The Conversation

Amazon and the Internet sales tax wars

In response to I Love Amazon Prime, and Stiffing the Government for Sales Tax:

Stiffing the government out of sales tax is nice, although it should be kept in mind that Amazon is on the front lines of getting Internet sales taxed.  One big reason is that Amazon is building distribution centers across the land to improve shipping (and offer same-day shipping in some areas, which is pretty amazing.)  These installations give them a physical "nexus" that makes them subject to state sales tax.  

"Nexus" is the core concept at the heart of the great Internet sales tax war.  As it stands, the absence of a brick-and-mortar structure in a given state prevents it from assessing sales tax on Internet commerce.  That's because such assessments would be, quite literally, taxation without representation.  If my Internet company located in Florida ships a product to Illinois, where I own no property and none of my employees live, I'd be suffering taxation from a state where I have absolutely no voting power.

Furthermore, requiring small Web companies to manage taxes for all 50 states (not to mention thousands of local governments) would be a crushing administrative burden.  The big boys like Amazon can handle it, as can corporations that have traditional retail operations in multiple states, and already have to cope with such taxes.  Not only would it be an immense paperwork hassle, but tax authorities have a habit of periodically auditing businesses.  

This state of affairs is vexing to tax-hungry state governments (and tax-happy Big Government types in general.)  It's also understandably annoying to traditional retailers, who complain that Internet immunity to sales tax gives such companies an unfair competitive advantage.  They're even more upset due to the rise of m-commerce, the use of mobile phone apps to make online retail purchases.  You can go shopping at a local retailer, point your phone at something you want, and buy it from Amazon with a few taps on your screen.  Not surprisingly, the folks shelling out big bucks for infrastructure and staff at brick-and-mortar retail outlets hate that.  Best Buy, for example, has been training salespeople to rush over to anyone they see using a mobile phone in this manner and offer to match whatever online price they're seeing.

It's a huge political and commercial battle, and while I also love Amazon - one of the best value-for-money operations out there; I'm actually writing this on a Chromebook I got from them - they're not on the side of Internet tax freedom.


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