Low Taxes Aren't A Subsidy
from the logistical-nightmare dept
Economist Dean Baker thinks that Amazon owes its profits to the fact that it doesn't have to collect sales taxes for customers in states where it doesn't have a physical presence. The absence of sales taxes on Internet purchases, he says, is a "subsidy that Amazon gets from taxpayers." This is silly. Some states don't have sales taxes at all, but no one would consider that a taxpayer subsidy. My local Wal-Mart benefits from a variety of state and local government services here in the St. Louis area, such as police and fire protection, and roads and other infrastructure. At least in part, sales taxes go to cover the costs of providing those services. Amazon uses few if any services from state or local governments in Missouri, so it's hard to see anything unfair about the fact that it doesn't have to collect sales taxes here.Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.
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Filed Under: e-commerce, state's rights, taxes
Companies: amazon
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Fair.
I buy a lot of stuff online. I enjoy not having to pay taxes. I do not have children. People with children use more government resources than I ever have or will AND they get tax breaks that I will never get. So I'm already subsidizing them. And they're completely fine with that. Any time I can get something tax free -- even from Amazon -- then more power to me. And them.
When I can stop subsidizing breeders, we can start talking about "fair" and "unfair" when related to taxes.
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Re: Fair.
I don't resent having to pay for things like education because that's an investment in the future (or at least if the education actually works, but that's another topic).
I could name a hundred ways in which my taxes are used that I _do_ resent that have nothing to do with tax breaks or kids or anything else. The fact of the matter is, our government could do everything it does with 10% of the money it spends now (and I think I'm being generous... I wouldn't be surprised if it's more like 3%).
Tax rate/cuts/breaksrebates are not the problem, it's our grotesquely corrupt politicians that hemorrhage money faster than their brains leak out of their heads, and their big business, rich or otherwise influential puppetmasters. 90% or more of the Federal Government exists solely to provide easy money to anyone with enough moxie to swindle themselves some.
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Use Tax Anyone?
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Cheap, effective software will make it simple enough. My business uses it now. In addition, businesses usually pay sales taxes to each State in one payment. Then the State distributes funds to the municipalities.
Please do a little bit of research before you write an article.
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Re: Anonymous Coward
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Re:
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Professors
Mail order businesses have always had tax-free sales. The disadvantage to mail order is the cost of shipping. Also, you lose the sense of immediate gratification. Shopping locally, you can find something immediately. And in some cases, you're paying for the brick and mortar store. You're paying the employees to serve the consumer, answer questions, etc. Amazon (and every other mail order firm) doesn't have to maintain a store in every locale. They don't have a bunch of people to wait on you either. It's self-service.
Why do people give college professors so much credit? 99% of these morons would get fired from most jobs because they can't function in any real world job. Can you imagine a college professor working as an insurance agent? Or a loan officer at a bank? These people would get fired, or they'd starve to death. Why are they suddenly considered experts?
The only professors I respected in college were in math and the hard sciences. Biology, Chemistry, Physics, Calculus.
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What prevents the city from double-taxing outside companies? There's not much they can do about it. And if you think no city would do this, look into "hotel taxes." Lots of places add taxes to hotels without any service cost justification. The hotels complain, but they aren't going to up and move from tourist areas. They just pass the cost along to tourists. Since these are all outsiders with no local representation, the tax has little opposition.
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Re: Taxes
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While there are some services that stores with a physical presence benefit from as result of being there, this is at most a tiny fraction of the cost of the tax. And, guess what, Amazon benefits from the police and fire service too, because no one would order from Amazon if they thought that people could hijack the UPS trucks delivering their stuff and steal it with impunity before it got to their doorstep.
In terms of the difficulty of complying with the tax, maybe someone should tell Amazon about a thing called "computers." It makes it real easy to process thousands of different tax rates on different items, almost all of which correspond to zip codes that they have on their mailing address. Frankly, any Internet retailer that can't figure out a method for coding the sales taxes is probably too incompetent to be in business. Will there me some mistakes? Guess what, there are mistakes now, this is not a serious argument.
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Re: Tax arbitrage
A tax is not a fee. A sales tax is levied on the buyer, not the seller, even though it is collected by the seller. No government in the United States is ever going to say that a tax break is a subsidy since it would be a confession that most governments are engaged in massive subsidies to other industries (car manufacturing for example).
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Taxes
If the government were an animal, wouldn't we group it it by feeding method? It feeds the same way that leeches, mosquitoes, ticks, and hookworms do.
Maybe it's really just another parasite...
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That burden is not on Amazon, it is on UPS which pays taxes anywhere it physically operates. What you're suggesting would be a double tax for use of the same services - paid once by Amazon's customers and again by UPS. It has nothing to do with Amazon.
No one would order from ANYWHERE, ship anything to friends and loved ones, or use UPS for anything else if they thought that people could hijack the UPS trucks delivering their stuff and steal it with impunity before it got to their doorstep.
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Sales taxes can only be legally (Constitutionally) applied & enforced within the 'legal jurisdiction' of the taxing authority.
A 'taxing authority' has zero legal right to operate outside its geographic limits. New York cannot tax its residents for purchases made while visiting California, but California can tax non-resident New Yorkers when they buy things while physically visiting California.
