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Amazon, Tennessee, Bill Haslam, and a national sales tax.

By: Moe Lane (Diary)  |  July 7th, 2011 at 07:00 PM  | 

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(Full disclosure: I am an Amazon.com Affiliate for Maryland.)

Glenn Reynolds noted this apparent contradiction in what Tennessee Governor Bill Haslam’s position actually is with regard to having Amazon.com collect sales tax: is the Republican Governor for it, or against it? I say ‘apparent’ because there isn’t one, really; there’s just not enough context.

Basically, the position that Haslam is taking is that the state of Tennessee trying to impose an Amazon tax would probably wreck ongoing negotiations between the state and Amazon.com when it comes to getting a couple more job-creating distribution centers built in-state (which it probably will). Haslam also thinks that a national, standardized system for sales tax is both necessary and proper:

[Haslam] said Tennessee is already losing between $300 million and $500 million a year on untaxed Internet sales — a growing number since the states and Congress have been unable for more than a decade to agree on a “streamlined sales tax” process enabling online retailers to collect taxes easily for the nation’s thousands of state and local taxing jurisdictions.

“It’s not going to begin eroding the state’s tax base; it already is. Something has to happen nationally. The whole streamlined sales tax is a big deal, and I’m more than willing to play a leadership role,” Haslam said. “It has to be addressed on a national level or we’re going to keep playing these kinds of move-around games.”

What Haslam is clearly referring to here is the Streamlined State Tax Initiative (SSTI), which is pretty much as advertised: it’s a drive to get the federal government to create an unified, (and hopefully uncomplicated) sales tax standard. Haslam supports such an initiative… and guess what? So does Amazon.com. CEO Jeff Bezos has made it clear that his company endorses the SSTI, and that the company has done so for years. What Amazon objects to is the notion of doing it piecemeal: whether you think that this is due to legitimate constitutional concerns, or merely an unwillingness to build over fifty different set of taxation guidelines* into the software, is of course your privilege.

The point is that Haslam – and Amazon.com – are both taking a position that is a bit too nuanced for the rather simplistic, rather Manichean worldview being promulgated by the unlikely alliance of Democratic-controlled legislatures**/big-box brick-and-mortar retailers like Wal-Mart***. There are a couple of obvious reasons why conservatives may be legitimately concerned with increasing the power of the federal government with regard to this issue, or indeed any issue involving taxation… but it’s still an internally consistent position to take.

Moe Lane (crosspost)

*All subject to change without notice.

**Which are mostly desperate to find enough money to keep paying into the sweetheart deals that they made with Big Labor.

***Which are mostly not happy that somebody is doing to them what they did to the smaller brick-and-mortar retailers.

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  • http://charlemagne-the-hammer.blogspot.com/ DerKrieger

    I work at the Wal-Mart Home Office and am often appalled at the positions the company takes to further its own interests in spite of the impacts on its employees, customers, shareholders and American citizens in general.

    1. Co-signing a letter to Obama with Andy Stern
    2. Supporting swipe fee limitations
    3. And now, Unternet taxes

    Mr. Sam would be disappointed in much of what his company does.

  • http://charlemagne-the-hammer.blogspot.com/ DerKrieger

    “Internet” taxes

  • Stinger808

    … the internet may need to be an “unternet”.

  • travelguy

    “merely an unwillingness to build over fifty different set of taxation guidelines”

    Clarification – it may be 50 sets of tax guidelines, but that represents ten of thousands of taxing entities, each with their own rates and rules. And no, figuring out what rates apply by zip code isn’t sufficient. You’d have to go down to the zip+4.

    It’s complicated enough to figure out what taxes should be applied by store location, now they want businesses to figure out what tax should be applied by the purchaser’s location. That’s a couple orders of magnitude more permutations. Imagine how things would be if you walked into a store and checker asked what your address was so they could charge you “your” tax instead of the store location’s tax?

