April 25, 2013

Amazon has always been in favor of paying sales tax, says Amazon


Jeff would prefer if they could pay tax to states in the form of salty bookseller tears. Is that cool?

Amazon loves sales tax, people. Loves it. Why would you ever think otherwise? Haven’t you heard their new slogan? “Amazon: Not a Company That’s Spent Millions Trying to Bankrupt Your State, You Must be Thinking of Someone Else.” It’s catchy!

Amazon has announced their support of a bill expected to pass the Senate in coming days that will give states the power to require online vendors to charge sales tax for purchases shipped to their states. This bill has been a long time coming and Amazon’s support is, to put it mildly, counter to their previous stance on the issue.

We’ve covered Amazon’s various schemes to avoid collecting sales tax before on this blog here, here, here, here, here, and, well, the online plungers-and-maybe-a-book-or-two vendor has a storied history of working to avoid charging and paying sales tax.

Why, then, throw their support behind a bill that would allow states to levy such taxes? (A right states already have, though they’ve inevitably had to go through laborious and expensive court proceedings to prove that Amazon has a “nexus” of operations in that state and is thus liable, based on current jurisprudence, for tax on sales in that state.)

Amazon even wrote a letter to the Senate back in February in support of the bill. Don’t look to it for any explanations, though, unless you are fluent in Sheer Gall. Amazon VP Paul Misener wrote “Amazon.com has long supported a simplified nationwide approach that is evenhandedly applied and applicable to all but the smallest volume sellers.”

That’s right. Amazon has always wanted to pay sales tax, you guys. You had it all wrong. They’ve spent a decade fighting tooth and nail to avoid doing exactly that out of support. It was a kind of tough—some might say abusive—love for state budgets. How could we all have misunderstood so badly?

Business reporters have been working to make sense of the dramatic shift. Andrew Ross Sorkin of the Times Dealbook blog looks at eBay‘s continued opposition of the bill, and debunks their continuation of the old Amazon line, that instating methods of charging the tax would be prohibitively expensive. As for Amazon’s reasoning, he writes:

As Amazon has grown, it has become better positioned to handle the tax hit. And perhaps more important, it is moving to build physical warehouse and shipping centers in many states so that it can offer faster delivery services, in some cases within 24 hours. That means it would most likely have had to collect sales tax anyway.

Over on NPR’s Planet Money blog, Jacob Goldstein comes to much the same conclusion:

The company agreed to start paying sales tax in more states — and it started building huge warehouses near major metropolitan areas in those states.

The warehouses meant the company had to start charging sales tax. But having warehouses closer to big cities also allowed Amazon to start offering same-day delivery to millions of customers.

As the FT reported last year, the brick-and-mortar stores got the level playing field they wanted for sales tax. But they also got a new level of competition from Amazon.

I would quibble that the company didn’t so much agree to pay sales tax as it was forced to, but the point stands. Both Goldstein and Ross Sorkin are correct. Amazon deals in distribution, not actual goods. They sure as hell don’t deal in books: they deal in methods to get you those books, whether that be digitally or physically. Amazon’s two big battlefronts have become streaming content for digital goods and same-day delivery for physical ones.

Amazon needs same-day delivery in more places to compete with the other employee-shredding monstrosity of retail, Wal-Mart. When Goldstein writes about brick and mortar stores, this is what he means. Amazon only competes with indie booksellers the way a high school bully competes with the tensile strength of your underwear: to see how far they can be stretched before they tear. And Barnes & Noble is not their competition anymore. No, Amazon wants to be selling you Tuscan Whole Milk alongside your books, making Wal-Mart their big competitor. It should be noted that B&N and Wal-Mart have both come out in support of this Senate bill as well.

To pull this off, they need more warehouses in more locations. They’ve used the jobs those warehouses might bring to entice local legislators in states like New Jersey to give them sweetheart tax abatements. Of course, those same jobs that states are fighting for are the very worst sort: low-paying, precarious, and without benefits, so that workers are forced to rely on the state’s social welfare programs. In a few states, though, including New York and California, Amazon already pays sales tax. (In the case of New York they were working to avoid this as recently as a month ago.) In every state, it would seem, it suits their tactical efforts to concede sales tax in order to further physical expansion.

It remains to be seen whether a House version of the bill will make it through the legislative process. Whether or not the act becomes law, however, one thing is certain: Amazon has an angle.


Dustin Kurtz is the marketing manager of Melville House, and a former bookseller.