(IBD) 'Amazon Taxes' Fail To Deliver As Retailers Cut Ties

Several states have passed laws requiring affiliates of online retailers like Amazon (AMZN) to collect and remit sales taxes. “Amazon tax” laws have passed in California, New York, Colorado, Rhode Island, North Carolina, Connecticut and Illinois. Lawmakers have tried in at least 14 other states.

But in nearly every case, online retailers have cut ties with their state affiliates. Residents can still buy from the e-tailers, but the affiliates lose business or move.

“The nation’s first few Amazon taxes have not produced any revenue at all, and there is some evidence of lost revenue,” according to a National Tax Foundation study last year.

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Posted in * Culture-Watch, * Economics, Politics, Blogging & the Internet, Corporations/Corporate Life, Economy, Politics in General, Science & Technology, State Government, Taxes

20 comments on “(IBD) 'Amazon Taxes' Fail To Deliver As Retailers Cut Ties

  1. Ian+ says:

    Up here in Canada, federal law requires collection of provincial sales tax by the retailer, no matter where the retailer is located, even if it’s outside the country. So, for example, if I order from Amazon.com in the US, they collect the sales tax for New Brunswick where I live. But in some cases Canada Customs will hold the package and notify me, then release it when I pay. So amazon.com in the US is already set up to collect sales taxes for some jurisdictions.

  2. Jim the Puritan says:

    This happened here last year. Once the bill was passed by the legislature, and Amazon and others immediately pulled their connections to their local etailers, which were mainly local companies trying to market locally produced products. A number of the companies immediately folded. The governor vetoed the bill several weeks later before the veto deadline. I don’t think anyone ever tried to figure out how many local companies the legislature put out of business because of the e-tax scheme, but it was just one more blow to our local economy.

  3. IchabodKunkleberry says:

    Once again, the dead hand of government throttles and strangles
    the economic vitality of small businesses. This is just government
    by zombies.

  4. C. Wingate says:

    That looks like the very live hand of Amazon throttling small businesses to me.

  5. AnglicanFirst says:

    The politicians don’t care about the free market consequences of their acts of taxation. They just want more money to spend and they want it right now.

    The left side of the aisle deals in unrealistic/unworkable and often destructive ideologies and the right side of the aisle simply seems to perpetually gravitate to the center in its self-centered attempts at “making nice” in order to achieve re-election.

    The reality is that business enterprises are the organizations that generate wealth. Government does not produce anything of value that is saleable at profit in the marketplace.

    It is the manufacture of something that is saleable and which is being purchased that generates jobs, individual income, and wealth for the entrepreneurs who actually create jobs to further invest increating more saleable products that create more jobs.

    Anything that gets in the way of a healthy free enterprise system is unAmerican. Its not of our tradition and it doesn’t work.

    Just look at the “reductions to the absurd” now occurring in Greece, Spain and Portugal.

  6. Jim the Puritan says:

    #4–Has nothing to do with Amazon. This mainly has to do with local companies in the state that are allowed to link into Amazon and market their products on the Amazon site. The etailers in the states are still responsible for paying whatever sales tax might be due under state law. However, the lazy state governments figure it is easier to try to force Amazon to track and collect the taxes for it, rather than rely on the etailers to properly report and pay the tax themselves. Amazon rightly tells the states it is not going to get involved in different states’ tax collection systems, and just pulls the plug; there’s no reason they should become a tax collection agent for various state governments, and face possible liability themselves if they don’t withhold the right amount of tax. So they just cut off the links to the local etailers. This is entirely government stupidity at work. If you’re a larger state like California or New York you might be able to force Amazon to do it because of sales volume; for smaller states, the larger etailers will just exit the state and the smaller (mainly local) etailers will go bankrupt.

  7. Alta Californian says:

    There’s actually a conservative argument to make here, that the tax free status of online retailers like Amazon disadvantages in state businesses and in state employees. Why buy something from a local store (even if it is a national chain), that employs local people, driving our local economy, when we can buy something from a company that may be out of state and not pay sales tax?

    I think this will eventually bite Amazon. We, of course, just passed an online sales tax here in California. After threatening to cut off all California etailers Amazon is realizing that it will take a huge chunk out of their supply base to cut off the fifth largest economy in the world. There is now talk of Amazon spearheading a ballot initiative to repeal the tax. And wouldn’t you know it, it is brick and mortar, on-the-ground retailers the likes of WalMart and Target saying that they will fight it with every resource they have, because they feel the new law levels the playing field for a change.

  8. DavidBennett says:

    There are small business owners in your neighborhood you may not even be aware of who are making money as affiliates – and who are already paying taxes based on their earnings to the state. They are supporting the local economy without having a traditional brick and mortar business. California is going to lose the taxes from these affiliate business owners, as well as take away a major source of income for many people who are making it on their own (or at least supplementing on the side) as small business owners. Personally I think we need more small business owners, not less, to foster competition and innovation. Maybe these (now former) small business owners can start living the new American dream, and get a minimum wage job at Wal Mart, or answer phones in a cubicle for a few dollars more an hour.

  9. Alta Californian says:

    Maybe Amazon could just collect the tax and keep the affiliates and make us both happy.

  10. AnglicanFirst says:

    Why does the State of California desperately need to further ‘pick the pockets’ of businesses by using taxes?

    Because, the State of California built a fantasy world far bigger ( by multiple orders of magnitiude) than Disney Land when it carried out its ideological imperatives.