    Then there’s the issue of authority. States clearly have the right to tax their own residents as well as those individuals in that state. By what authority does California direct a company with no presence in California to collect taxes? Simplified tax or not, the Supreme Court doesn’t seem to think they do. Quill talked about a physical nexus, not the complexity of the rate. If states can reach across borders, imagine how that will evolve: Furnituremart – we want you to charge our citizens our tax rate on those $2000 sofas. Not that smaller rate your state charges.

    The bottom line is that every almost state has a “use tax” law on the books. The fact that they can’t collect that tax from their own citizens in a cost effective manner doesn’t mean they get to force an out of state business to do it for them.

  • travelguy

    Just for grins, I picked New Mexico as one of t he least populated and presumably least complex states in the country.This is what I found:

    Approximately 200 different sales tax districts with rates that change twice a year. The tax districts do not align with zip codes.

    Within the tax code, there are almost 20 pages of exemptions and deductions. Some depend on who is purchasing, some depend on what the intended use is. Some depend on where within a taxing district the sale takes place. Some are based on the line of business the company is in and how long they have been resident in the state.

    Just a few examples:

    Weed killer or seed sold for use on a farm is tax exempt, but for use in a back yard is not.
    A shovel sold for use on a farm is taxed at ? the rate for non-farm use.
    Purchases on a reservation are tax exempt unless they are sold to non-Native Americans.
    Sales to film production companies, regardless of location (the latest fad).
    Sales for resale within the state, but only if you have a resale certificate from the state.
    Qualified food sales. (An oldie but goodie. ?Groceries? are non-taxable, but the definition of what constitutes a grocery is different in every state.)
    Government entities of any type are exempt.
    Non-profits, but only if they are registered with the state.
    Contact lenses, eyeglasses (frame and lens glass) sold to ophthalmologists and
    Optometrists, but not to consumers.
    Anything reimbursed by Medicare or Medicaid
    501C charitable organizations are exempt from taxes on items purchased for resale, but only for two events a year.

    And on and on and on.

  • travelguy

    Coming up on those back to school tax holidays!

    Clothing is sales tax exempt, but only between midnight Friday and midnight Sunday, but only for items that are staple in nature and cost less than a certain amount by category. No tax free Air Nikes for you!

    Computers are exempt, but only certain configurations and dollar amounts and with certain peripherals. Can’t have business computers exempt now.

    And on and on and on.

    By the Constitution, interstate commerce is the sole domain of the federal government and the US Congress could easily solve this “problem” by implementing a national sales tax. Of course the odds of that are slim to none, so instead the states try to disguise this as a “fairness” issue.

  • GregInFla

    And that “some” I am spending is what the state guvmint and local guvmint and the feds decided I could keep from what I earned! How many chances should they have to get my money? My purchase at Amazon did not place any burden (roads, security, etc) on my state or local guvmint. I did not drive on a state road to the store, require protection as I drove and shopped, etc. I placed zero burden in making that purchase, so why do they need to tax the transaction?

    And the only time we tax “the rich” in this country is when they die. (Feds tax income, not wealth.) Okay, maybe just the stupid unprepared wealthy.

  • edintexas

    Thanks for pointing out what should be obvious to everyone, everywhere – but is not.

  • Change Jar Conservative

    Why is it that we can’t seem to squeeze a dime’s worth of conservatives out of seventy cents worth of Republicans in TN.

    If ever there was a state where the tea party needs to take over a GOP apparatus existed, it is TN.

  • plwinteregg

    Kudos to travelguy on the analysis of NM’s taxes. I live in NM, and even we can’t figure out what is taxable and what isn’t. To make things worse, this technically isn’t a ‘sales’ tax, but a Gross Receipts Tax (GRT). Easiest explanation is to think of it as a mini-VAT.

    But I digress. This whole issue is being raised by an unholy alliance of greedy state bureaucrats and politicians, and a number of large brick & mortar retailers. To make the statement that there is an ‘erosion’ of revenue is absurd. Today, we have internet sales, but interstate commerce is not new. Sears got its start well over 100 years ago with the mail order business.

    The key to remember is that any politician who purports to support their state adding an ‘Amazon’ tax is not doing so to benefit their state (it, in fact, has been shown to potentially reduce tax revenues). They are doing so to benefit a few select large corporations and their own reelection coffers, period. The only other explanation being that they are exceedingly stupid or easily duped.

