Forbes "Taxing Matters" columnist Janet Novack wrote a column asking the musical question: "Are Amazon.com's Days Of Tax Free Selling Numbered?"
Maybe. There's no loaded flintlock (governments are way behind the times compared to tech companies) that says tax-free Amazon days are numbered, but Novack gives a great summary of the constant pounding the company is taking from tax-strapped, club-wielding states trying to collect. The lack of a definitive action is why her headline is a question, not a statement. (When I was at Business Week, the magazine over-used the strategy of hedging through questioning headlines, leading one wag to parody the Radio Shack ads with the unofficial BW slogan: 'You have questions, we have questions.')
But I digress. I don't see how Amazon can avoid the tax man, or the grim reaper, forever. Although it could hold them off for a while.
In 1992, the U.S. Supreme Court ruled that companies that have a physical presence in a state have to collect sales tax from residents of that state.
Amazon says that its distribution centers in states like Texas don't count. Bezos closed the distribution center in Texas when the state sent him a bill for $269 million in back taxes. Texas says Amazon still owes it the money.
New York passed a law saying you had to collect taxes if you have "affiliates" sellers in the state. Amazon is challenging it, but now collects taxes from New York residents.
Rhode Island and North Carolina passed laws similar to New York's, and Amazon ended its relationships with affiliates there (not enough of them to justify the taxes it would have to pay, I guess.) Illinois is awaiting the governor's signature on a similar law, and Amazon has warned that it will end its affiliations there as well.
A few strange things about Novack's blog:
First, it's surprising to see the libertarian rag take a stance for more taxes (the opinions of our blogger do not necessarily reflect...).
She says that Bezos set up shop in Seattle rather than in Silicon Valley so he wouldn't have to pay California sales tax. I've heard lots of reasons why Bezos went to Seattle, such as its proximity to a book distribution center and the growing high-tech community there, but never anything about avoiding taxes.
She thinks Amazon could lose the PR war and the support of the public if it keeps threatening to pull out of states that pass 'Amazon tax' laws. Really? People in those states want an extra tax in order to save about 100 jobs? That's about how many they would lose if Amazon pulls distribution centers.
But it may happen anyway. The thing is, just because Amazon isn't requred to collect sales tax in some states, it doesn't mean you the customer doesn't have to pay the sales tax in your own state. It's just that nobody pays it and states find it too difficult to try to collect.
That means that, at some point, the Supreme Court, or individual states, may force online retailers to start collecting taxes for their sales to all states. Amazon certainly has enough computing power to collect all the sales tax data and automatically add it to shipments to each state.
It's not actually Amazon that has to pay the tax. It's you. Amazon will just collect and pay it on your behalf. It wants to use its no-sales-tax status to keep prices down.
So the question is, do the states and the courts have the political will to make it happen? If enough states pass Amazon tax laws, Bezos will find it hard to keep ending relationships with affiliates and closing distribution centers. It will have to ship products farther, and that's an extra expense it will have to pay.
I don't know. Amazon probably should collect taxes.
But it'll probably still be a while before it happens.