

 Amazon Sales Take a Hit in States With Online Tax  - IBM
http://www.bloomberg.com/news/2014-04-22/amazon-sales-take-a-hit-in-states-with-online-tax.html

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gtaylor
I'll gladly pay an additional 6-10% to keep avoiding Wal-mart or Target or
even Home Depot. There are people like me who just really hate having to suit
up and go shopping. I don't like the traffic, I don't like getting ripped off,
and I don't find in-store shopping a fun or magical experience like some do.

I can pull up Amazon and read ratings/reviews, see what kind of problems
people ran into with products, and make a reasonably informed decision with my
money.

In a big box store, I feel like I'm taking more of a chance unless I stop,
scan the barcode, read through reviews. Meanwhile, I look like a silly guy who
can't make up his mind.

Yes, I enjoy obsessively comparing reviews/ratings for potential purchases.
Even the really cheap/insignificant ones...

~~~
bradgessler
If you walk into Bestbuy and show them the item you intend to purchase from
Amazon, they'll match the price. With taxes, and assuming you don't have to
drive out of your way, this can be more convenient than Amazon. If you need
something overnight, it's actually cheaper than Amazon.

~~~
baddox
Depending on your work or living situation, that might not be more convenient.
I'm in SF with no car, and I wouldn't even consider going to Best Buy.

~~~
rtpg
I've often had the problem of not being home during the day, and post offices
closing early, so hitting a store would be easier for me in some cases.

Of course if the price is right...

~~~
vidarh
In the London - no idea about elsewhere - Amazon offers drop-off at a large
number of local convenience stores. Usually I have stuff dropped off at the
office, but if it's something big I get it delivered to a convenience store
2-3 minutes walk from my house which is also open late.

~~~
nnnnni
I believe that's available in the US now as "Amazon Lockers"

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sytelus
I read the book "The Everything Store". There are large chunk of chapter
devoted to how Bezos fought against paying tax. Originally, the argument was
that online retailers don't use facilities provided by states so they are not
obliged to pay any taxes to states. If I remember correctly, this follows
almost directly from constitution. But then states like New York found a
loophole which basically says if you have any affiliates in the state then you
are physically in that state and so you are obliged to pay taxes. This thing
is very messy because some regions not only have state tax but even district
and city taxes. So calculating them is very complex task.

When I thought about the whole situation, it became apparent constitution has
a bug here. The sales tax is not supposed to be levied because the state is
providing some service to the business. It is levied because that's how states
want to distribute the burden of taxes on two components: What you earn and
what you spend. This way you can target most of the money flow that happens in
the state even for edge cases where a person don't have regular income but
spends a lot out of his or her inheritance.

So summary here is that online retailers got lucky from this bug in
constitution. It was extremely unfair to brick-and-mortar guys who not only
have to spend lot of capital but also pay full taxes losing their competitive
edge even faster.

Note: Above are just observations and logical arguments. Personally I don't
have lot of respect for current tax system.

~~~
mratzloff
It's bullshit anyway. If the state had no infrastructure essential to Amazon,
that person couldn't get online, the package couldn't be delivered to them by
truck, etc.

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coreymgilmore
The push to tax Amazon is so online and brick-and-mortars are treated equally
in a tax sense. Yet the states that have enacted taxes on Amazon, do not
collect taxes unanimously from all businesses selling online within their
borders. It seems to me that states need to find a new method to treat all
online sales equally as well, and not separate Amazon into its own tax
bracket. Is each company that faces a legislature going to have to fight for
its tax rate separately and work their won deals? This is ambiguous to buyers
and hurts smaller businesses that don't have the legal funds or ability to
negotiate.

~~~
bbq
The problem is taxes are incredibly complicated. There are companies that do
"tax as a service"[1].

Governments should pass tax laws in some sort of industry standard tax rules
specification[2]. This way, companies and the open source world can write
rules engines to process taxes and online stores can pick among the
competitors, not having to worry about the complexities themselves. Costs are
reduced, competition increased, and consumers win.

[1] [http://www.avalara.com/](http://www.avalara.com/)

[2] this might also make taxes simpler. If legislators can't encode (compile)
it, they can't legislate it!

~~~
dangrossman
That's basically the Marketplace Fairness Act, which is the most likely
"internet sales tax" bill to pass in the near future.