    If the feds want to create a simple national method, fine. As an e-commerce business owner, I have no issue with that. But anything beyond VERY simple will squelch one of the few great drivers of new business development we have.

  • karatetraining

    that passing a federal sales tax would decrease or replace the state sales tax? All the passage of a federal sales tax would accomplish is to further bleed the middle class with yet another tax. I don’t care what the big corporations support or what the politicians say we need, they do not have my best interests in mind.

    Government needs to stop looking for “new revenue” streams and cut back on their spending. BTW, we should never allow government to talk about “revenue streams” since that implies they generate income (ie: revenue) and apply some honesty and force them to talk about “new Tax streams” which is always what they mean.

  • travelguy

    Do I believe that passing a federal sales tax would decrease or replace the state sales tax?

    Absolutely not. That’s why although I think sales taxes are less evil than income taxes, I don’t support a VAT. (VAT is just a complicated sales tax that makes it far too easy for governments to hide how much you are paying in tax).

    plwinteregg has it exactly right. The attempt to charge sales taxes (even “simplified” ones) on interstate transactions is just a way for states to take even more money and large corporations to benefit at the expense of small businesses.

  • plwinteregg

    …one or the other. Either tax the income, or tax the consumption. To do both borders on immoral.

    Having lived for a short bit in a country that had no income taxes, I have to throw my hat into the consumption tax ring. The government simply has no business knowing my business, and income taxes are too tempting to try to engineer behavior.

    I vote for a simple, straightforward, flat national consumption/sales tax.

  • travelguy

    Was going to post this as a diary, but I can’t see how.

    A conversation overheard at the checkout register of a large retail establishment shortly after the so-called ?Amazon tax? was implemented?

    ?Hello, sir. May I see your driver?s license, please??

    ?That?s OK ? I will be paying with cash today.?

    ?Sir, I still need to see your driver?s license to confirm your address.?
    ?Why do you need my address? I?m just trying to purchase a shirt with cash.?

    ?Sir, sales tax is now based on where you live, not where you purchase. I have to enter your address in the computer in order to know what tax to charge you.?

    ?Wait a minute! You mean that person who was just in front of me paid a different sales tax rate than I will??

    ?I couldn?t say, sir. There are over 200 different sales tax rates in this state depending on where you live.?

    ?Well that?s just crazy. Anyway, according to your ad, this weekend is a tax free back to school sale. Shirts shouldn?t be charged sales tax.?

    ?I?m sorry, sir. That only applies if you reside in tax districts 02-611, 10-214 and 29-973. Some tax districts chose not to participate. May I see your driver?s license to see if you qualify??

    ?How do you know what tax district I live in??

    ?I couldn?t say, sir. Tax districts are not the same as zip codes. The computer will look it up.?

    ?Well, I live in Arizona, so it doesn?t matter.?

    ?Oh no, sir! Arizona said it wasn?t fair that their citizens could shop in our state and take advantage of the lower tax rates or tax free weekends, so they insist that we charge you the higher Arizona rate. Didn?t you notice your hotel and car rental were also being charged at the Arizona rate? By the way, how is that stadium surcharge working out for you??

    ?Does that mean if I live in a low tax state that I?ll pay my state?s lower rate when I visit a higher tax state??

    ?Oh, sir! You are too funny!?

    ?Forget it. I?m not going to buy anything.?

  • Ned Reck

    Asleep-at-the-wheel Alexander… then Cavin’ Corker… now we got us the Tax-slammin’ Haslam…

    What in the wide world of sports is goin’s on this Bass-ackwards state?

    Next thing ya know… Howard Dean will come on down… put on a Heston mask… and convince folks ’round here he’s the Republican Moses…

    Sorry dang lot… the whole bunch of ‘em…

    Sure wished we had an opponant to run against Corkscrew Corker. His sorry votes has done ’bout stimulated our state economy to death. Believe he’d vote for a big tax increase… if somebody dangled a D.C. camera in front of him.

    Ned Reck