Bezos: Attempts To Collect State Sales Tax On Amazon Sales Is Unconstitutional

from the won't-stop-'em dept

For quite some time now, we've covered how various states have tried to avoid laws that say mail order companies don't need to collect sales tax in states where they have no staff (while individuals are supposed to self-declare and pay that tax, almost none do). The main target has been Amazon, with various states pushing to get Amazon to pay taxes anyway. Amazon has taken a hardline with many of these states, even announcing plans to move subsidiaries out of Texas if it kept on trying to collect sales tax because of those subsidiaries. The latest, found via Slashdot, is that Jeff Bezos is claiming that such attempts to collect sales tax are unconstitutional without Congressional approval:
And in the U.S., the Constitution prohibits states from interfering in interstate commerce. And there was a Supreme Court case decades ago that clarified that businesses — it was mail-order at that time because the Internet did not exist — that mail-order companies could not be required to collect sales tax in states where they didn’t have what’s called “nexus.”

And that’s a very clear decision.
This is, of course, entirely accurate. Of course, Bezos also points out that Amazon would be perfectly happy with Congress stepping in and creating a sales tax system that works across states. There's been an ongoing effort for years, called the Streamlined Sales Tax Initiative, which tries to align all of the states and their sales tax practices, to avoid every company from having to follow 50 different sales tax laws. Bezos notes that Amazon would support such an initiative:
Our point of view on this is that we should simplify the sales tax system, and we’ve been consistent on this for about 10 years. It’s called the Streamlined Sales Tax Initiative. I think 22 or 23 states have signed onto it. Because the right way to fix this is with federal legislation. That’s where it can be fixed properly.

Sales tax collection is very complicated. And, you know, we’re no different from big chains of retailers — they don’t collect sales taxes in states where they don’t have nexus, either. So everybody is following the same rules. And I don’t think our customers would say, “Why don’t you just optionally collect the tax? I know you’re not required to do it, but aw, go ahead.”
This is actually a pretty big issue. It makes sense that companies shouldn't have to collect sales tax in states where they have no employees. Not only does it create a massive bureaucratic nightmare (especially for smaller e-commerce players), but it actually acts as disincentive to sell into those states. On top of that, the point of the sales tax is supposed to be about supporting the local infrastructure for those retailers (roads, and such). But if you have no local presence, there's a much weaker argument that such taxation is needed. Still, I have no doubt that eventually sales tax will be standardized at the federal level in some format or another, just because the government can't resist a chance to tax -- especially a tax that can be seen as regressive, like a sales tax.

Filed Under: interstate commerce, jeff bezos, sales tax, states
Companies: amazon


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  1. identicon
    dig.photographer, 1 Jul 2011 @ 12:34pm

    Re: Mail Order and Internet sales tax

    Last couple of thoughts... when I buy stuff off the internet overseas, will we have companies in the UK, France, Germany, China... all collecting sales tax too? If they don't have to because they have no presence in the state, then neither do companies in the US. Wonder if we're just giving big companies yet another reason to figure out how to move out of the US... there are already 61 other countries with less corporate income tax... Wonder if NAFTA could be leveraged here... shipping might tick up a dollar or two from Canada but there would be no overhead / infrastructure like there is trying to keep straight state sales taxes... maybe these states can figure out more ways to motivate companies to move jobs out of the US :-)

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