Amazon.com chief Jeff Bezos says the online retailer won’t collect tax from most of its 90 million customers until Congress clearly mandates it.
Although a growing number of states are demanding that Amazon collect and pay tax on sales within their borders, such demands are “interference in interstate commerce” and prohibited by the Constitution, Bezos said.
“We’re no different from other big chains of retailers,” Bezos said. “They don’t collect sales taxes in states where they don’t have [employees], either.”
Bezos didn’t refer by name to nationwide stores like Wal-Mart and Target, which have griped of Amazon’s “unfair” advantage because it seldom pays tax.
Bezos made the comments during an interview with Consumers Reports magazine (transcript below). Bezos added that Amazon wouldn’t oppose a uniform, nationwide tax on Internet sales.
With state budgets under pressure and many local retailers struggling, Amazon has faced mounting pressure to collect state sales taxes nationwide. But a 1992 Supreme Court decision exempts Amazon and other remote sellers from collecting tax in states where the company has no employees or warehouses. Amazon collects tax in Kansas, Kentucky, New York, North Dakota and Washington. Forty states have sales taxes, and their residents are supposed to document and pay tax on out-of-state untaxed purchases, but few people are aware of the requirement, or comply.
Recently Amazon has taken a more aggressive stance on the tax issue:
- Amazon has closed or canceled new warehouses in states challenging its tax-collection policy. For example, last month Amazon began shuttering a Texas fulfillment center after the state sent the company a $269 million bill for four years of “uncollected” sales tax. Three weeks ago, Amazon scuttled plans for a South Carolina warehouse after the state nixed a sales-tax exemption.
- The company canceled tens of thousands of affiliate accounts in Illinois and Colorado after the states asked for taxes. The affiliates had earned commissions by linking to Amazon products from their Web sites and referring sales to Amazon.
- This month, when Amazon announced plans to build or expand three warehouses, it praised the governors of Arizona and Indiana, who didn’t demand sales tax collection. “We are committed to growth in Indiana because Gov. Daniels and other state officials have demonstrated their commitment to Amazon jobs and investments,” said Paul Misener, Amazon VP for global public policy.
With more than 90 million registered buyers, Amazon is the biggest online retailer in the United States. The company added 13 warehouses in the past year. Its third-party sellers, who offer used and new items on the site, are often required to collect and pay sales tax on intrastate sales, but Amazon doesn’t enable most sellers to collect the tax. By contrast, eBay allows all its U.S. sellers to collect state sales taxes where required by law.
TRANSCRIPT OF BEZOS REMARKS ON SALES TAXES:
Consumer Reports: We know nobody likes taxes … We asked our readers, “What would you like to ask the CEO of Amazon?” One question that repeatedly came up was, “Why should Amazon not have to collect state sales taxes? Don’t you think it gives them an unfair advantage?”
Jeff Bezos: First of all, most of where we do business — Europe, Japan, some of the states here in the United States – we collect sales tax. More than half our business. We do collect sales taxes, the European equivalent of value-added tax.
And in the U.S., the Constitution prohibits states from interfering in interstate commerce. And there was a Supreme Court case decades ago that clarified that businesses — it was mail-order at that time because the Internet did not exist — that mail-order companies could not be required to collect sales tax in states where they didn’t have what’s called “nexus.”
And that’s a very clear decision. Our point of view on this is that we should simplify the sales tax system, and we’ve been consistent on this for about 10 years. It’s called the Streamlined Sales Tax Initiative. I think 22 or 23 states have signed onto it. Because the right way to fix this is with federal legislation. That’s where it can be fixed properly.
Sales tax collection is very complicated. And, you know, we’re no different from big chains of retailers — they don’t collect sales taxes in states where they don’t have nexus, either. So everybody is following the same rules. And I don’t think our customers would say, “Why don’t you just optionally collect the tax? I know you’re not required to do it, but aw, go ahead.”
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20 Comments
If you don’t believe him, just buy a copy of the US Constitution on your Kindle and read it for yourself.
I am a tiny online retailer. In order to collect sales taxes for jurisdictions outside of my own, I would have to do the following:
1. Setup an account with each and every state, county, and municipal jurisdiction with a sales tax.
2. Report sales taxes monthly or quarterly with each and every jurisdiction even if my sales in that jurisdiction during the reporting period is $0.
3. Determine all of the jurisdictions that every shipping address I have is contained in.
4. Understand all of the tax rates and exemptions and exemptions to the exemptions.
5. Keep up with the changes in tax rates, exemptions, exemptions to the exemptions, and arbitrary boundaries that form jurisdictions for each and every jurisdiction in the country.
