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Yet another reason why I often wish I lived in Massachusettes
wraith808:
I am also wondering what incentives from the state Amazon had been offered (or suggested) in exchange for their coming to CT? Because I'm positive CT didn't approach them first.
Which makes me wonder if this is an emerging business strategy for Amazon and other big web retailers?
Consider: Amazon is in an ideal position to cut such deals. They can easily approach a state and tell them exactly how much sales tax revenue they're currently losing.
-40hz (February 06, 2013, 08:30 AM)
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I don't think that was the case. I think it was the opposite. For many years, Amazon has been lobbying and spending money to keep taxes from being levied on out of state purchases. That's why they shipped from central processing locations. Then, all of a sudden, they stopped lobbying the federal government to resist changes, as they saw that they were spending a lot of money on this, and certain states have actively created legislation to force the issue, and they're fighting on multiple fronts. So they shifted plans.
Look at the change in amendment to the agreement with Amazon and VA:
Amendment Language:
2. That the provisions of this act shall be effective on the sooner of September 1, 2013, or the effective date of federal legislation authorizing states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller. If however, that federal law is enacted prior to August 15, 2013, and the effective date of that legislation is on or prior to January 1, 2014, the provisions of this act shall be effective January 1, 2014.
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Emphasis mine. They're fighting a war on multiple levels. This allows them to circumvent it, and make gains in the process- they are able to do something that they've been actively avoiding (making smaller distribution centers which cost less to maintain, and allow their distribution network to be able to get product to consumers)
40hz:
Emphasis mine. They're fighting a war on multiple levels.
-wraith808 (February 06, 2013, 09:05 AM)
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Agree. But I also think this move is a well thought out transitional strategy.
Too many states are getting increasingly strident about the sales tax issue. And with the federal government cutting state level funding now that so much has been spent on homeland security and the never ending war on terror, the money needs to come from somebody. And the feds are not about to introduce new taxes if they can possibly avoid it. Nor do the states want to do the same.
Unfortunately, the common practice of cutting back on state funding to its own municipalities is reaching a limit now that the municipalities are pushing back because their property and local taxes have been increased to the absolute threshold of what their residents can still afford to pay.
So the current state of affairs with online retailers not charging sales tax is a temporary one at best. And it will be a quick tech fix on most order entry servers once they're required to collect it. So it's not as if it impractical or not doable from an order processing perspective. It's just a sku + zipcode + tax table lookup + calculation loop on their system. No big huhu. This stuff is old hat - and the code has already been written anyway. The computer handles the heavy lifting so it's really just a "set & maintain a tax database" thing.
About the only tricky part will be if somebody in state A buys something - but has it shipped to an address in state B. In most places that wouldn't be taxable under current 'destination-based' sales tax laws. In my state something purchased with the intent of shipping it out of state within 30 days, and actually shipped within that grace period, is usually exempt since we're a destination-based state for sales tax purposes.
I think Amazon saw the writing on the wall and decided to move quickly to capitalize on the current state of affairs while it still existed.
A year or so from now, when charging sales tax is the norm, there won't be any point to approaching states to cut a deal. Unless somebody gets enterprising and gets most states to switch over to 'origin-based' sales taxes. If that happens, then it becomes a very attractive proposition to get a business like Amazon in-state. Because under that scenario, the hosting state would (theoretically) receive sales taxes on ALL the transactions.
(Note: It wouldn't really be that simple. But it would still be advantageous to be the hosting state for a mega-retailer. And for far more than just the 'job creation' opportunities.)
8)
CWuestefeld:
As I noted, sales taxes are among the most regressive forms of taxation, and I personally think that they should be replaced with more progressive forms of revenue, like income, or preferably, wealth taxes.
-xtabber (February 05, 2013, 01:13 PM)
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This isn't true, sales taxes are not perticularly regressive. And most economists will tell you that, moral questions aside, they're probably the best way to do taxes.
In America, the most regressive taxes are Social Security and Medicare. That's because wealthy people tend to live longer; while young black men (unfortunately) live much shorter (because they're far more likely to be murdered, what with gang violence, drug culture, etc.; note that I'm not saying this is inherent to being black, but it's the result of the situation they find themselves stuck in). The result is that SS is significantly a machine for transferring money from young black men to rich old white ladies. THAT is regressive.
