amazon-ceo-jeff-bezos-11Publishers Weekly is carrying a piece about the American Booksellers Association and Civic Economics releasing a report blaming Amazon for over $1 billion in lost state and local revenue. The trade groups claim that Amazon’s failure to pay sales tax accounts for $625.4 million in lost revenue, and the growth of Amazon and other online retailers has resulted in lowered demand for retail space to the tune of $420 million in lost property taxes.

I have a few bones to pick with this report, and that’s leaving aside the implausibility of pretending that a report released by the American Bookseller Association blaming Amazon is any more neutral and unbiased than a report released by the Association of Mice In Your Wall complaining about your local housecat.

First of all, where did all that “lost” money go? It didn’t just disappear into the aether, vanishing from the economy forever. It stayed in the pockets of the local consumers, who could and in at least some cases did go on to spend it on something else bought locally that did have sales tax figured in.

But more importantly, I think it’s a little unfair that Amazon gets the blame for what is in actuality an issue endemic to the cobbled-together nature of our sales tax laws. Our sales tax laws were simply not designed for a world in which people could purchase goods from other states so readily, and the problem did not originate with Amazon. In fact, the problem was around for a lot longer than Amazon—as long as mail-order businesses have operated, in fact.

Case in point: my father owned and operated a mail order antique clock part business, the M.L. Shipley Company, from 1983 to 1991. (It’s now part of the Internet retailer.) I just called him up to ask about it. During that time, he received mail orders from forty-nine of the fifty states, plus a walk-in customer from Alaska. The only orders he was required to collect sales tax on were orders that originated in Missouri, the state in which he was located. (Which probably also included the walk-in customer from Alaska.)

That’s the way the sales tax system was set up. You’re only required to collect state sales tax on orders from places in which you have physical facilities. People who placed out-of-state mail orders were assumed to be virtuously keeping track of how much they spent, so they could tally it up at the end of the year and submit it with their income tax.

Be honest: how many people do you think actually did that? And where were all the complaints about Sears & Roebuck, or L.L. Bean, or whatever other major mail-order retailers existed back in the day, not collecting sales tax for other states? I haven’t done the research to figure out whether actually were any, but even if there were, they can’t have come to anything, because if they had, we wouldn’t be having the same problem all over again with Internet mail-order.

And we are, indeed, having that same problem all over again. It continues that way to this day, in fact. Check out page 4 of Scottsdale, Arizona-based Timesavers’s catalog (PDF, fairly large) and see what it says on the subject of sales tax. “Arizona residents please add 7.95% State Sales Tax or provide your current resale number.” That’s it. That’s all she wrote. By comparison, Amazon now collects sales tax for purchases made in twenty-seven states. You can count them yourself.

The reason for that is, sales tax rates depend not just on the state, but also on the county and municipality. There’s not just one rate for sales tax in any given state—there are dozens, depending on where in the state the business is. (Or, in the case of Internet mail order, where in the state the customer is.) Even if there were only one sales tax rate per state, keeping track of that would be ridiculously complex. As it is now, the only reason you’re able to get 27 states’ worth of sales tax out of Amazon is that it’s big enough to be able to afford an accounting department, and to attract notice from people passing laws saying that companies have to collect sales tax in their state. (I wonder how many of  those states Timesavers should be collecting sales tax for?)

And even Amazon fought having to collect sales tax tooth and nail wherever it could, often shutting down affiliate programs in places like Missouri if a loophole in the law meant they could avoid collecting sales tax there if they did. But that’s entirely its own prerogative, and Missouri probably should have phrased its law better.

So, fine, Amazon accounts for a billion dollars in “lost” revenue. Even if we take that tally at face value, how many billions do you think every other mail-order and Internet-order retailer accounts for? There are thousands of those businesses, ranging in size from sole proprietorships like the Shipley Company up to big corporations like Amazon. The vast majority of them couldn’t afford to keep track of and collect sales tax from other states right now, even if they were required to by law, so they probably don’t.

Heck, even the law that’s supposed to fix all this—the Marketplace Fairness Act of 2015—only requires such businesses to collect sales tax for other states if their revenue in the previous year exceeded $1 million. So even if we get the law passed that will make Amazon sales taxes all better, there will still be millions and millions of dollars in sales tax “lost” because of all the businesses that are too small to be required to collect it. What are the ABA and CE going to do about that?

Also, let’s not forget that this bill is fully supported by Amazon, which wants to collect sales tax everywhere, if the tax rates could just be harmonized to make it simpler. An article about this current iteration of the Marketplace Fairness Act lays it out thus:

But one key company has joined the ranks of supporters in recent years as well: Amazon.

“If they’re going to do real-time deliveries, or same-day deliveries, how do you do that without a physical presence in a lot of places?” Heitkamp said. “So I think that’s why they’re starting to come around on this.”