This is effectively impossible.
Are there vendors out there that can help? Sure, but they don’t do it all and they charge serious amounts of money to help you with this.
I should not have to spend large amounts of time and money in order to collect sales taxes. The states sell their sales tax and jurisdiction data to a small number of private companies that turn around and offer services to retailers, but these services are expensive.
The sales tax system needs to be simplified and the states need to offer an online service (one online service for all 50 states plus all smaller jurisdictions) that given an address will return all of the applicable tax rates. And this service needs to be free for retailers to use. The states should form a public corporation to provide the service and then go and start to simplify their sales taxes. Any jurisdiction who doesn’t have a simple enough tax structure to be serviced online by this system does not get to participate and they lose revenue.
It’s difficult to make sense of remarks claiming that a tax on goods sold within a state constitutes “interference in interstate commerce.” Amazon must pay taxes in Texas for Texas sales for the same reason taxes are charged when I buy from Amazon in Washington state. Amazon has what the Supreme Court has called a business presence there. Amazon’s being asked to do exactly what your local Starbucks and WallMart does without protest.
The real problem may lie with enforcement. Bezos hopes to stall off paying these taxes as long as possible and then, when forced to pay, insist on only partial payment or perhaps have somehow ‘lost’ the record of sales. We can only hope states levy those taxes plus stiff penalties, although the gutlessness of some politicians, like Texas’ gutless governor, Rick Perry (no relationship to me) makes me wonder if that will happen. All too many politicians’ knees buckle in the presence of wealth.
I might add that Bezos’ arrogant, ‘I make my own rules’ behavior is a common problem with high-tech founder-CEOs, He isn’t behaving that different from how Bill Gates behaved in the 1990s when he was at Microsoft leading it into the anti-trust mess. Nor is it that different from how Steve Jobs behaves now both in his much-noted abuse of Apple employees and his attempts to levy a 30% ‘Apple tax’ on ebook sales for iPads. Because such people are both the founder and the boss, so no one dares to stand up to them.
The result is often disaster. Microsoft’s clash over anti-trust has left it a shell of its former self. The same could happen to Amazon.
Amazon is not making it’s own rules. The rules on selling out of state have been clear for a very long time. As mentioned above, mail order catalog sales aren’t taxed out-of-state. Amazon is basically a giant catalog, so it makes sense that they shouldn’t be taxed either. In fact, Amazon is large enough that if they *had* to, they could probably handle recording and paying taxes to 50 different states and all sorts of local jurisdictions – you should worry about the smaller online retailers if some rule were go to into effect to say that everyone has to pay taxes to every state that asks them to.
At any rate, the CEO isn’t stupid, and I am certain he has a legal team who has vetted this before speaking publicly about it. As things stand now, the states have no legal ground to stand on. Warehouses were a gray area, which is why Amazon closed them, in order to be very clear that it was following the letter of the law. The “affiliate sales” is a huge stretch by the states, and even those Amazon canceled just to be sure.
Face it, the states don’t want to charge tax because it’s legally allowed, or because they should be allowed to in theory, etc. – or they would have been having this fight with the mail-order catalogs a long time ago. The only issue is that Amazon had gotten large enough that people see deep pockets, and they want some.
In the end, consumers stand to lose more than Amazon does if they have to start collecting tax for everyone.
(Note: I live in Japan where they have to collect tax anyway, so it doesn’t affect me one way or the other).
Bravo to Bezos for telling the state governments that he won’t play tax enforcer for them unless they’re trying to collect a lawful tax.
But here’s a concept for everyone: most “sales taxes” if enforced against someone who knows what they’re doing are attempts at unconstitutional deprivations of property anyway, which you don’t have to pay if you do your research and papers right. It depends on your state, but most state constitutions have something equivalent to the federal constituitonal prohibition on direct taxes without apportionment. Do your research and your tax “bill” will drop dramatically. And no I’m not “one of those tax protester nutcases.” The taxing system is entirely legal. It’s just so convoluted and people have been so brainwashed to unthinkingly “pay their fair share” that most don’t bother to understand it and pay much more than they legally have to. Of course the government doesn’t really have a problem with that and is happy to contribute to the misunderstandings. But the fact remains that most of these taxes you complain about don’t need to be paid in the first place.
