Amazon Offers Strong Support for Tax Bill
Amazon CEO Jeff Bezos was on the record back in May in support of federal legislation that would straighten out the sales tax mess associated with online sales. Now that an actual bill has been proposed, Mr. Bezos and company are still behind the legislation.
The Marketplace Fairness Act, sponsored by Senators Mike Enzi (R-Wyo.), Dick Durbin (D-Ill.) and Lamar Alexander (R-Tenn.), is expected to help state governments collect roughly $23 billion in additional sales taxes.
"Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers, and the states to get this bi-partisan legislation passed," said Paul Misener, Amazon vice president, global public policy, in a press release. "It’s a win-win resolution — and as analysts have noted, Amazon offers customers the best prices with or without sales tax."
Others also expressed support for the bi-partisan legislation.
"A true free market is devoid of government preferences and special treatment," said Katherine Lugar, executive vice president for public affairs at the Retail Industry Leaders Association, in a press release. "The Marketplace Fairness Act will get government out of the way, restore the free market and close the loophole that has given an unfair advantage to online retailers like Amazon.com for over a decade."
Not all were enthusiastic. The conservative anti-tax group, Americans for Tax Reform, said, if enacted, the Enzi-Durbin-Alexander bill would automatically increase "taxes in many states without any taxpayer protections." The group, headed by Grover Norquist, has received pledges from many legislators, primarily Republicans, against raising taxes of any kind.
Sen. Alexander, a member of the GOP, told the Los Angeles Times, that the bill was "about closing a tax loophole."
- Amazon’s CEO Calls for Federal Action on Sales Taxes – RetailWire
- Amazon Strongly Supports Enactment of Enzi-Durbin-Alexander Federal Online Sales Tax Bill – Amazon.com, Inc./Business Wire
- Prospect of online sales tax grows – Los Angeles Times
- Support for Sales Tax Fairness Gets Huge Senate Boost – Retail Industry Leaders Association
- Marketplace Fairness Act: Internet Tax, Round Three – Americans for Tax Reform
Discussion Questions
Discussion Questions: Is the Marketplace Fairness Act legislation that retailers should get behind? How will the collection of taxes, where not collected before, affect retail sales?
Why should some consumers pay sales tax on items and others not? The question answers itself.
If every transaction has a sales tax, the retailer with the perceived best combination of price, service, value and fashion will win … and the selling will go on.
The government needs more cash like a crack addict, and needs to act like the fairness bill is the right thing to do. Nice try, but nothing is fair across the board to the regular folks, as only the big corporations get the tax breaks, so the consumer will pay the tab, and Washington DC can sit back and gouge us a little more. The bricks and mortar folks like me don’t mind the bill, but I suspect cronyism will creep into it, and allow someone to get away without paying their FAIR SHARE.
There are two broad sets of retailers impacted by this legislation. I would expect all the B&M retailers to support the bill as they will see this as something that helps level the playing field, does not lessen the increased structural cost they incur by having retail operations, but will cut the differential in their final price and that of the internet retailers.
Internet retailers on the other hand are likely to be divided into two subgroups. Those have the infrastructure or can quickly afford to build it to tackle the huge variations in sales tax that they will incur in a national operation and those that can’t. The larger companies may look down the road and see that one way or another this is going to occur. By supporting it on a national level they have some control over when and how. They will also see an advantage in that this may force some smaller internet retailers out of business because they can’t afford the cost of compliance.
I doubt that there are many on online shoppers doing it for the tax savings! Convenience, selection, better utilization of time, free shipping (where applicable) etc, etc, are all much stronger motivators than saving the state taxes. As with any cost change there will be some negative impact on Amazon and other online businesses but talk to me a year from now and see where they are. Many of these companies are very smart marketers and they should do what it takes to close any short-term sales impacts.
