Super: Amazon & Wal-Mart team up to lobby for new online sales tax

posted at 3:07 pm on August 2, 2012 by Mary Katharine Ham

Keep your eye on the, ahem, “Marketplace Fairness Act” in Congress (S.1832). As Tim Carney of The Washington Examiner explains, we’ve all been ordering online for years with no sales tax because there is no federal sales tax, and a 1992 Supreme Court case ruled states can’t “collect sales taxes from a business [with] no physical presence in the state.”

Up until now, online sales tax bills have had a powerful opponent in Amazon, with the popular online retailer playing defense against efforts by powerful brick-and-mortar lobbyists working to get bigger government to handicap its new competitor. But now Amazon is switching sides.

You’ll never guess why:

In order to provide faster shipping, Amazon is building warehouses throughout the country. These warehouses constitute a “physical presence,” which requires them to collect sales taxes, in any event. So, if Amazon is going to have to collect sales taxes under the existing “physical presence” doctrine, it may as well try to expand online sales taxes to whack its smaller competitors who don’t have a 50-state network of giant warehouses.

The rest of the online retail industry remains on the anti-tax side. NetChoice, a coalition including other online retailers like eBay and Overstock.com, is fighting the “Marketplace Fairness” bill.

These are the typical battle lines in Washington: big business for big government, and smaller business for smaller government. And the bigs typically win.

Here’s Sen. Jim DeMint addressing Amazon’s change of heart at a hearing on the bill in the Senate Commerce Committee Wednesday. Key quote via Amanda Carpenter: “I’ve been here a long time and I’ve seen many businesses that used to be small, they grow. Then they use their political clout to come here, to advantage themselves and to erect barriers to entry for smaller companies.”

The deck was stacked against taxpayers at the hearing, with six tax supporters testifying and only one opponent on hand. But one of the tax’s supporters unwittingly offered the senators an object lesson in how difficult implementation of such a law might be:

Steven Bercu, CEO and co-owner of BookPeople book store in Austin, Texas, told the committee that he felt so strongly about collecting sales taxes that his business did so even for sales into states where he has no physical presence. He has no legal obligation to do so, but he likened it to a kind of civic obligation to support infrastructure and services in other states (nevermind the fact that shipping companies that help deliver his items already do plenty of that through income and gas tax burdens of their own).

The revelation of illegal tax collection came when Steve DelBianco, Executive Director of NetChoice, gave his testimony. In it, he presented a screenshot of a purchase he made on BookPeople’s website this morning which showed that he was charged what was purportedly Virginia state sales tax of 8.25%. There’s only one problem: Virginia’s sales tax is 5%. Mr. Bercu quickly proclaimed that a mistake had likely been made and that he’d look into it with the provider of the service that calculates sales tax collection for his business. It turns out that 8.25% is actually the prevailing sales tax rate in Austin, Texas, where BookPeople is physically located. In all likelihood, this is the source of the mix-up.

While it was somewhat amusing to uncover this mistake, it also suggests that the tax was illegally charged to DelBianco. If BookPeople collected and remitted on behalf of Virginia, they illegally overcharged him because no business can collect more than the legal sales tax rate. If they collected and remitted to Texas, they illegally charged DelBianco on a transaction which was not subject to sales tax. Under current law DelBianco has no sales or use tax obligation whatsoever in Texas and if BookPeople charged him one, that was just as illegal as a grocery store charging someone sales tax on something in a state where food is exempt from it.

As Andrew Moylan notes, “even the best of intentions can’t iron out mistakes resulting from the confusion of 9,600 taxing jurisdictions with different rules across the country.” The Senate’s bill is branded as an attempt to level the playing field for small businesses. I concede there are genuine concerns for small, brick-and-mortar stores, but this law will just burden small online businesses while big retailers will be able to devote resources to compliance and absorb the extra taxes. Complexity is a subsidy for those with the money for a better lawyer.

Jazz Shaw, who has covered this bill as it bubbled up, noted in April that two states have already struck down “Amazon tax” rules.


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I don’t understand why Wmrt & Amz are playing footsie on this?
Wmrt is everywhere so most customers already pay a tax whenever they buy online from them.
Whereas Amz isn’t in every state and few customers are required to pay a tax….

kregg on August 2, 2012 at 5:05 PM

You missed the first excerpt MKH included. Also, an increasing number of states count Amazon affiliates as a “physical presence”, which up until now was answered by Amazon dropping all the affiliates in the states that did that.

