California is the latest state to tax Amazon.com purchases

There are two things that are certain in this world: Death and taxes. California is proving the latter as they join six other states in attempting to force online retailers to charge sales tax on purchases made by citizens of the state. The LA Times is reporting that the measure is expected to pull in an estimated $317 million a year in revenue to the struggling state.

At issue is the fact that a 1992 Supreme Court ruling states that a state can’t force the collection of taxes if the seller doesn’t have a physical presence in the state. To get around this, states are considering affiliates and advertisers as a physical presence. To counter this, Amazon.com and Overstock.com have both severed their affiliate programs in many states; according to the article, California collected $152 million in state income taxes last year, money that will no longer be flowing into the coffers.

Many people are unaware of the intricacies in sales tax laws in the United States and believe it’s as simple as charging a flat rate to everyone in a state. Unfortunately nothing is that simple; according to Tax Lawyer NYC, there are approximately 11,000 different sales tax jurisdictions in the country and to force a company to keep track of them all forces an additional burden and a large expense. It’s unlikely that a small company would be able to compete on the Internet if they were forced to collect taxes for every jurisdiction in the country. It’s ironic that companies like WalMart, notorious for moving into cities and destroying small businesses, have been complaining about Amazon having an unfair cost advantage.

As states try to balance their budgets, large online retailers have increasingly become easy targets due to the fact that they’re out of state and could potentially generate millions of dollars. It will be interesting to see if these new laws will have an impact on future e-commerce both from established companies as well as new startups.

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AFineFrenzy said,
We get VAT'ed to hell and back in England, anyway. Man up, America!
We don't get "free" healthcare, so taxes SHOULD be lower. All that taxes should pay for is Police, Fire, Roads, and Protection - nothing else. The states should suck it up and actually manage the money that they do get well.. Idiots.

Yeah, er, the UK has representation. Kinda why they were so annoyed - the UK *did*, the US *didn't*. What has that got to do with 'fleeing' the UK?

i think that NY have extra tax too even in digital purchase which really sucks....

anyways taxing the internet its bad

honestly, and this is from a point of view of seeing malls and stores failing now due to no sales tax on the net and states going basically bankrupt due to lost revenue...... there almost needs to be a sales tax on the net, not as some people interpret it as "taxing the web" but a sales tax... we kind of made it an unfair playing field by saying on the internet you pay no tax, but in the store we are going to tax you on the same item..... I've even seen some naive people go as far as buying most stiff on the net instead of in a store because "there is no tax" yet they pay about the same due to shipping if its not free at the time.....

but in a place like Pennsylvania or California where a lot of warehouses are at you end up paying tax on most net items to start with as the business has a presence in that state, you have to pay state taxes on anything sold from it...

Stewart Gilligan Griffin said,
...snip

Malls and stores aren't failing because of no sales tax on the internet. They are failing because of the economy and the amount of people that are unemployed.
Amazon has been around for 20 years now. To suddenly say they are causing brick and mortar stores to fail is ludicrous.

Stewart Gilligan Griffin said,

...

Plenty of people still shop at local stores. Have you stopped shopping at local stores? I'm quite sure most people still buy groceries in person, find bargains at the mall, among other stuff. Many people still buy regular purchases too, either because of the convenience or they just want it right now without the extra shipping charges.

Wow ... some of you guys should live in Europe some time I find it really surprising to find such vehement opposal to sales tax on online goods - they're still goods, just bought in a different fashion.

Hell, it would just be lovely if prices in the US included sales tax in the immediate prices rather than adding it later (yeah, I know it's made more complex by the states system).

Kirkburn said,
Wow ... some of you guys should live in Europe some time I find it really surprising to find such vehement opposal to sales tax on online goods - they're still goods, just bought in a different fashion.

Hell, it would just be lovely if prices in the US included sales tax in the immediate prices rather than adding it later (yeah, I know it's made more complex by the states system).


The thing is that sales tax is supposed to be collected because it helps the local government take care of the store. For example, it builds roads, police and fire departments to protect the business, and that sort of thing. That's why if a store has a physical presence in the state, you pay sales tax - because the warehouse or whatever is using public resources. But if there's no physical presence, what are you paying the tax for? There's no benefit, it's simply a way to line the government's pockets.

Kirkburn said,
Wow ... some of you guys should live in Europe some time I find it really surprising to find such vehement opposal to sales tax on online goods - they're still goods, just bought in a different fashion.

Hell, it would just be lovely if prices in the US included sales tax in the immediate prices rather than adding it later (yeah, I know it's made more complex by the states system).

