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Different Rules

There are a few basics principles that limited government conservatives can agree to; taxes should be low, spending should be restrained, government should not encroach upon personal liberties, the markets should be free and open, and elected officials certainly shouldn’t be pick winners and losers in the marketplace.  Yet recently, many conservatives have been forgetting this last principle and advocating for the Federal government to let online giant Amazon.com play by different rules.

At issue is whether online retailers who have facilities in states have to abide by the same rules as every other local business.  Amazon.com, in an attempt to improve their delivery and distribution system, is building regional shipping and distribution centers.  In order to protect the favorable tax status it enjoys in nearly every state, the company has been feverishly lobbying for tax exemptions.  In sum, Amazon is using the government to further protect their competitive advantage over brick-and-mortar stores.

What exactly is this competitive advantage?  Amazon is able to provide an average of 7-10% discount on the items it sells over local competitors because it has steadfastly avoided collecting local sales taxes.

A recent agreement with California Governor Jerry Brown provided Amazon with a one year sales tax exemption in exchange for reinstating many of the state’s affiliates and allowing time for the Federal government to act.  The company has sought similar, but lengthier deals in other states.  Just yesterday, Tennessee Governor Haslam announced a tax deal which hands local retailers a government-imposed disadvantage to the direct benefit of Amazon.

The tax deal announced by Gov. Haslam disadvantages local retailers for two full years and three holiday shopping seasons.  While some claim that Amazon will provide 2,000- 3,000 badly needed jobs, a recent study cited the potential cost as being the loss of 8,500 jobs across the state as small businesses are unable to compete with Amazon and shut their doors.

An opinion released last week by Tennessee’s Attorney General echoes the decisions made by California and Arkansas: when locating in a new state, a company must abide by the same rules as other local retailers.  The attorney general’s opinion further states that “the state cannot waive requirements to collect sales taxes on items sold in Tennessee without specific legislation being passed by the Legislature.”

Amazon has shown that it is both willing and able to collect sales taxes at the point of purchase, just like every other state retailer.  Yet, they continue to fight for and receive government protections which keep the playing field unlevel for local businesses.  Amazon’s sales tax exemption has seriously penalized its competition, which is mostly smaller, locally-owned retail shops.  It has hurt job creation and economic growth, resulted in government superseding market and consumer preferences, and left Main Streets barren across the country.

With nearly 20% of the country unemployed, we caution against supporting any additional burdens on job creators.  However, it is important that we do not misapply this principle and provide unjust government subsidies to one company to the detriment of other businesses.  Consumers, not the government, should determine a company’s success.

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