And many common deductions, particularly on mortgage interest, are regressive. And egregiously so, because they're forcing people who can't afford to buy a house to make up the difference from the people who were lucky enough to get to that level.
So SS is entirely regressive. A standard tax fee for all people (say, $X,000 per person) is regression-neutral: everyone has to pay exactly the same amount, so it's neither regressive nor progressive. A flat income tax (e.g., 11% of your income) is progressive, because those making more money have to pay more money. Our marginally-increasing income tax you might think of as being doubly-progressive, because its progressive scales up super-linearly.
By way of comparison, Ben Franklin's idea was that rich people should pay more, because it's the job of the government to protect ourselves and our property; so if you've got more property, you're getting more of the government's services, thus you should pay more. So if you make twice as much, you should pay twice as much. But that's a FLAT tax rate, not America's current system of marginally-increasing rates.
Sales taxes are not regressive in this way, because they don't get lower for richer people. If you're picturing an ostentatious millionaire living off the backs of the poor, that's not accurate. That rich guy is going to be buying all sorts of fancy cars, expensive wine, etc., that the poor can't even afford. And he's paying the sales tax on that.
The good thing here is that there's a loophole to the sales tax: just don't spend the money, but invest it instead. And the thing about saving is that it's actually an investment: your savings will be turned into the money for someone else's mortgage, or paying to start up a new business, or to invest in newer more efficient equipment for an exist business or something like that. And all those investments are helping other people achieve their own goals, creating jobs, etc.
The end effect of taxes is that when you tax something, you wind up having less of it (and conversely, removing the tax will generally result in greater demand for it). The governments understand this, and frequently use this fact intentionally, such as increases in cigarette taxes to get people to quit smoking.
This is why income tax is a bad thing. We don't want to discourage people from making an income (i.e., working): we want to encourage them to work, to produce more. But at the margins, there are people saying "it's not worth me working any more time, because the amount I will make after taxes isn't going to pay for my childcare" or something like that. And that decreases total productivity.
A "wealth tax" is essentially the same thing, since wealth is just the accumulation of income over time. And the way to avoid that wealth tax would be to spend more -- and just as with a sales tax, we don't want to be encouraging the commercial, consumerist economy.
We want people to buy what they need to achieve their own ends, and to save (i.e., invest) the rest in order to enable the rest of society to pursue their dreams.
EDIT: added some clarifications
wraith808:
So the current state of affairs with online retailers not charging sales tax is a temporary one at best. And it will be a quick tech fix on most order entry servers once they're required to collect it. So it's not as if it impractical or not doable from an order processing perspective. It's just a sku + zipcode + tax table lookup + calculation loop on their system. No big huhu. This stuff is old hat - and the code has already been written anyway. The computer handles the heavy lifting so it's really just a "set & maintain a tax database" thing.
About the only tricky part will be if somebody in state A buys something - but has it shipped to an address in state B. In most places that wouldn't be taxable under current 'destination-based' sales tax laws. In my state something purchased with the intent of shipping it out of state within 30 days, and actually shipped within that grace period, is usually exempt since we're a destination-based state for sales tax purposes.
-40hz (February 06, 2013, 12:54 PM)
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Currently, in most states that I know of, you are charged tax even if you purchase online if you reside in a state that they have a presence in. That's what Amazon (and Woot) already got slammed for; not charging tax on purchases by TX residents.
The second part is the part that I was referring to as a burden, especially on small business. When I worked in retail, we only shipped to certain places because of it- we had the tax codes for a few places in the system; others were just out of luck. To much trouble maintaining that.
Tinman57:
The brick and mortar shops think this is great. Well, it is for them, because now you'll wind up paying more for an item online than you would locally after shipping, handling and tax.
It's bad enough that we are all overtaxed as it is, and our good ol' gov't gives it away by the billions to other countries, now the states can get in on the action.
Here's one I just can't understand, buy a car, pay state taxes. Yeah, understandeable. Now sell that car a year later and whoever buys it has to pay state taxes all over again. How is this fair that you have to pay taxes on something that was already taxed once?
When Amazon sells something, they are already paying federal taxes figured into the price. Now let's add state taxes to the mix, and now those online deals aren't such a good deal anymore.
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