Also don't forget, we have income tax, you just have VAT. If we all went to a Fair Tax or Flat Tax system maybe the situation would change.

Fezmid said,
The thing is that sales tax is supposed to be collected because it helps the local government take care of the store.
I've never heard that explanation before. I couldn't say if it's true, but it sounds like an explanation after the fact rather than a true reasoning. A quick Wikipedia look up suggests it's a type of 'consumption' tax - i.e. taxing people based on what they use (which can be a method of 'fairer' taxing).

stormlifter said,
Also don't forget, we have income tax, you just have VAT. If we all went to a Fair Tax or Flat Tax system maybe the situation would change.
We (the UK) have income tax too.

Edited by Kirkburn, Jul 1 2011, 11:32pm :

How about making the big corporations pay their fair share.
G.E. paid no federal taxes last year. Yet they made billions in profits.. They tweak the books so all the profit is foreign. All the expenditures is US. They are not the only corp doing this. Now they have petitioned congress to drop the corp tax rate from 35% to 5%, saying then they can bring this money back in to the US to help stimulate the economy. Or how about the billions in tax breaks to the flippin' oil companies. This is whats wrong with this country....total BS and GREED!!!!

dreckman said,
How about making the big corporations pay their fair share.
G.E. paid no federal taxes last year. Yet they made billions in profits.. They tweak the books so all the profit is foreign. All the expenditures is US. They are not the only corp doing this. Now they have petitioned congress to drop the corp tax rate from 35% to 5%, saying then they can bring this money back in to the US to help stimulate the economy. Or how about the billions in tax breaks to the flippin' oil companies. This is whats wrong with this country....total BS and GREED!!!!

I'm quite sure many people have heard about that by now, but this article isn't about federal taxes. It's about state's sales tax...

psionicinversion said,
I'm surprised arnie doesn't go terminator on there ass!!

Arnie has no power in California anymore

psionicinversion said,
I'm surprised arnie doesn't go terminator on there ass!!

They tried to pass this before but Arnie vetoed it. Now Arnie has no power and it's all dems, they've passed it. But in doing so they've hurt themselves more.

This happened in IL. Both California and Illinois are probably the two worst states to be in. I want to move - I hate America and their damn liberals.

Strong statement, I know.

Is this different from std Tax or is this like another tax on-top of normal tax?

If you guys dont get taxed on Online sales ur lucky

Then again i dont think we have Online Only shops

brent3000 said,
Is this different from std Tax or is this like another tax on-top of normal tax?

If you guys dont get taxed on Online sales ur lucky

Then again i dont think we have Online Only shops

In the USA you pay federal taxes on your wages, state taxes on your wages, and sales taxes on items purchased based on what state you purchased it in... most of the time its a lot less then a VAT type tax but it depends on a lot of factors

I order a bunch of stuff from Amazon and Newegg... so long as I don't pay a tax on it I'll continue to but if that changes I'll change locations of most of those purchases.

Globalization here we come. Everyone pays the same for the item but depending where they live pay different premiums to retrieve it.

Why on earth if I have to pay sales tax (ontop of shipping) would I buy online? That's stupid enough to make me go physically to a store to purchase a product.

I know a lot of brands are opening stores around the country forcing you to now pay sales tax if you buy online, an example is Lego stores, but there is a catch with Lego; if they don't have what you want in store you get free shipping to your house (if you order it from a salesperson in store) Lego has to eat the shipping cost, but that's a small price to pay for brand loyalty. Most companies don't do that, but in a world where many companies are making profits right now during the recession, they should.

It's not just sales tax CA is going after. If you work in CA more than 20 days over the year in my company, they are starting to withhold CA income taxes from you. It is going to affect me because my company (large engineering firm with gov't contracts) has a presence there and I travel out there a lot (I live in another southwestern state and not in CA). For 2011 I will have to file state taxes in 2 states -- what morons. Time to look for another job.

CA is going after anything and anyone for tax money since they have zero fiscal discipline and couldn't manage their way out of a paper bag. What a f@#$ed up state.
<rant off>

LEAVE AMAZON ALONE!!! it's one of the best things on the internet..... I say increase alcohol and Tobacco tax. Yes I am perfectly fine with people paying premium $$ to poison their bodies.

capr said,
LEAVE AMAZON ALONE!!! it's one of the best things on the internet..... I say increase alcohol and Tobacco tax. Yes I am perfectly fine with people paying premium $ to poison their bodies.

