that should be solved by TEXAS.
~ How is it MY problem (an out-of state online retailer) that TX has no income tax or the ability to place a line item for Use Tax on a tax form?
~ I was not the one who decided that the legislators meet once every two years. Even if Congress passes said bill, it will take TX 4-6 years to get their house in order .... oh my!
~ You have a law on the books now to collect said tax. Most don't know that such a law exists. Again, this is MY fault? Mr. Otto, get your house in order before insisting Congress write new bad law. How about have TX DOR educate the public on current law, and actually make an attempt to enforce same. It's not my place to do YOUR job.




The Cloud
By The Raven on 12/5/2011 11:15:46 AM , Rating: 2
What is the sales tax rate in the Cloud? I thought Amazon was moving all of thier business there? Is the Cloud even in the US?




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