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Paul Misener, Amazon's vice president of global policy   (Source:
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 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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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
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
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.

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