[http://www.marketplacefairness.org/](http://www.marketplacefairness.org/)

It requires each state that wants to collect from foreign sellers to provide a
uniform state-wide sales tax policy, a single organization in each state to
handle registrations/filings/audits, and free tax compliance software. It also
builds a mechanism to certify companies (like Avalara) to take care of
internet sales tax for you, and relieves businesses of liability for mistakes
if they use one of these companies to compute/file their taxes.

~~~
thatthatis
For true fairness there needs to be a single organization nationally that can
collect and process the tax. 50 different filings is an unduly onerous and
inefficient hurdle for setting up shop.

~~~
walshemj
Unfortunetly the distrubuted nature of the political system acts aainst this
its the same with emplyment having 53 diferent sets of employment laws is very
ineficient.

From an outsiders perspective what the USA needs is a proper reform of the
constitution and remove a lot of thinkgs from the perview of the individual
states.

A maximum age for senators, congessmen and judges would also be a good thing.

~~~
lsaferite
Short term limits and a required popular vote to adjust congressional pay
would be a better idea that an upper age limit.

~~~
awda
Most higher-level politicians are independently wealthy. Lowering
congressional pay would just serve to further weed out non-super-affluent
candidates. I guess it depends on how you like your politics, so I won't pass
judgement either way.

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mrcharles
Honestly, Amazon has a lot to offer even beyond "No Tax". And I say this as a
Canadian who has had to pay taxes and duties on amazon orders since day 1.

People may gripe about it for a bit... but amazon is still the best way to
shop, and also has the best selection and prices.

~~~
justinsb
I agree that Amazon is often the most convenient option. But their prices
simply aren't the best any more (at least for things other than books). Try a
price comparison next time and see if you agree! (Another change is that
Google Shopping has improved a lot over the last few years, so price
comparison is less painful as well.)

One thing Amazon still does best: their deliveries arrive on time, and seem a
lot less likely to get stuck in UPS limbo.

~~~
ekianjo
Yeah, even in Japan, they are not the cheapest option anymore, there are
usually smaller retailers for specific items that get you better deals, but
think about the following cost: \- cost to register on a different website \-
cost to "trust" a minor player you have never used before \- cost of time lost
because of delay in delivery \- cost of how they handle returns

Most of the time, I think a few seconds about the difference in price between
amazon and that minor retailer, and unless the difference is huge (which is
usually not the case), I'll go for Amazon. Even when I had issues with what I
got from Amazon they sent me the replacement item BEFORE I even send back the
defectuous item. Who else does that?

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minouye
_The biggest sales uptick -- 61 percent for big-ticket items -- went to
merchants that use Amazon Marketplace...That means Amazon still indirectly
benefits, since it collects a fee from merchants on its marketplace._

Not sure why they buried this at the end of the article. Amazon can still
attract price-conscious shoppers by funneling them to marketplace sellers that
don't collect sales tax, and can now invest in more fulfillment centers and
other initiatives that require nexus (Amazon Fresh, etc.)

~~~
justinsb
This does seem the most important conclusion. What's likely happening is
Amazon is no longer showing themselves as the top seller in some cases.
Consumers are still buying on Amazon, but from a different seller, who does
not charge sales tax.

What would be impressive is if Amazon made an (algorithmic) judgment call, and
showed price-sensitive shoppers that would otherwise go elsewhere the cheaper
seller, and shoppers that would tolerate the tax the (presumably higher
profit) Amazon offering.

~~~
robryan
They already do that with fulfillment by amazon. There is a certain price
difference for which Amazon will show you that fulfilled product vs a cheaper
marketplace offer with slower fulfillment/ shipping.

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minouye
From the report:

 _Our data consist of daily transactions for 2,807,476 households from January
1, 2012 to December 31, 2013, and include both banking (i.e., checking,
savings, and debit card) and credit card transactions. We observe the date,
amount, and description of each transaction._

I'm a little disturbed that they had access to complete transaction
information for roughly 2% of American households. Is it common practice for
banks to share this data? Surely date + amount + description is personally
identifiable in many situations.

~~~
gph
Not to defend the banks, but in what situation could date/amount/description
become personally identifiable? I guess it sort of depends on how descriptive
the description field is, but if it just lists the product(s) then I don't
really know how you'd ever be able to verifiably match it with a name.

