Amazon, tax bully

Here's a great article by Christopher Caldwell in the Financial Times about a move by California's Governor to sign a law requiring internet retailers to collect the state's 7.25% sales tax at the point of sale.

State and federal legislators made a big mistake when they exempted e-commerce from taxes in the 1990s. They were giddy with the rhetoric of cyberanarchism and inspired by anti-tax yahoos convinced that raising revenue is an optional part of running a government.

In California, Amazon gets a wholly unproductive 7.25-9.25% (depending on which city or country you're in) price advantage over competitors with physical stores in the state - which have to collect the sales tax even when it sells online. As Caldwell argues, it's the tax exemption, not the technology, that most distinguishes Amazon from its rivals.

Amazon, instead of taking the patriotic view and accepting that free-riding on the backs of others isn't the way to go forwards, has opted instead to thumb its nose at taxpayers and fight the changes. It is backing a referendum to oppose the changes - as the LA Times reports in an article aptly entitled Amazon takes the low road, with a strapline that reads:

"It's depressing to see Amazon slogging around in the fetid swamp of corporate cynicism, promoting a self-interested ballot measure to overturn the California law on sales tax . . .arm in arm with such previous promoters of self-interested ballot measures as Pacific Gas & Electric, Mercury Insurance and the oil industry — all paragons of the public-be-damned school.

And it noted this:

In response to the law, Amazon made two moves. It cut loose all its California associates, putting many of them out of business. Then it filed the referendum, claiming that the new law will put people out of work.

This is known as shedding crocodile tears over your own actions.

And Frank Knapp Jr., president and CEO of The South Carolina Small Business Chamber of Commerce, summed up the economic folly of Amazon's tax subsidies:

“This issue is fundamentally one of fairness to the small businesses that compete with big businesses. Amazon already has competitive advantages in this regard. The state does not need to artificially give them another one that lowers their costs," he said. "The state should not be creating an uneven playing field when it comes to use tax or sales tax collection.”

Amazon has form as a tax bully - it reacted to California's effort to tax it by severing ties with its thousands of California-based “affiliates”; it has also moved to close facilities in Arkansas, Connecticut, Illinois and Texas when plans to tax e-commerce were debated. According to one politician Amazon is effectively at war with local communities:

Assemblywoman Nancy Skinner, one of the sponsors of the tax bill, accused Amazon of declaring war “on the community shop owners who support our little leagues, scout troops and local economy”.

Indeed. For further arguments, see also ITEP's blog entitled States Should Not Allow Amazon.com to Bully Them into Forgoing Sales Tax Reform. Caldwell ends with a warning note:

"One can look at the collapse of Borders, not to mention independent booksellers, and ask whether government policy has undermined the bricks-and-mortar retail economy to protect a will-o’-the-wisp."

Will-o'-the-wisp: a metaphor for the individuals and corporations who roam the offshore world. From Wikipedia (our emphasis added):

"sometimes seen at night or twilight over bogs, swamps, and marshes. It resembles a flickering lamp and is sometimes said to recede if approached. Much traditional, non-scientific belief surrounds the phenomenon.. . . often a malicious character. . . As the traveler follows the púca through the marsh or bog, the fire is extinguished, leaving the man lost (etc etc etc)."

As an aside: California's idea of taxing at point of sale has recently been adopted by the UK government, in a different but somewhat similar struggle.