Should Congress enact an “Amazon Tax?”

internet sales tax comicOn May 5th, the U.S. Senate overwhelmingly passed a bill which would enable states to collect sales taxes due for online purchases.  The bill is facing great resistance from U.S. House Representatives who have vowed to defeat the Marketplace Fairness Act.  New Hampshire and Montana oppose the bill because those states do not impose a sales tax (isn’t that nice).  Most online merchants, except most noticeably eBay and OverStock.com, oppose the bill.

The Senate bill exempts online merchants with annual revenues of less than $1 million.  Some have advocated for the exemption to be raised to $10 million.  Advocates of the bill argue that the current tax structure creates an inherent disadvantage for “brick and mortar” stores.

I agree.  I will be the first to admit.  I like not paying sales taxes on my online purchases (mostly Amazon).  Many people don’t know that you still have to pay states taxes on online purchases.  Technically you are supposed to add all your online purchases and multiply it by your state tax rate and then include it on your tax return.  Most people however don’t do this.  It is estimated that states lose some $23.3 billion in revenue each year—a burden spread among other taxpayers.

I don’t think it is fair to businesses, in particular small businesses, to compete with giant online companies who don’t charge their customers a sales tax.  You can’t really compete with that option, especially for larger purchases.  Online purchasing will only grow as more and more people use the internet to convenience their lives (i.e. online bill pay, online banking, etc.).

I don’t think states that don’t enforce a state tax should be forced to do so.  Customers should be charged a state tax in accordance to their respective residence.  As someone who lives in a state (Illinois) with exorbitant taxes (9.25% sales taxes (it used to be 10.25 %!)) I was at first against the notion of enforcing the tax at the point of sale.  But my personal reluctance shouldn’t be a factor in national policy. 

I reluctantly (only in that I don’t want to pay more taxes) support the Senate bill.  However, I would rid the $1 million exemption.  Small businesses with “brick and mortar” stores don’t get exempt in enforcing a sales tax for that same threshold.  Unless the government plans to share the exemption with them then I don’t see how it is fair.  I don’t think the bill raises taxes.  It only enforces the taxes one should be paying on their tax return at the point of sale; which equals the playing field for businesses.

Do you think online merchants should be forced to apply a sales tax?

Email: realtalkdebate2012@gmail.com

Twitter: @adrakontaidis & @talkrealdebate

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About adrakontaidis

A conservative who doesn't pander to the GOP.

2 responses to “Should Congress enact an “Amazon Tax?””

  1. JF Owen says :

    I agree with most of what you said, especially the reluctant part. The only major difference of opinion is with the exemption. The proposed exemption is there to protect the smaller online retailers from being put out of business because of the need to satisfy literally thousands of state and LOCAL tax regulations.

    Imagine if you’re a retailer based in Oregon and someone in Pennsylvania orders a baseball hat. When it comes time to calculate the sales tax, you have to know that Pennsylvania doesn’t collect tax on clothing. Then there’s the question of whether the buyer lives in a city or township that also assesses a sales tax.

    The bill includes provisions that require states to provide software that will assist in calculating, collecting and reporting the tax. However there is no requirement for a uniform interface. That means that someone at each small business is going to have to install fifty-one different computer programs, learn how to use them and keep them updated. I suspect that means that every affected retailer is going to have to hire at least a part time employee. So let’s look at the numbers.

    On-line retailing is very competitive, cut-throat business, so the margins are thin. In many product lines the margins average around ten percent. That means, if the retailer does one million in sales, he has a gross profit of $100,000. From that he has to deduct his employee costs (if any), the cost of his business structure (even on-line businesses have a physical presence somewhere), cost of utilities, local taxes (business taxes, licenses, etc.), all the nickel and dime expenses a business has and his personal taxes. Does that leave enough to pay another employee to manage collecting sales taxes? Maybe, but if it does is there enough net profit left to justify staying in business or should the small retailer just hang it up and get a 9-5 job that doesn’t have the head aches?

    One million dollars in sales is too low. Is ten million the right number,,,I’m not sure. But however it shakes out, our goal can’t be to make on-line retailers less likely to survive. They deserve as much protection as the small local “brick and mortar” stores. Local stores only have to deal with one set of sales tax rules, not fifty-one.

    • realtalkrealdebate says :

      Good point! I didn’t really think of that. My opinion was more so because I didn’t think it was fair for small businesses with physical stores to not get the same benefit.

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