It’s the same reason why GM basically wrote the emission control laws that went into effect in 1975, and when Honda figured out how to meet it without the GM-designed catalytic converter, had that “tweaked” to require catalytic converters.

Steve Eggleston on August 2, 2012 at 5:14 PM

first – they could solve the problem really quick, treat the sale like any other sale, sales tax is levied at the point of sale, if the online store is located in Texas charge Texas sales tax, if the online store is located in Oregon charge Oregon sales tax

second – wait till they really want to level the playing field between online and brick and mortar stores.

RonK on August 2, 2012 at 5:09 PM

States can’t do that as it is considered interstate commerce, just as it has been since catalogs were the rage in the late 1800s. What states can, and have been, doing is imposing what is properly described as a one-time property tax on the value of goods purchased from an out-of-state good that just so happens to equal the sales tax of that good sold in-state. Of course, enforcement is “fungible”.

Prediction – if this flies, look for the ‘Rats and Huge-Government “Republicans” to agitate for the larger of the sales tax rate in the seller’s locale or the buyer’s locale to be applied to be applied to interstate purchases.

Steve Eggleston on August 2, 2012 at 5:22 PM

I’m not sure what you two mean, but the way you make something and stand for something, then leave it to invariably go sideways at some point, is kinda sad. It’s not the dying. It’s what they do with what you built. :)

Axe on August 2, 2012 at 4:28 PM

Sorry, busy day and I can only get to the computer sporatically.

That’s what I meant. The corporate culture at Walmart changed dramatically once Sam was gone.

Fallon on August 2, 2012 at 5:24 PM

Remember: big businesses often support costly regulations and taxes because it squeezes out the smaller businesses who can’t afford it. The Tea Party movement is just as suspicious of big business as it is big government, liberals seem to be fine with both.

Daemonocracy on August 2, 2012 at 5:28 PM

Whenever there’s a proposed law with “Fairness” in its name, lock up and hide your wallet.

bgoldman on August 2, 2012 at 5:30 PM

We live in Texas and since Amazon made a deal with the state to collect sales tax, we have stopped shopping Amazon. The only advantage they is gone.

johnny reb on August 2, 2012 at 4:45 PM

Same here.

Dominion on August 2, 2012 at 5:31 PM

And this, ladies and gentlemen, is why Big Business is so reviled in this country, fair or not, although often fairly, in my estimation.

Given that so many of these companies are run/owned by libs, there is no reason for the GOP not to completely dissociate itself from the moniker of ‘the party of big business’. They donate to the other side, and these sort of tactics are unamerican (i.e., contrary to this country’s founding principles). They are not worth being associated with or showing any love to.

avgjo on August 2, 2012 at 5:53 PM

Walmart is supporting the bill because they are competing against online vendors who don’t have to charge sales taxes. I am sure Best Buy would be all for this bill too, along with other big box stores. In some respects, I am for the bill. I would like an even playing field when it comes to this matter……………..but I do understand the complexity of the sales tax laws throughout the country. Perhaps the states could simplify their sales tax laws for online vendors.

SC.Charlie on August 2, 2012 at 6:02 PM

US Constitution Section 9 Clause 5
Tax or Duty shall be laid on Articles exported from any State.

timberline on August 2, 2012 at 6:39 PM

Opps….

US Constitution Section 9 Clause 5
NO Tax or Duty shall be laid on Articles exported from any State.

timberline on August 2, 2012 at 6:40 PM

I have a brick and mortar and an online store. My state forces me to incur expenses to collect its sales taxes on in-state sales. I have to pay over 2% commission to the credit card companies for the total sale, which includes sales taxes. I don’t believe I should be forced to pay for the ‘privilege’ of collecting my state’s taxes. I damn sure don’t see why I should have to pay to collect other states’ taxes as well.

Why does everyone here – on a conservative site! – assume that the best (or only) way to “level the playing field” is to increase taxes?If in-state store are put at a disadvantage, why not “level the playing field” by lowering or eliminating sales taxes?

Texastoast on August 2, 2012 at 8:40 PM

We live in Texas and since Amazon made a deal with the state to collect sales tax, we have stopped shopping Amazon. The only advantage they is gone.

johnny reb on August 2, 2012 at 4:45 PM

There are still oddball things that I can get at Amazon that I can’t get here locally, but for the most part the party is over.