I’m not going to get into a great big explanation of direct taxes vs indirect taxes, but here’s the basic concept for anyone interested in doing the research: Receiving currency or products/services in exchange for your labor (or products or services your labor produces) is a common law right, is not profit, and in most cases cannot be taxed; you are only exchanging things of equal value. Say you raise sheep, for example. You and your fellow farmer Bob, who raises cows, agree that two sheep are equivalent in value to one cow. If you give Bob two sheep and he gives you one cow, have either of you made a profit? No. You did an equal exchange and your assets are the same before and after your transaction. How about if you agree with all your farmer friends in the area that two sheep, one cow, ten chickens and three pigs are all equivalent in value. If you give Paul (the pig farmer) two sheep and he gives you a promissory note that entitles you to three pigs at a future date, and you take that promissory note and give it to Bob for a cow, and he redeems the promissory note for the three pigs, who’s made a profit? Nobody. Only things of equal value have changed hands.
How about if you agree that all those things are worth five hours of farmhand labor, and you trade a promissory note from a farmhand entitling the holder to five hours of labor for something else. Anybody made a profit? Nope. Some people get confused here and say the farmhand profited, but that’s not accurate, because his labor is limited by, among other things, the time and energy necessary to labor.
This value-for-value concept extends through the whole economy. In the past, when we used gold and other metals as money, the money itself was a product of labor. Now we use paper currency because all you really need for commerce to take place is something where each currency unit represents a fraction of the common value pool. Ultimately, all currency is based on human labor, because all products and services are produced as a result of it. Think about it: can you name a single commercially-available product or service that doesn’t require human labor in some form to produce? The total amount of currency in circulation is supposed to represent the total value of all products and services in the common value pool. When you labor, you add something to the common value pool, and you become legally entitled to take something out of equivalent value. If someone interferes with that equal value for equal value exchange process, they are doing the same thing as taking a part of your property or enslaving you for a time. The use of currency sometimes confuses people because you can purchase a product and resell it for more currency than you gave to get it, but that doesn’t mean you’ve made a profit. It just means that whatever you’ve added to that product by your labor (like providing a convenient place of purchase, the prestige associated with your name, etc.) is being sold along with it.
For the still-skeptical, think about it this way: If you were a sheep farmer and acquired everything you need by bartering, no currency (or electronic equivalent) involved, could the government come in at the end of the year and just take a quarter of your flock? If they can’t do it when you spend all your time trading property or labor for other property or labor directly, what makes you think they’re allowed to do it when you exchange property or labor for paper that entitles you to property or labor at a later date? The answer is that they’re not; except in a few, very narrow, constitutionally-defined circumstances.
As I said at the beginning, each state has its own constitutional limits on imposing taxes on its citizens, and you have to do your research. Bezos has the right idea: DON’T GIVE THE GOVERNMENT ANY MONEY UNLESS THEY’RE CONSTITUTIONALLY ENTITLED TO IT. If I were a state, I’d think twice about going after Amazon. Bezos is a brilliant guy, not to mention a multi-billionaire. They might find out he knows a lot more about the taxing system than they expect him to.
All of the Borders are closing. Most of the local bookstores have gone out of business. Would they still be in business if Amazon had to collect state sales tax? Yes, they probably would.
I love local bookstores, but sadly they are a thing of the past. It’s really too late for all this sales tax talk.
i have not read this article yet but i just want to say that i thank jeff bezos for fighting the government and reducing their ability to tax us already overtaxed citizens (and businesses, too). i have read elsewhere about this growing issue of amazon vs uncle sam. i really feel he is doing a great public service. thank you jeff bezos!
Amazon is good at what they do. They’ve figured out how to recommend 3 million books to their 90 million customers. They could figure out how to collect sales tax if they wanted to. But, obviously, they don’t have to.
Amazon ain’t good at PR. So they’re getting taken to the woodshed by the media. Google the “Alliance for Main Street Fairness” which is stirring all this bad publicity up. It’s financed by Wal-Mart, Target, Best Buy and Lowes. Not one of them is on Main Street. But slowly, they’ve giving Amazon a black eye with this issue.
Bezos is right, Amazon shouldn’t collect tax when it’s not required. That would be nuts. They need to turn this issue around though. Amazon has a great reputation, but they’re being made to look like cheats on this tax issue.
I can’t speak about other states, but I know that Washington State has changed it so that delivered good are taxed based on the destination… that means there are a ton of different tax rates that must be applied to good delivered in state… that makes it ridiculously hard to apply sales tax…
Bull Crap!