The article claims that the law is closer than ever before to passing, which, if true, would surely bring some relief to groups like the ABA.

But I think that all the focus on Amazon is doing a disservice to the larger cause. Other big companies, like Google and Apple, have their own tax woes—though not necessarily sales taxes in those cases. But at least they get attention. What about all the other big companies that quietly tick along making sales to all the other states but don’t come under Internet sales tax fire because they’re not controversial like Amazon? Is it really fair to give them a pass just because they’re not Amazon?

If you’re going to attack the problem, attack the whole problem. It’s as if you were only calling out one particular politician for corruption—it’s painfully transparent that the way the system is set up, there are actually going to be a whole lot more guilty parties.


  1. if you’re going to attack the whole problem, you’ve got to start somewhere – the largest online retailer seems the obvious choice. (and the ABA isn’t the first to raise this issue – as bookstores are part of local culture, the attention to Amazon’s – and online bookselling – erosion of the local culture via attack is especially apt) on the local bookstore and local tax base

    • You don’t attack the problem by attacking the largest online retailer. You attack it by attacking the actual problem. Like, y’know, by trying to get legislation passed to make it actually feasible for retailers to be able to collect state sales tax for all fifty states in a sane and reasonable way. Amazon does only what they can’t weasel out of under the law, after all—the same as any business. So pass a law none of them can weasel out of.

      • and this problem has been addressed (though not always successfully) from the legislative side. That the ABA would point to the largest actor in the book sector is not surprising. Nor is there any harm in folks knowing who is weaseling and what the weaseling entails – sure that’s what businesses do; doesn’t mean no-one should expose it. And when making decisions on which retailer to patronize (online, local) the degradation of the local tax base and its effect on local schools (and infrastructure) should be an essential part of the decision making – just what is the problem with people being informed ?

        • But you see, that’s just the thing. The only people trying to tell us “who is weaseling” seem to be focusing solely on Amazon. And you have to know they can’t be the only company doing it! What about, for example, Timesavers? They’re only collecting sales tax from people located in Arizona, while Amazon is collecting it from over half of the USA! How is that fair? How is Timesavers getting a pass while Amazon has to be responsible?

          If they want to tell us who is weaseling, then okay, fine, we’ll accept that Amazon is. (Congratulations, ABA, you’ve made your case!) But what about everybody else? Where’s the itemized list by company of all the companies that aren’t collecting the sales tax they should be, complete with the amounts they’re not paying? Where’s the list of any company? Hell, the ABA and CE even admit it themselves in the latter part of their statistics, where they talk about how Amazon and other companies are depressing the market for storefront retail space. How about it, ABA and CE? What about those other companies? Who are they and how much do they owe? Why is it incumbent upon only Amazon to be accountable for the sins of every company who isn’t bothering to keep track? Last I checked, Amazon wasn’t a Christ figure.

          • Why would the ABA publicize the idea using Timesavers as an example; does Timesavers publish and sell books ? As a journalist, how effective is providing an exhaustive list to publicize a problem ? Otoh, publicizing the matter using a company with major retail market share as an example allows readers to grasp the issue and consider their purchasing choices in light of the problem characterized by the example. I suspect that local tax loss from Amazon is greater in any State than loss of tax revenue due to Timesavers even if Timesavers sells and ships through an Amazon presence. In fact, why have you focused exclusively on the ABA discussion of this matter – there have been numerous articles on this issue from other sources.

  2. I am with you on this Chris, which other companies in any industry are taking advantage of the laws that are in place? Is Amazon breaking any laws? When were these laws put in place? My guess is that these laws have been around way before Amazon came into the picture.

    The ABA dislikes Amazon and will find any excuse to write any negative article on Amazon. I don’t think The ABA cares how much the states are earning or how they use that money. All the ABA care about is one more negative article on Amazon.

    Google and Apple also get brought up in these types of discussions. Again, usually by people who dislike Apple and/or Google. These laws have been around for many years and many companies have worked within the requirements of those laws.

    Now I agree that the system is wrong and it benefits these companies, but my anger is not aimed at them but at the useless people who are elected to ensure this country is run fairly. How about naming some of those elected officials who allow this situation to carry on.

    Apple, Amazon and Google have always stated that they pay the amounts of tax that they are bound to legally. Why would they pay any more? I know I would never pay any more tax than I have to.

  3. If you want to see what would be required, look at the EU’s mail order VAT rules.

    There are 27 EU members and a mail order business has to collect VAT (sales tax

    effectively) for every country for which its sales exceed a threshold of the order of

    10,000 $.

    One set of rates per country nothing extra for cities and communes.

    The EU has just (January 2015) started to require tax on ebook, music and software

    downloads based on the same location of customer rule. But they left out the threshold

    to the dismay of small businesses.

    And of course they would like US businesses to collect VAT on EU downloads but have to

    rely on persuasion.

    Little Egret in Walton-on-Thames

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