JFS61 on August 2, 2012 at 9:24 PM

We live in Texas and since Amazon made a deal with the state to collect sales tax, we have stopped shopping Amazon. The only advantage they is gone.

johnny reb on August 2, 2012 at 4:45 PM

Hit the wrong button.

There are still oddball things that I can get at Amazon that I can’t get here locally, but for the most part, yeah, the party is over.

JFS61 on August 2, 2012 at 9:26 PM

Talk about stupid. I am an Amazon “Prime” member of long standing. When the day comes that an internet sales tax is imposed, I will drop that membership immediately and go back to local buying.

minnesoter on August 2, 2012 at 9:33 PM

I guess all these guys really REALLY want their sales cut in half.

Ok, no problem. I’ll start not buying now.

Wolfmoon on August 2, 2012 at 10:51 PM

…TWERP!……?
Do something!

KOOLAID2 on August 2, 2012 at 3:11 PM

Only she can save us now. Bishop is gone fishing.

SparkPlug on August 2, 2012 at 3:38 PM

sorry that I didn’t see this until now. I was busy working in the produce department @ you know…Walmart.

annoyinglittletwerp on August 3, 2012 at 2:11 AM

Arkansas’s 3rd Congressional District Representative, Steve Womack – R, is pushing this in the House on WM’s behalf. He didn’t take kindly to it being pointed out that it was ironic that his 1st piece of legislation was a tax on businesses…

Gohawgs on August 3, 2012 at 2:41 AM

first – they could solve the problem really quick, treat the sale like any other sale, sales tax is levied at the point of sale, if the online store is located in Texas charge Texas sales tax, if the online store is located in Oregon charge Oregon sales tax

second – wait till they really want to level the playing field between online and brick and mortar stores.

RonK on August 2, 2012 at 5:09 PM

States can’t do that as it is considered interstate commerce, just as it has been since catalogs were the rage in the late 1800s. What states can, and have been, doing is imposing what is properly described as a one-time property tax on the value of goods purchased from an out-of-state good that just so happens to equal the sales tax of that good sold in-state. Of course, enforcement is “fungible”.

Prediction – if this flies, look for the ‘Rats and Huge-Government “Republicans” to agitate for the larger of the sales tax rate in the seller’s locale or the buyer’s locale to be applied to be applied to interstate purchases.

Steve Eggleston on August 2, 2012 at 5:22 PM

that’s the reason it is being done at the FEDERAL level, they could just as easily give the taxes to the original state, congress has the power to regulate interstate commerce.

RonK on August 3, 2012 at 3:19 AM

A business that WANTS to be taxed, has an agenda.

TX-96 on August 3, 2012 at 6:20 AM

Up until now, online sales tax bills have had a powerful opponent in Amazon, with the popular online retailer playing defense against efforts by powerful brick-and-mortar lobbyists working to get bigger government to handicap its new competitor.

No, they weren’t working to “handicap” their competitor. They were working to have it play on the same field as them. I love your work, MKH, but conservative fetishization of “no internet sales tax” has got to end if we truly mean what we say when we talk about level playing fields.

Charge the tax at the point of distribution (the shipping point). This makes it equivalent to the b&m stores (where you pay the tax at the cash register, regardless of where you live), lines up with the “physical presence” requirement already there, and solves a bunch of issues for the mom&pop internet stores.

As for “interstate commerce”, I still pay the tax at the point of sale in a b&m store, even if I then have them ship it to my house in another state. This is not really that hard, requires little new regulation (might actually reduce the regulation already in place), makes sense, makes it “fair”… where’s the con to these pros?

GWB on August 3, 2012 at 10:44 AM

Texastoast on August 2, 2012 at 8:40 PM

And, what, pray tell, would you have them replace the sales tax with? Or, are you going to start paying directly for fixing the potholes in the roads that lead to your business?

And, all you folks crying about how you will stop shopping at Amazon when this goes into effect – you obviously don’t ever buy things that aren’t just sitting around in a local store. I can’t buy any of the music I like in a b&m store. I can only find about half the books I want in a b&m store. I can’t get computer parts at all in a b&m store, any more. I don’t want to drive all over town looking for who has that washing machine part so I can fix it myself. I can’t download movies from a b&m store (that I know of). I will continue to shop online because it is convenient for a lot of things.

GWB on August 3, 2012 at 10:54 AM

I fired Amazon when they turned their back on ALEC like a bunch of sniveling cowards.

along with a whole list of other sniveling cowards to long to list.

jomondo44 on August 3, 2012 at 1:59 PM

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