I was a programmer for an ecommerce site 11 years ago. There was third party software back then you could license that calculates all the taxes for all the taxing bodies for a given address (piece of cake). Was this software free, no, but it’s the cost of doing business. Brick and mortar stores have there own special cost of doing business as well.
Good for Amazon. There is no reason they should be acting as tax enforcers for States while there is no constitutional legal justification for it. The States are in a position where they must collect that tax from *individuals* who are using Amazon’s services because of Supreme Court precedent, and that means the responsibility lies with the States to enforce their own tax code, and that if they intend to try and force Amazon to collect for them when Amazon has no physical operations inside their border they are acting outside their jurisdiction and Unconstitutionally interfereing with inter-State commerce. If those States want to collect taxes on their residents purchases, they’re going to have to go after their own people unless the law changes.
This idea that we need to spread the pain around to be fair is bull crap. Making out of state companies pay in state sales tax is simply a way to punish them for not being stupid enough to setup their business in high tax states. The greatest freedom we have as Americans is we get to govern ourselves. If we’re too stupid or just too lazy to govern ourselves and allow our state, local or federal governments to take away our property and distribute it around to buy votes then we get what we deserve. If we don’t like the government we have we can choose to participate and elect new representatives. If we live in a city or state where our views are in the minority and we don’t want to participate in the mass stupidity of punishing the achievers and rewarding the deadbeats we have the right to pack up and move to a place where people have the same values and work ethics. Forcing out of state companies to pay for bad economic policies is rediculous, just as it’s rediculous for the unions in Washington state to assume they have the power and right to force their employer (Boeing) to only build planes in states where employees are forced to join a union and pay union dues. Companies, and people, have the right to do business where their business is appreciated and not mandated, overtaxed, or overregulated. They exercise that right with their feet.
And the idea that you have to raise taxes to raise revenue is also completely backwards. If Walmart wants to increase their profits do they raise prices? No. They lower prices. Lowering prices increases sales, brings in more customers, and increases profits. Lowering taxes and reducing regulations attracts business, increases employment, and increases tax revenue. Why are Walmart and Amazon so successful at providing their customers with quality products and services at lower costs while our state and federal governments spend billions and trillions and provide only shoddy service and dismal results? Why do we punish businesses that provide jobs and reward governments that destroy jobs? Who are we a slave to? Capitalism or Government? The question is rhetorical.
I have been using Microsoft Office since 1.0
I had been getting Upgrade from MS without sales tax [here in NYC it was 6.5% at that time, now 8.75%]
One Upgrade form had a Tax Due list which had NY on it ?
Microsoft had opened a large office in World Wide Plaza a new square block building with Corporate offices. So incompliance MS was collecting tax.
Where Amazon is drawing fire is with their wishing exemption from paying taxes in states with fulfillment facilities. The supposed “loophole” is from he fact he orders are coming in from another state. Amazon should at least collect and pay taxes on orders within that state.
One must look at how Avon, Brookstone, Sears, Victorias Secret, L.L Bean, J.Crew and other “Traditional” Mail-Order operations handle Taxation with regard to 3 factors:
1. Corporate and/or Managment Location
2. Fulfillment and Warehousing Locations
3. Customer Locations
With that as a model – Amazon is fighting a battle they cannot win
Technology is a 2 edged sword – the ease of Data Processing and “Data Mining” creates ease for the “Powers That Be” as well….to add a “tithe”
SOLUTION:
The solution is an Internet VAT [Value Added Tax] not a “levy”. A levy is a calcuable “sliding scale”. Each purchase no matter what the amount should be $0.25. Given to the State the purchaser lives in.
WHY:
Every State has a different Tax Rate, Rules and Regulations. In some States; Shipping gets Taxed in others not. This woudl create a Flat Reumueration to all equally and fairly.
“Hooray for Jeff …..Screw Gov’t ”
Is the wrong idea, and si palying upon recent anti-gov’t fervor
I am against Farm Subsides and breaks to Corps who are moving labor offshore and creating unemployment.
If AZ had a facility in a State, even an office with 1 part-time employee “That is a Presence”. That is the issue in a nutshell.
I do not knwo if all of you are Sellers. I pay Local Tax on in State Sales. I either recalculate the Sale or pay Tax out of the total. I pay Income Tax on the whole Operation.
In response to Bookateria, I’d like to point out that Amazon is making rational business decisions and complying with the law just as much as these other companies you cited. They are no different. Amazon ships to California primarily from a Nevada warehouse. Why? By avoiding a California presence, they can fully legally avoid charging Californians (more than 10% of the nation) sales tax that ranges between an 8% and 10% markup. That’s a huge audience and a significant price advantage.
