The “Amazon tax”: who’s the bad guy?

ArsTechnica had an article recently about how Amazon has decided to cut off its California affiliates in order to avoid having to collect California sales tax. The California law considers independent affiliates to be a physical presence of the affiliated company, a position Amazon disagrees with. In the midst of an overwhelming budget crisis, it’s understandable that Governor Brown would want California residents to pay the same tax on their Amazon purchases that they would at BigBoxStoreCo. There’s concern that this could end up resulting in a loss in tax revenue as employees of these affiliates lose their jobs. I did a cursory search for reports of such job losses in other states that have enacted similar laws, but couldn’t find anything concrete.

I understand why Amazon is taking this position. They’re not avoiding paying taxes (the customers would be the ones paying), they’re avoiding the overhead of determining the appropriate sales tax for every combination of address and product. Sales taxes are complicated. They vary not only by state, but sometimes by county and city. Different products are sales-taxable and others aren’t. Some customers are exempt from sales tax for certain purchases. Trying to keep all of that straight for the entire country is a non-trivial overhead.

So what’s the solution? One argument is that sales taxes are inherently unfair as they disproportionately affect the poor. Some would argue that a uniform sales tax is the solution. Another issue is that sales taxes are the sometimes only way to get money people who don’t live in the area but use services and infrastructure. This is a complicated problem and the solution is way more political than I care to be on this blog (if you like law and politics, Doug Masson’s blog is an enjoyable read). I take this as an example of how governments have yet to catch up with technology. It’s not unreasonable that online retailers collect sales taxes, but it’s unreasonable to expect it until the process is simplified.

4 thoughts on “The “Amazon tax”: who’s the bad guy?

  1. Law isn’t too much different from code.

    All those taxes and conditions are codified.

    Yes, it does take time to enter all that data into some form of database.

    If Walmart can figure out sales tax in very place it has a store I’m pretty sure a tech savy company like Amazon can.

    I would color Amazon as the bad guy. I am surprised they don’t have a physical presence in California. Where are their fulfilment centers located?

  2. Impossible? no. Difficult to set up and maintain? Probably. Walmart has to be able to keep everything straight because they have stores in the different jurisdiction. Even so, if there’s a county or municipality where there’s a local sales tax butno Walmart exists, I’d guess that does not collect the appropriate sales tax. Amazon’s certainly not angelic, but they’re certainly acting rationally (i.e. in their own interests). For better or for worse, our economy demands nothing else.

  3. I won’t take sides as to whether Amazon and other online businesses should collect sales tax when no physical presence exists. But using affiliate marketers as the argument for a “physical presence” is a very hard pill to swallow. I find it difficult to believe the computer sitting in the corner of my living room constitutes a store front on par with Walmart and their thousands of square footage.

    With the exception of New York (currently in a court battle), the following has occurred with each state who has decided to use Amazon affiliate marketers as their deficit holy grail:

    1) Amazon affiliate marketers are declared an Amazon physical presence by the state.
    2) Amazon immediately cancels all affiliate marketers within the state.
    3) The state receives no tax revenue from affiliate marketer income within the state, because marketers no longer exist.
    4) Former affiliate marketers no longer have affiliate income to spend within the state, resulting in less sales tax revenue.

    The states lose. The affiliate marketers within the state lose. Local businesses within the state lose.

    The only winners are the big-box retailers who hope to one day knock Amazon from their lofty #1 online retailer spot.

    Affiliate marketing helps support my family. I spend income I make from affiliate marketing locally, including a local Walmart. I’ve used it to help support efforts like the Mario Marathon. I would hate to see this go away, simply because a lobbied politician in my home state has decided the Internet is some pie-in-the-sky solution to his budget shortfall.

  4. the only amazon question to be asked is whether or not to run them out of town tarred & feathered or with the old pitchfork & hoe!!!!!!! walmart, target, sams, etc. too !!

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