(Samantha Stone/The Reasonable Reporter) – Online retailer Amazon announced this week that it will scrap its expansion plans in Texas, and close down its existing facility in the state. This, as Texas pursues the Seattle-based internet company for taxes on sales to Texans. Its distribution center just outside Dallas is a legal sales tax target, says State Comptroller Susan Combs, and she’s demanding $269 million from Amazon.
Amazon has turned tail and told Texas to pucker up.
Here, we clearly see a single strand in a tax discussion with many threads. The outcome, sooner or later, will surely be an internet sales tax on residents of all states. The dominant voices in the discussion are as follows:
The Main Street merchant without a web presence, to the extent that such retail entities still exist. When the “Main Street Fairness” battle began, there were no internet sales. It was a fight to level the playing field against direct mail merchants, who were flooding mailboxes with slick catalogs, using zip codes and neighborhood profiles to target likely customers with new precision. They were amateurs by the standards of today’s browser cookie hounds, but it was a blow to the gut of Main Street, which launched a campaign to tax “remote transactions,” hoping to drive customers away from the mail box and back into the stores.
We all know what happened next. Consumers embraced ecommerce, and most merchants decided, wisely, to join ‘em if you can’t beat ‘em. Those who took the internet seriously have thrived in both their physical and their online locations. The glossy catalogs that jammed mailboxes a few short years ago are as rare today as phone booths, and the savvy Main Street merchant has adopted a synergistic approach. But the Save Main Street theme endures.
Big Silicon Valley software companies – ka-ching! – recognized Main Street’s pain. Big Software applied its algorithmic expertise to smoothing out tax collection on, let’s say, a sweater, which would be subject to various tax rates in thousands of jurisdictions, depending on the location of the merchant or the shopper. There would be gold in them thar hills for Big Software if it could streamline sales tax collection across state lines.
State legislators across the land seized eagerly on the Streamlined Sales Tax concept, calculating the money that had slipped away as folks shopped across state lines. Lawmakers in both parties jumped on board an interstate taxing compact. Thus, all states could collect their share of the lost loot, and no single elected body or politician would feel the heat. But nobody forgot that the mouse is clicked by warm fingers attached to human voters. Nobody sent out a press release bragging that they’d helped paved the way for an internet sales tax.
The other big advocates for the Streamlined Sales Tax are lobbyists. They represent almost every tax-dependent constituency in the state, and almost every tax-paying business in the state. No matter their politics, these folks promote the Streamlined Sales Tax every chance they get, for two reasons.
First, a sales tax is not a new tax. An internet sales tax would feed the hungry beast while offering political cover. Second, internet commerce is conveniently nebulous. An internet sales tax hits the proverbial “guy behind the tree.”
In Nevada, the enabling legislation was passed years ago, in the frenzied, final hours of a now-distant legislative session. It got scant attention from the press or the mouse-clicking consumer. The law inhabits dozens of pages in the Nevada Revised Statutes, and does not once spell out the phrase “internet sales tax.”
The wheels of progress have turned slowly for Streamlined Sales Tax advocates. The mechanism is in place, and could start filling state coffers immediately but for a U.S. Supreme Court decision that says sales tax can be collected only from businesses with a physical “nexus” in the state, generally construed as a brick-and-mortar store. Texas construes this more liberally. Amazon does not.
With or without the Streamlined Sales Tax, Nevada law requires everyone who makes any purchase from an out-of-state vendor to pay a use tax. Nevada Taxpayers Association President Carole Vilardo routinely takes a poll in any room where she’s the featured speaker. Who, in this room, she asks, has bought merchandise from a website? And how many of you then surfed over to the Department of Taxation website to pay the use tax? By a show of hands, virtually everyone is a tax scofflaw.
The Reasonable Reporter must disclose having worked for the Nevada Taxpayers Association for a year, and must further disclose an abiding affection and respect for Carole Vilardo. But the Streamlined Sales Tax was and is a subject on which we disagree. It’s a disagreement rather resembling one Helen Keller might have had with Anne Sullivan. Yours truly plays the role of Keller in any technical discussion of taxation, including this one.
The Reasonable Reporter has long believed, though, that the Streamlined Sales Tax would produce the Texas-Amazon phenomenon writ large – pushing ecommerce distributors out of the United States, and costing many jobs, on top of the lost sales taxes. Texas will lose 119 existing jobs, in addition to the jobs that might have been, had Amazon gone forward with its expansion.
Internet sales tax evasion is a compliance issue, not a taxation issue, as Carole Vilardo herself said this week to a legislative committee. On this, we do agree.
No matter the law, every company will seek to lessen its tax burden. So will consumers, if they can get away with it. The law says you’re supposed to pay on out-of-state purchases. The law also forbids you to exceed 70 miles-per-hour on U.S. Route 95 between Hawthorne and Las Vegas. By a show of hands….