Just like you, they pay Local Tax on In-State Sales. They pay Income Tax on their whole operation.
Why you are mad at Amazon is because the tax law in various states is unclear in some cases, and is changing. Amazon is reacting to those changes rationally, trying to weigh the costs and the benefits of these various things. They encourage people to give referrals to Amazon, even though those people are not employees of the company at all. When a state decides that these people who are not employees count as an Amazon presence, Amazon counts the benefit of having the referral people versus the cost of lost business when they have to pay sales tax. And they’ve said that until there is a national sales tax, it is better for them to not have a state presence in many of these states.
I have a brick and mortar. I HAVE to collect sales tax in NYS (where I do business) or go to JAIL! IF I get caught ‘doctoring the books,’ I can go to jail. Worse, if I do any # of a variety of erroneous missteps, I can pay penalties that are pretty hefty. So I don’t. I play fair and honest. I am that sort anyway, but I sort of resent doing so when so many do not. Amazon doesn’t make it easy. And I’ll explain.
I also have to collect sales tax even though Amazon does not have a tax collecting template for used products. When I telephoned the NYS sales tax office, I was told, if you can’t collect it, you must pay it from your profits. Occasionally this nullifies any profit I might make (which seems like a serious problem with fairness in business/equal playing field). The thing is, I can argue all I want, but ignorance of the law sort of nullifies any argument I can make.
HOWEVER, the literally millions of dollars lost in state sales tax revenues must be made up elsewhere. IS it fair to make property taxes or other sales vendors cover the costs of running a government so that Amazon vendors that make tens of thousands a year do so without any cost to them? DO THESE vendors NOT use the same highways to post their products (or even shop for their inventories?); do they not use libraries, schools, etc. that the taxes pay for? There is a bit of a out of kilter imbalance when profit making businesses can have no accountability just because all their business is on Amazon from their home, using their home phone and no business expenses beyond time and inventory. My two cents. UNFAIR!
I must post to govenment all of my profits because I have a physical vs. cyber presence. I can’t hide, and because of this I make several thousand a year less due to this.
The argument is that Amazon does not WANT to lose a fraction of their sales (profits) when buyers complain, or do not buy an item from them because NOW they must pay tax (for decades, Amazon was the ‘go to’ place because it was like shopping in states with no state sales tax even for states that collect it).
The truth is, I think this will be more of a level playing field. My locals might come to my shop instead of buying from an out of state vendor by mail because there won’t be a benefit to them (invisibility). And my property taxes might go down with more local revenue collected.
My property taxes are a killer! I WOULD LOVE IT if we had some state sales taxes to defray them. Especially as so many people that make a LOT of $$$ (vs. me who does not) are getting away with tax exemption for the majority of their purchases.
There was an elected official that told me that he buys online and he doesn’t want state sales collected, so he’s not for this change. AN ELECTED OFFICIAL?
Two cents, but I’m tired of carrying the load.
Debbie
I’m tired of this argument. They just passed this in the State of Illinois and its ridiculous. The primary reason they got it passed is because “small business” complained too much about the loss of sales to online retailers. Whats to stop the mom-and-pop shops from setting up their own online store?
How does this give Amazon a black eye? If anything, Amazon customers are more than happy to not have sales tax collected, and all this publicity lets them know that Amazon is fighting for them. I don’t know anyone who says to themselves, “I’d rather buy this electronics gadget from Worst Buy, since I’ll pay sales tax and it helps fund the state government.”
The buy local movement is strong, but I don’t think supporting big-box retailers is really a part of the mission.
Here’s an idea: Cut the salaries of all our “dedicated public servants”–all TWO MILLION OF THEM–by half. Working for the government is supposed to be something one does out of dedication to one’s country. It is not supposed to be a cushy job that any idiot can do. Over ten years you’d save hundreds of billions of dollars.
Of course, it won’t happen. The incentives are wrong. The people who would lose the most have strong incentive to spend and organize in support of the status quo; while the opponents have to incur significant costs to support a possible gain that might not happen at all. Funny how inertia works even in politics.
I am not sure on the tax issue but he is right everyone should pay or none should.
On the other hand Amazon is loosing sales because of their delivery fee’s. Just yesterday I found the item (at a semi reasonable cost on AMAZON) and then shopped around and found a cheaper delivery cost for the ecxact same item (further away I might add) and I bought there.
I like Amazon because of their web offerings but I would rather pay for my fair share of taxes.
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