I concur

capr said,
LEAVE AMAZON ALONE!!! it's one of the best things on the internet..... I say increase alcohol and Tobacco tax. Yes I am perfectly fine with people paying premium $ to poison their bodies.

or legalize cannabis.
money saved on the war on drugs + if we taxed it = some experts estimate more than $14 billion

Phuk0ff said,

or legalize cannabis.
money saved on the war on drugs + if we taxed it = some experts estimate more than $14 billion

+1

Phuk0ff said,

or legalize cannabis.
money saved on the war on drugs + if we taxed it = some experts estimate more than $14 billion

thats right more money and less death a violence

Phuk0ff said,

or legalize cannabis.
money saved on the war on drugs + if we taxed it = some experts estimate more than $14 billion

$14 billion. Those experts were high.

Since it's "home grown" how would they tax it?

PeterTHX said,

$14 billion. Those experts were high.

Since it's "home grown" how would they tax it?

Wait are you questioning the government's ability to collect taxes? You're the one that is high.
Also don't you know how economy works? Companies will pop up to supply the growing and now legal demand. Thus people buying it, thus taxes.

Come on...

RedFlow said,
Hopefully this will never happen in Ohio...

why would you not want your state to get more tax revenue???.. and why punish people for running a real store..

Lachlan said,

why would you not want your state to get more tax revenue???.. and why punish people for running a real store..

I don't think you quite understand what happens here...Basically, from what Amazon has made very clear to states like California, IF they pass a law to make Amazon pay taxes, Amazon will cut ties with affiliates. This destroys jobs in said state AND the state can't make Amazon pay taxes any longer. So, in the long run the law does more harm than good cause the time and effort to put said bill in place, results in hurting businesses and jobs and no additional tax revenue. That being said, states end up hurting themselves by pulling this crap instead of putting laws into place that actually help everyone in general. The USA and its states have been mismanaging resources for many years now. They are now realizing the holes they have dug and trying to fill them by bullying companies and their citizens around. Its gotta stop honestly.

Kutster said,

I don't think you quite understand what happens here...Basically, from what Amazon has made very clear to states like California, IF they pass a law to make Amazon pay taxes, Amazon will cut ties with affiliates. This destroys jobs in said state AND the state can't make Amazon pay taxes any longer. So, in the long run the law does more harm than good cause the time and effort to put said bill in place, results in hurting businesses and jobs and no additional tax revenue. That being said, states end up hurting themselves by pulling this crap instead of putting laws into place that actually help everyone in general. The USA and its states have been mismanaging resources for many years now. They are now realizing the holes they have dug and trying to fill them by bullying companies and their citizens around. Its gotta stop honestly.


to me it sounds like amazon is being the douche here.. so what your saying is the government should not stand upto corporations because they could be mean back.. i dont know why people dont want to tax all people and companies the same... if they dont tax them every small business in california will lose jobs because they cant compete with a company not being taxed... think about it, all brick and mortar stores will fail because how can they compete against a free and non taxed company.. california should look out for the physical stores instead of an internet company because when **** hits the fan real stores stay and internet companies will be gone with the wind..

sorry for my views but as a recent macroeconomics graduate i believe that taxes need to be a level playing ground or inefficient incentives will ruin the economy for everyone..

Lachlan said,

if they dont tax them every small business in california will lose jobs because they cant compete with a company not being taxed... think about it, all brick and mortar stores will fail because how can they compete against a free and non taxed company.. california should look out for the physical stores instead of an internet company because when **** hits the fan real stores stay and internet companies will be gone with the wind..

A local company might not be able to compete on price, but how is that any different than WalMart coming into your small town and putting Bob's Hardware Store out of business? In fact, the state is pulling in less sales tax in the WalMart case because the prices are lower. If Bob sells a hammer for $2, but WalMart sells it for $1, the local government's making 50% less in sales tax on that hammer.

In addition, there's more to a business than competing on price. Sure, Bob's Hardware Store can't sell the hammer as cheap as WalMart, and sure, Amazon might have the same hammer for $1 with no sales tax which puts WalMart at risk. But local stores should be able to offer better services to entice users to buy from them. Perhaps Bob's Hardware Store offers design ideas when you buy from them. Perhaps WalMart offers a "replace your hammer for free if it breaks" service. Whatever it may be, cost is not always the #1 factor for customers. It is for some people, obviously, but not everyone.

Lachlan said,

why would you not want your state to get more tax revenue???.. and why punish people for running a real store..

Why do people have this crazy patronage to physical local stores? I never understand it. If Amazon is doing a better job then let them do their better job. People will still go to local shops if they want to. Jobs are made either way.