Back when the Constitution was being drafted, interstate commerce was a really big deal. With the federal government being so small, power lived in the states. States established sales taxes to collect revenue from commerce. But the internet wasn’t around and so thanks to old school law a number of online retailers don’t have to pay sales tax.
Look at Amazon. If you ring up an order and are charged a sales tax, that means Amazon does some kind of physical business in your state. It would likely mean they have a distribution center there. If you aren’t charged a sales tax, it’s because they don’t have operations in your state.
Ignoring the price advantage Amazon has over traditional bookstores, many customers get an extra discount because Amazon doesn’t have to charge them a sales tax. If you bought the book from Barnes and Noble or Walmart, you’d be paying the tax. Some people, especially small business owners and brick and mortar retailers don’t think that’s fair.
They have a point. But laws is laws and Amazon doesn’t have to charge a sales tax if they don’t technically do business in your state. All that may be changing as Amazon and eBay are battling it out with policymakers. You’d think Amazon may be pushing for status quo, but you’d be wrong. They’re all for a sales tax for everyone so long as it’s for everyone. eBay is arguing for their customers. Their customers aren’t buyers, but the sellers, many of whom are small companies using eBay as a forum for sales.
As of right now, if a national solution is rolled out (that doesn’t mean national sales tax), a number of small internet retailers will not be subject to collecting the tax. eBay supports this because small companies are already at a disadvantage compared to Amazon, or Best Buy, or Walmart. I say so what, they shouldn’t look towards sales tax policy to fix that problem.
Small companies have been competing with larger ones for a couple of generations now and this is just the reality. Having tax law catch up after 250 years isn’t going to be the solution to this problem.
What you’re likely to see come out of this is a more universal collection of taxes from internet sales. The states will benefit from this by having a new revenue source (largely Amazon) and savvy shoppers will be out a few percentage points of every sale. Sorry, but if you’ve enjoyed the extra discount from buying online, you better enjoy what’s left of it.
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
