Should Amazon Collect State Sales Tax?

Amazon and other ecommerce vendors enjoy a tremendous advantage in these times of fiscal responsibility as many of the products the company sells do not involve sales tax in most states. There are arguments for and against Amazon paying taxes to the states and today Randall Stross of New York Times makes the argument for why Amazon should pay. His main argument is the fact that many states are in desperate need of the revenue.

What Stross, doesn’t delve into however is why after record tax revenue collection by many states for a number of years are the deficits so great? He does mention the following:

This may be a good time to point out that states and localities are having a bit of a tough time paying bills. The Center on Budget and Policy Priorities estimates that state budget gaps for this year and next year combined will be more than $350 billion.

Wider collection of the sales tax is not going to plug a hole of that size, but every billion or two would help. In California, the State Board of Equalization estimates annual tax revenue losses of $1.085 billion from unpaid “use taxes,” which are supposed to be paid for out-of-state purchases.

In other words, even if Amazon was to comply with Ross, it wouldn’t really help. At no point does Ross discuss the responsibility of states to spend in a manner which is not similar to a compulsive gambler on an eternal losing streak. Moreover he doesn’t mention what history has taught us – that the government will just continue to spend regardless of how much money they have coming in. They will find ways to make it happen. In the end, they know that the federal government will bail them out like they have everyone else.

There seems to be a feeling among many in the media that the government needs to tax more and spend more with zero accountability.

When any of us spend recklessly we go bankrupt. There are consequences to making poor financial decisions – well at least there used to be. When a state spends recklessly, it reaches out and tries to collect taxes on anything it can and in turn risks bankrupting its constituents.

And politicians are already beginning to take drastic measures so they can continue spending money they don’t have. Connecticut is where TMC is located and recently it decided it needed more money and the way they decided to get it was by raising income tax retroactively on small business owners. More precisely a 30% tax increase from 5% to 6.5% on people earning more than $500,000 per year.

Sure, people find it hard to feel sorry for people making this kind of money but consider that many corporations are structured in such a way where the income the company makes shows up on the owners tax return and the more of the money the government takes, the less there is left to invest in new business ideas, hiring, benefits, etc.

But what is worse than increasing taxes on the small businesses we need to help hire people in this country is to tax the same people retroactively. This new tax in fact was imposed on October 5, 2009 and applies to the entire year of 2009!

If that doesn’t upset you perhaps you would be more interested in news that there is potentially a new 10% tax coming to tanning salons which will help pay for healthcare.

This will no doubt put many tanning salons out of business that again are struggling small businesses we need to keep people employed.

But getting back to the point, I prefer to write about technology topics but it seems the impossible to separate tech from the US government because the attitude among many seems to be that companies which are successful should help fund states and others who are not.

This means that today it could be Amazon but tomorrow, why not Apple, Microsoft, Netflix , Google or others. If tanning salons are fair targets why not any company or class of people?

There are real consequences to runaway spending and since small business owners seem to be underrepresented by lobbyists they make easy targets to tax. And as this continues the result will be fewer jobs. It is very simple to see how this works.

The more our state and federal government expands, the more we eventually have to pay and right now I am very afraid that tech companies make tempting targets for politicians looking to tax and spend.

What started me thinking about this post was one from Tom Keating titled, Amazon Should Collect Taxes? Over my Dead Gadget-Loving Body! which you should check out.

  • John Beck Tele Seminar
    January 8, 2010 at 2:45 am

    There are real consequences to runaway spending and since small business owners seem to be underrepresented by lobbyists they make easy targets to tax.

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