If retailers want to level the playing field, they will get behind this bill, especially brick and mortar retailers. The collection of taxes should not negatively impact retail sales. People are accustomed to paying local and state sales taxes. The Internet has matured and no longer needs to be supported through tax-free shopping. States need the revenues. Rather than sending out lame notices, like California does, asking businesses to voluntarily identify and pay sales tax on items purchased on the Internet, this bill will have retailers collect and report the tax. It’s simpler and should work.
Fact is, a significant factor in the growth of internet sales is due to consumers not having to pay taxes. This provides the internet seller the ability to offer a lower price. This helps the consumer justify the spending money and having to wait for the purchase to be delivered. Consumers do significant cross-border shopping for this same reason. The net effect of this act will increase consumer costs and reduce total consumer spending, increase internet retailers’ operating costs and slow internet growth sales. The internet retail model is more efficient than operating a retail store. Retail stores must learn to compete or their market share will decline. This is no different than teaching a supermarket that their frozen and refrigerated pizza is in direct competition with the pizzeria down the street. Competition comes in many forms.
Overall retail sales will not be hurt; consumers will still consume. It will have a slight impact on those retailers who are only online, and with those consumers who are strictly price buyers. Otherwise, it will just be the new normal.
It was only a matter of time before the enormous revenue stream in e-commerce was taxed. It’s just too much money for our fearless spenders, er, leaders to leave alone.
With one of e-commerce’s leaders expressing support, it’s logical to assume that the legislation is the least of the evils.
This is literally a textbook question (and I hate to break it to some of my fellow travelers, but they seemed to have slept through it): all else being equal what happens when the cost curve shifts upward? Consumption falls. Of course consumers for years have done their best to live in some alternate universe, so perhaps this will be no different…without seeing the actual bill, it’s hard to say anything definite. But at least — as implied by the survey question — we have acknowledgement that internet sales aren’t really some new frontier…they’re simply an expansion of mail order.
Um, let’s see. So Amazon etc will be effectively raising prices by around 7%, while its brick & mortar competitors stay the same. How can that not have a significant dampening impact for online only? Especially now that most major brick & click operators have now pretty much harmonised pre-tax prices and are starting to capitalise more effectively on their store network as pick-up and return points? Amazon putting a very brave face on what now seems inevitable, and indeed fair (though due to natural human loss aversion it may not seem that way to those who were shopping online and will have to pay more).
I work primarily with independent retailers, and I don’t think this will have a big impact on their retail business. What I suspect it will negatively impact is their e-commerce business. So the cynic in me thinks that Amazon is behind this bill not for any altruistic reasons, but because they believe that collecting sales taxes places their online competitors, large and small alike, at a greater pricing disadvantage than it does them. After all, when you are a volume seller, it’s all about low prices.
It is a waste of retailers’ time. It will never get out of committee in the US House and Bezos knows this. Hey I am for a 25 cents/pound green cheese, but no one is going to the moon to get it so I can advertise this price all I want. The fault is with the consumer. They are obligated to pay the tax. A retailer is obligated to “collect” a tax only in a state in which they have a brick and mortar presence. I have had internet retailers attempt to collect taxes on sales made in Georgia even though they have no presence in the state. Questions to Georgia’s Secretary of State indicate that these retailers were not submitting collected taxes and were VERY INTERESTED to find out who these internet retailers were. I “reluctantly” supplied them with all the information they requested.
If sales tax is collected on internet sales then I would expect that much e-commerce will move off shore and that e-prices will become even cheaper. Can you imagine Samsung selling their TVs direct to consumers from their home office? Shipping the TVs to LA and contracting with UPS to deliver them. All of the contest winners will be responsible for the taxes, as we are now, but who is going to enforce collection? I think that retailers’ cost of doing business will increase due to more Federal regulation.
And another thing — where are all the rollbacks in retail pricing because of the reduction in the horrible swipe fees retailers were paying before Dodd/Frank? If you want to collect sales taxes, make the banks collect them! But then that would result in the elimination of free checking for seniors!
This is simply a federally enacted, state-administered tax bill, that is the lesser of two evils (i.e., an entirely state controlled tax), that will probably be lower and more stable than a state controlled tax bill.