~~~
cbhl
An '08 paper from Arvind Narayanan and Vitaly Shmatikov at the University of
Texas at Austin showed that, in a large dataset, the combination of a large
number of transactions could be used to de-anonymize individuals.

[http://www.cs.utexas.edu/~shmat/shmat_oak08netflix.pdf](http://www.cs.utexas.edu/~shmat/shmat_oak08netflix.pdf)

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bbq
> Amazon supports federal legislation that would explicitly let states require
> tax collections by all online retailers above a certain size.

This would give Amazon a huge competitive advantage (given their existing
infrastructure). Of course they support this.

~~~
adventured
They get hit with flack coming or going. If they're against online taxes, then
they're accused of not doing their fair share to support government coffers,
or they're accused of getting an unfair competitive advantage (per offline
retailers).

It's similar to Walmart's minimum wage support. If Walmart were against
minimum wage increases, their opponents would lambast them for it. If they're
in favor of it, they get accused of only being in favor of it because they
know they can more easily afford it compared to smaller retailers.

~~~
bbq
You're right, I said this accusingly and that's unproductive. I think
legislation like this should exist. I don't think it's right to ignore the
advantage (assuming we accept they have one here) and the legislation should
take it into account.

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chc
I wonder if the difference is really about the competitive advantage per se.
The 10% difference is about the same as the difference in price with tax. It
sounds like people are actually spending about the same amount, but now part
of that budget is going to tax rather than actually being spent on goods.

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Urgo
They started collecting tax in NC in Feb and I'll be honest, I've bought less
since then. Last year when I needed something I went to amazon first and if it
was there ordered it. Now I shop around.

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shittyanalogy
This is a good thing. It creates an enormous enforcement efficiency as now
states can go after amazon (which they won't have to) and not individual tax
dodgers. Not having to charge sales tax also creates an unfair business
advantage against local stores.

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wycx
A straightforward solution would be for the US to have a uniform online sales
tax, distributed to the state of the shipping address.

Is this intractable?

~~~
AnthonyMouse
All it would take is an Act of Congress, but it's political. Birmingham,
Alabama has a sales tax of 10%. New Hampshire has no sales tax. How do you set
the rate nationally without making enemies?

~~~
justinsb
I suspect if you tried to do it federally it would be a violation of States'
rights and thus unconstitutional.

~~~
chc
There's always a way around that. Most likely you'd just do it like many other
federal carrots — "This tax is levied on all online purchases and will be
distributed to the state of the recipient provided that state does not impose
any additional taxes on the purchase." You're not depriving the states of
their right to tax the purchases, but it will be onerous to their residents if
they don't go along with the federal plan.

~~~
mzs
Clever but why should this sales tax go to the state I live in instead of say
the community where the item was shipped from? It's really more of a duty or
use tax in such a case, like in the old days where I would order something
from a catalog not in the state I live in, I was supposed to pay a use tax to
this state of the difference between the sales tax here and what I might have
paid in taxes when ordering when I did my state income taxes. They really
should not call it a sales tax, it potentially gets collected by a state that
has nothing to do with the sale at all and the cities and states that had to
do with it did not collect any of it.

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mzs
I'm curious, in states that have this, how does it work? Is it all online
sellers that did not previously collect sales tax or just a few big ones like
amazon? Does it show-up on your shopping cart directly or do you have to do
forms quarterly say?

~~~
MisterBastahrd
Amazon currently collects taxes if they (or the seller) has a physical
presence in your state. Apple does the same thing. In my state, I'm required
to pay taxes on every online purchase for which taxes have not already been
charged to me.

I keep all my receipts for the year and split them between tax paid and not. I
pay taxes on all of the online purchases I make during the year. Most people I
know, even in states that require collection of taxes for online purchases,
don't claim any at the end of the year. Given that out of state companies are
under no compulsion to report purchases to state governments, there simply
isn't a whole lot of way for states to know whether the information is
accurate except through state tax agency audits.

~~~
mzs
Thanks for the nice explanation. The state I live in requires to pay a use tax
either quarterly or as part of income taxes but for a couple of years at least
has allowed you to use a table graduated based on income instead of keeping
records.

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mutert2
Amazon is awesome.