The legal residence of a buyer has no bearing on state & local sales tax "authority".
Sales taxes can only be legally assessed & collected at the geographic location of the sales transaction -- the place where the sale is made and recorded.
An internet sale is transacted & recorded ("point of sale") at the geographic location of the seller's computer/server.
That's the only place a sales tax may be legally collected. It legally makes no difference whether or not the particular seller has some other facility or presence within a buyer's state -- the tax may only be applied at the specific point of a specific sale.
Catalog mail order sales always worked that way for interstate sales. Of course, many greedy state & local politicians have aggressively (and illegally) forced some retailers to collect sales taxes on residents who make catalog & internet purchases out of state.
The Commerce Clause in the U.S. Constitution prohibits states from imposing any taxes on businesses & sales conducted in other states.
Nonetheless, there is no limit to governments' desire for tax revenue -- whatever is left that isn't taxed now........will be taxed in the future, legally or not. The courts are government agents and rarely will protect citizen rights against unjust taxes.
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Tax Fairness
The government is so stupid that it decided to outlaw Internet gambling throwing away billions in taxes. Now I get to play online anyway (there have been more sign-ups since it became illegal) and never have to pay any taxes on my winnings. Thanks Bush.
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Anyhow, just to make things clearer, the sales tax is primarily a mechanism for collecting tax from consumers in the state. We can do analyses of incidence, which will differ some by product, but in most cases, most of the incidence will fall on the consumer.
Given this fact, imagine that we have the Jeff Bezos tax scam shop (a.k.a. Amazon.com). They don't make you pay the tax. Naturally you will be willing to give most of your savings to Mr. Bezos, since even if you just managed to pocket 20 percent of the tax savings, you're still way ahead.
This is the Amazon.com business model -- it's Internet existence is beside the point. Honest anti-tax conservatives propose cutting taxes, not creating tax scams for those who have the opportunity and willingness to do so.
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Re: Cost often considered pre-tax
See... I have never thought "I'll buy this from Amazon because then I will not have to pay sales tax". Usually, I check my local stores, and several online retailers and buy from Amazon when they are cheaper. When I get to check out, the absence of a sales tax is a perk. I do not think about it when making my everyday purchases.
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Sales Tax Ruling
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Re: Sales Tax Ruling
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Complicated Taxation
But Dean, are you only against Amazon.com or all online/mail order type businesses that don't feel compelled to collect each states tax for them? You call this a tax scam?
The only tax scam in this country is how our taxes are spent as ConceptJunkie points out. Someday we might clean out all the corruptness in Washington when all the old farts die off and this next generation puts people in office that pays attention to the will of the people.
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Re: Complicated Taxation
--nice thought, and I'm sure that those "old farts" said the same thing when they were younger (think about the 60s). What we need is a truly fundamental shift in politics if we're going to see that happen.
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Does anyone here understand sales tax?
Amazon is already paying all the taxes that they would even if they were to collect sales taxes. These include property taxes, income taxes on retained profits and believe it or not, anything that they purchase for their own use (ie. tools, supplies, computer equipment, pallet jacks, etc.) within their facilities. They purchase goods for sale tax free (as any other retailer does).
Sales taxes are collected FROM the end user (you and I) BY the retailer and then forwarded to the taxing authority. The only burden on Amazon and other online retailers would be the collection and mailing of collected taxes to the states and municipalities.
Because government wants to collect their fair share of taxes on goods and services, the burden to collect those taxes is places on the retailer. It is no different that your employer deducting your federal and state tax withholdings from your gross wages.
Those are the facts - plain and simple. Now for the opinion part: Sales tax exemption on online purchases IS as subsidy to the consumer - not the retailer. The purpose of the lack of collection of sales taxes on online purchases was to boost online sales to help online retailers get a foothold.
I am not a tax authority, but I used to be an accountant and that is where I am speaking from.
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Wrong.
Sales taxes are a tax on the 'seller'.
If sellers could so easily have charged their buyers another 6-8% in product pricing (sales-tax equivalent price increase) -- they would already have done so to maximize their seller profits.
That's how markets work. Would you intentionally sell your car, house, or EBay stuff for less than buyers were willing to pay for it ? If you added an automatic 6-8% 'Special-Zonie-Sales-Fee' to all prices of your stuff for sale -- do you think potential buyers would just pay it without considering it in their purchase decisions ??
Market prices are determined only by 'Supply & Demand'. That's Economics 101 everywhere.
Government imposed sales taxes do not change either the market supply nor demand for particular products. Therefore, any sales tax levy can only be taken from the seller -- because buyers overall will not pay more than market prices. It reduces seller profits and increases seller costs. Sales taxes are ultimately an income tax on sellers (...and sellers are also forced to be unpaid tax-collectors for the government).
Sales taxes are not shifted forward to buyers. If that were true, consumers could just shift the extra sales tax cost to the buyers of their labor (employers) thru higher wage demands; it would be an endless circle of shifting, where nobody ever really paid the sales tax (??)
Amazon.com gets zero subsidies from any government sales taxes -- only reduced profits & sales.
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Heh
Here in MI, we do have the Use Tax exactly as post #2 mentioned.
Its stupid, just like Dean Baker.
*/mean moment*
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