Sales Tax, who cares about sales tax? I’m here to tell you why you might want to care but first a quick history lesson... For those that don’t know the rules of taxes are in the US constitution, why is it in the US constitution? Because the time between after we seceded from Brittan and became formally became USA (and even several years after we were a nation) there were economic problems for the US, not just the usual financial issues from war expenses, but each state and even some banks had their own currency (banks’ currency were called “banknotes”). Having so many different kinds of currencies made difficult for those living near boarders and limited businesses doing business over boarders. Once the constitution was finalized the USA became an official country, as a new country to keep the states united the commerce clause (article 1 section 8 clause 3) “when interstate commerce happens federal government has jurisdiction, states are forbidden to collect sales tax on things that are sold between two states” was put into the constitution along with many other clauses that state when things involve between states that the federal government would take over (which today by the way is part of the reason why the new federal healthcare bill was passed). As the nation grew it became harder with no centralized currency, to better USA’s economic system we finally transitioned to today’s US dollar.
Today Amazon, an awesome website, the e-commerce “800 pound gorilla” of a company is currently running Best Buy and other companies out of business. Amazon has a lot of great business ideas but one edge Amazon has against its competitors is that the majority of Amazon products are not taxed. Most online purchases by consumers the company is in another state or even another country than the customer where the product is being delivered to, therefore falls upon federal law. You might ask, “but hey wait a minute there have been times when I was buying something online and had to pay sales tax!?” Well the truth is that you were probably ordering that item from a company that has some kind of store in the same state you’re in, so sales tax still applies. For states to be allowed to tax items that are sold online the company must have a “physical presence” of some kind; a store, call center, or warehouse in that same state. Amazon’s headquarters is in Seattle, WA, which is why Amazon customers in Washington State have to pay sales tax. Unless you live in Alaska, Oregon, Montana, New Hampshire, Delaware because those states don’t have sales tax, lucky, then it doesn’t matter if there’s a physical presence. This clause only applies to things you buy through the mail, over the phone, or over the internet, not things you buy in person visiting outside of your home state.
Ok… So who cares about not paying sales tax? It’s great, not paying sales tax! Actually…Lately Amazon has been in the news about going to court against several states, because state governments are becoming bankrupt because of the bad economy part of that is because more and more people are buying things online and most e-commerce is tax free because they’re across state lines meaning a lot of income states used to get about 15 years ago, before the internet was widely used, don’t anymore. One of the issues is Amazon’s Affiliates or Associates program (see https://affiliate-program.amazon.com/gp/associates/join/getstarted), which is a nationwide program were Amazon pay businesses for referring customers to Amazon.com, like an Amazon Ad on the business’s website that has a physical store in that state or a promotional display for Amazon in their physical store. Even though that’s a stretch states have used that program as an excuse to try and force Amazon to collect sales tax. Sales tax, especially on expensive items, will hurt Amazon’s profits. Amazon’s response to these states is simply pulling their Associate program from that state which really hurts whatever businesses that were getting extra income from Amazon, almost like these Google ads on this blog I actually get a few cents a month (not a lot because I don’t have a lot of viewers TT_TT) from Google for having these ads up. That’s why you’ll see “where did you hear about us” question drop down box when you’re in an online check out or survey, a lot of companies pay other businesses to refer customers to their website. In addition to Amazon removing this program from the state, in some cases Amazon has even relocated their warehouses, offices, and call centers to other states that have more hospitality for Amazon. Meaning people in that state are losing their jobs because of their state’s greediness, about something in the constitution that the state cannot change anyways. On the other hand, some states acknowledge online businesses like Amazon are the future and see how hard it would be to change USA’s constitution and encourage Amazon to bring their warehouses, call centers, offices to their state; which will bring more jobs to the welcoming state and therefore boosting the state’s economy.
(from The Street at http://www.thestreet.com/story/11052898/amazon-sales-tax-the-battle-state-by-state.html)
Some states are accusing Amazon like an online Wal-Mart, (a company that was getting a bad rap for being a mega company and for killing small local businesses), that’s protected by the US constitution (by not charging sales tax). The key to one of Amazon’s business strategy is cutting the middleman costs out, Amazon ships products directly from their suppliers to you so you save money because the price of the product doesn’t include paying for physical stores because Amazon doesn’t have any stores. But in reality cutting the middleman costs out doesn’t hurt small businesses, it helps small businesses by allowing small businesses use Amazon to further their products beyond local customers, Amazon is actually hurting Best Buy and other large businesses that have the burden of the cost of physical stores.
Ok so now you can see the relationship between Amazon and state sales tax, and how the significant decline of states’ revenues of not collecting sales tax can lead to underfunded education systems and other important state funded programs. Right now the laws are written so that the customers are responsible and supposed to submit their sales tax on online purchases all by themselves – which to be honest no one does. There’s lot of people that don’t do their federal and state income taxes! Right now there isn’t a solution for states to collect sales from online customers buying out of state. There’s no way a state can create a computer program that would snoop on its citizen’s personal computers and record what a person buys and from where to digitally track and collect sales tax and be legal. The state government can’t force companies like Amazon to reveal customer information without a warrant, and sales tax isn’t included as probable cause.
Why can’t the states just figure out some other way to tax people to get money? I’m not sure, I imagine they haven’t come up with a way to tax people that would be fair yet and that they could enforce and actually keep track of. The Constitution, that long document that was written hundreds of years ago for the foundation of our nation, though it is a well written like a skeleton for laws that’s worked for this nation for many centuries, it’s somehow supposed predict the future, like the internet. I am no way saying the constitution is bad but I am saying it might be too old for issues like this.
To read more check out these links...
http://articles.businessinsider.com/2011-03-11/tech/30095705_1_illinois-residents-amazon-associates-program-governor-quinn#ixzz1rs6XhLgjhttp://arstechnica.com/tech-policy/news/2012/04/judge-spares-amazon-from-colorado-sales-tax-reporting-scheme.ars
To learn a lot more, take a look at http://marketplacefairness.org
ReplyDelete