The Amazon-California tax debacle: We all lose

COMMENTARY: In this winter, summer, spring and fall of our discontent, every politician with a larynx is opining on how best to reduce the country's unemployment rate. All the more reason, then, for California to ram through a piece of tax legislation that could cost a lot of new jobs.

So it was that on Thursday, Amazon caved, dropping its opposition to California's plan to force cyber retailers to collect taxes on online sales. The plan, originally slated to start in July, now will take effect next year as part of a deal under which Amazon agreed to end its push for a ballot referendum in return for a temporary delay.

Amazon tax bill: AB 28X1

Watching the down-to-the-wire maneuvering, the big surprise is that it's taken this long for states to go on the offensive. But a faltering economy has given them added incentive to change the rules. With e-commerce accounting for over 20 percent of sales of consumer electronics and office supplies, this is expected to turn into a considerable windfall. For instance, California expects to rake in an extra $200 million annually.

What we're witnessing is a historical inflection point. Until now, online retailers like Amazon were not required to collect sales tax from state residents if they didn't actually have a physical presence locally. This was a status granted them in a 1992 Supreme Court ruling. But with onetime cyber-startups all grown up and many now multimillion (or multibillion) dollar enterprises, lobbyists working on behalf of the brick-and-mortar crowd argued that the arrangement was outdated and unfair. And what could be more American than fairness?) They sought a level playing field, one that would allow the likes of say, Wal-Mart or Staples, to better compete.

Now they are on their way. As California goes, so goes the nation and it won't be long before Congress follows with its own national online sales tax bill (which would take precedence over any state law.)

But let's be honest about what's going on here. The temptation to find a quick fix to big budget holes was impossible to resist and it mattered little to the politicians voting for this tax grab that their argument rested on an increasingly outdated assumption about what's behind the growth in e-commerce.

Some people do shop online because they can save money. But that was more true in 2001 than it is in 2011. The powerful attraction is convenience. What with the multiplicity of online applications and mobile devices, shopping online has become easier and more efficient than ever. For people who don't have a lot of time to waste, it's a no-brainer. Even with the sales tax tacked on, prices at more efficient online retailers are likely to remain as good - if not better - than what the brick-and-mortar crowd usually can offer.

And the future? At one point in the debate, Amazon reportedly dangled an offer to open six distribution centers that would employ a total of 7,000 people if California offered a reprieve from the new law until 2014. That deal is now history. Now it's up to Amazon and other online retailers to decide where they want to keep doing business. If they decide, for instance, that California's not to their liking, then an estimated 25,000 small affiliates in the state could disappear.

Not what you want during a deep recession.

[randallb]

Here in NY state, we already pay sales tax on most Amazon purchases (some affiliates apparently bypass this). I'm finding that most larger online retailers, whether because of physical presence or NY pressure, are charging NY sales tax. I'm surprised that is not already the case in CA. In any case, I don't think sales tax is make or break for online vs. local shopping. Many items are impossible to find locally (or one has to wait days for special orders to arrive at a store). And as noted, online pricing is usually better, even taking into account any shipping charges.

[MegaProcrastination]

It won't change the amount of online shopping I do unless it encourages me to do more because someone else will be doing the bookkeeping for me. As it is, I have to keep track of every purchase I make via any mail-order shopping so I can pay state sales tax on it when I file my state return. It would be so much easier to have it done this way!

I shop online, not just for good deals, but because it's convenient. Hubby needed a battery for his mom's old laptop and spent three days and I don't know how many phone calls trying to find one locally. We got online and had one ordered in ten minutes. If I'd have ordered it when he started looking locally it would already be here.

As for shipping charges, it's easy enough to be careful on those. Amazon offers Amazon Prime, where a person pays an annual fee and gets free two-day shipping or reduced-rate one-day shipping. It can become profitable in pretty short order.

[SusanStoHelit]

A nicely worded excuse to say that you don't want to pay sales tax. Come on now - that's what this is all about - do we let online retailers dodge taxes or not. And if we do - the tax dollars have to come from somewhere - police, firefighters, welfare, roads, etc. don't suddenly come from nowhere. So - the state will have to charge higher taxes on it's people.

Right is right - sales tax is part of the cost of purchasing something, anywhere.

[jmailbox]

States are always going to charge higher and higher taxes no matter what

[jmailbox]

I think the better idea is to just have a total of 2% for a sales tax no matter what state you buy in.

This way, it's not that you are not paying a ridiculous sales tax, or not knowing what percent the sales tax will be. Because to be honest, the major reason why most online retailers don't want to charge sales tax is because you have to pay for shipping.

And the majority of the time, shipping makes up a good portion of what would of been sales tax

[Lerianis4]

No, the main reason they don't want you to charge sales tax is because there are localities who have their OWN sales taxes which Amazon would have to keep track of.

This is a case where the feds should overrule the states, realize that sales tax is becoming a matter of interstate commerce, abrogate the sales taxes in all the states and charge something like 3% sales tax on everything sold except food and a few other things.

[mrmxltplk]

This will cause more jobs to be lost. Customers will be spending less, the Amazon warehouses will lose jobs, some of Amazon computer techs will be let go, UPS, Fedex, and the Postal Service will let people go. All the people let go will be spending less, therefore they wont be buying as much gas, food, entertainment and miscellanous items and down the line it goes. If they are going to tax these websites lets hope they will only tax ones that are dealing directly in a state.