    The citizens of California aided and abetted this debacle and now they should have the intestinal fortitude to live with it and to solve the problems that they created without further ‘theft through taxation.’

  11. Alta Californian says:

    Actually, being willing to pay for the level of our commitments takes some courage and fortitude as well. Most of us are willing to pay more to live in what we consider to be paradise. And I say that as someone who pays those very taxes.

    And your statement in #5 is patently false. Government investments have, and can create, a great deal of value. If it weren’t for government research and development we wouldn’t have the internet (or thus Amazon) in the first place.

  12. AnglicanFirst says:

    “And your statement in #5 is patently false. Government investments have, and can create, a great deal of value. If it weren’t for government research and development we wouldn’t have the internet (or thus Amazon) in the first place.”

    Do you understand what you are talking about?

    Government research and development are not done in a competitive market place. Almost all of the major technological developments done by or paid for by the U.S. Government have been done in time of war or to meet a major politically driven challenge such as the Space Race.

    Radar, sonar, the first vacuum tube computer (the ENIAC), modern aviation, Velcro, jet propulsion, nuclear reactors, were developed in this manner. And their civilian applications were by-products and not the primary focus of the development efforts. The internet was developed by DARPA for the Defense Department.

    Most other technology was developed in the free-for-all processes of the free market system. Let’s think Goodyear, Thomas Alva Edison, George Westinghouse for example.

    The record of government research and development, except in in time of war or in the command economies of socialist dictatorships (most of which was directed at preparing for war) is not that great. And a great deal of the technological output of the socialist dictatorships was based upon the reverse engineering of things developed in the Western Nations.

    Compared to the free enterprise, national defense, and space program innovations; the innovative output of the rest of the U.S. Government lags far far far behind.

  13. Sarah says:

    RE: “Personally I think we need more small business owners, not less, to foster competition and innovation.”

    And thanks to California’s policies many of the rest of our states will enjoy those small business owners! ; > )

    The coming years of “consequences” for California will be charming to observe for many of us and I think — other than the bailout battle that will take place — the rest of us will greatly benefit from the exodus of so many producers.

  14. Capt. Father Warren says:

    [i]If it weren’t for government research and development we wouldn’t have the internet [/i]

    Having heard that canard so many times, let’s look at that a little more critically. Given what we know about Government inefficiency, maybe the correct statement would be “if the Government hadn’t been monopolyzing work in that area, we would have had the internet earlier”. Some will disagree, but seldom do we see Government advancing the learning curve; we just see them monopolyzing the playing field. Case in point; Dept of Energy and Fusion Research. Decades of inaction combined with billions upon billions of overbudget spending.

  15. Archer_of_the_Forest says:

    I used to be against taxes on internet sales, but I have recently rethought that position. I think there is a fairness argument that can be made for a federal sales tax on internet sales because such a break gives mega sellers like Amazon an advantage over the local retailer that does have to collect tax for the exact same product. Small, local businesses do get hurt by this policy, and I think we need to think about that.

  16. Br. Michael says:

    15, you, like so many others confuse sovereigns. A federal sales tax is not a state sales tax. The feds need to stay out of it. We need another federal tax like we need a hole in the head.

  17. Cennydd13 says:

    Well, this is one Californian who doesn’t mind paying the online sales tax. When I order something from a specialty company in Maine because I can’t find it here, for instance, I pay the tax, so so what?

  18. Cennydd13 says:

    I guess the difference is that I don’t buy it through Amazon.

  19. Capt. Father Warren says:

    Like so many things in the world, “fairness”, a very subjective word, has nothing to do with this. Amazon and others like them have created a business model that some folks appreciate and use. Others like Wal Mart, Target, etc have chosen another model and people like that one also. There is not a single thing (other than get up and go) stopping local merchants from setting up a web shop and selling to the state next door if they have something of value to sell and want to take advantage of the no sales tax angle.

    I just bought my wife a birthday present on Walmart.com because the item was not available on Amazon. I will pay sales tax because I value the item that much. If Wal Mart really thought they were being unfairly competed against by Amazon, they could go set up a whole new entity not tied to their morter and bricks store. But notice, they haven’t.

    I agree with Br. Michael, the LAST thing we need is the Feds poking us with another tax, ahem, “Revenue” source according to the Messiah.

    Why did CA start taxing internet sales? Oh yes, to help balance the budget of course. Who believes that will really happen versus endorsing even more liberal spending…….on new kindergarten books with gay history in them?

  20. C. Wingate says:

    re 12/14 and “Given what we know about Government inefficiency“: could you cough up some actual evidence that governmental research is less efficient (by some mutually acceptable standard) than business research? Can we even come up with some standard for what constitutes efficiency in research?

    Yeah, some research is done privately, some in corporations, some in academia, and some in the government. Having to reach back over a century for exemplary figure in private research is not exactly a strong point for one’s arguments. Personally I don’t see that there is a great difference, and in any case the money spent on pure research in the government is minuscule.

    and Jim, in #2, wouldn’t that be “how many local companies that Amazon put out of business”? Amazon, could, after all, have stooped to compliance with the laws. I’m not a big fan of sales taxes, but to the degree that Amazon’s business model depends upon tax evasion, I don’t really have a problem leveling the playing field. If it turns out that Amazon is less viable when sales taxes are due, and that local booksellers are more viable, then I think that’s so much the better. They could, after all, go to L.L.Bean’s model and start eating the shipping charges.