Amazon SC Sales Tax Exemption Rejected: 1200 Jobs Lost

[jtbell]

The South Carolina House of Representatives yesterday rejected a bill which would have granted amazon.com an exemption from collecting SC sales tax on purchases from SC residents. In response, amazon.com has stopped construction of a new distribution center near Columbia which would have created more than 1200 jobs.

http://www.thestate.com/2011/04/28/1795776/amazon-packing-after-house-vote.html (The State newspaper, Columbia)

Amazon.com, like most online retailers, does not currently collect SC sales tax because it does not have a "business presence" in the state. The new distribution center would have changed this, hence their desire for a exemption from collecting SC sales tax.

The opposition claimed that the sales tax collection exemption gives amazon.com (and other online retailers) an unfair price advantage over local retailers who do have to collect sales tax. I tend to agree with this; however, granting the exemption would not have changed the status quo. People in SC are going to order stuff from amazon.com regardless of whether it gets shipped from Columbia or from, say, Lexington, Kentucky, which is where most of the stuff I order seems to come from. The only difference between building the center here (with the exemption) and not building it, is the 1200+ jobs, as far as the state is concerned.

 

[BobG]

This is a problem that states will eventually have to solve by eliminating sales tax and increasing income and/or property taxes to make up the difference.

Any person making online purchases, mail order purchases, etc. has an obligation to pay the sales tax regardless of whether the supplier charged the sales tax at the time of purchase (and that was true before the internet for mail order catalog purchases).

States just haven't made an effort to collect most of those taxes because:

a) For small purchases, the sales tax isn't enough to offset the cost of processing a form for each purchase.
b) For small purchases, the sales tax isn't enough to offset the cost of prosecuting a person for tax evasion (in spite of the fact that failing to report and pay those taxes is tax evasion).
c) Even if people could just pay all of their accumulated sales tax at the end of the year (which is an option in some states, I think), it would be hard for the person to keep track of each purchase they made during the year and hard for the state to check and see if they'd actually accounted for each of their purchases.

In other words, most people choose not to pay the sales tax since it's hard to pay and even harder for the state to come after them.

On the other hand, if you make a large online purchase, it's going to be a lot easier for the state to come after you for at least the sales tax on that particular purchase.

 

[AlephZero]

One day, the "land of the free" might discover what "free trade" means.

But probably not any time soon enough to seriously annoy the Chinese.

 

[jtbell]

"Bricks and mortar" chains that also sell online do charge the appropriate sales tax. I've see this with Best Buy and Sears in particular. They even get SC's county-by-county "local option sales tax" right for my county, based on the billing ZIP code that I give them. A large online vendor like amazon.com could use the same or similar tools to Best Buy's to calculate and collect state sales tax. Of course, they'd then have to pass those taxes along to the individual state tax departments, which the bricks-n-mortar chains already had to do anyway.

It would be more of a hardship for the small "mom and pop" web sites to collect and distribute sales tax for 50 states (plus various cities) if they had to do it themselves. If there were a requirement for this, I'd expect companies to spring up to take care of the details, for a fee of course.

 

[Evo]

This is a problem that states will eventually have to solve by eliminating sales tax and increasing income and/or property taxes to make up the difference.

Any person making online purchases, mail order purchases, etc. has an obligation to pay the sales tax regardless of whether the supplier charged the sales tax at the time of purchase (and that was true before the internet for mail order catalog purchases).

States just haven't made an effort to collect most of those taxes because:

a) For small purchases, the sales tax isn't enough to offset the cost of processing a form for each purchase.
b) For small purchases, the sales tax isn't enough to offset the cost of prosecuting a person for tax evasion (in spite of the fact that failing to report and pay those taxes is tax evasion).
c) Even if people could just pay all of their accumulated sales tax at the end of the year (which is an option in some states, I think), it would be hard for the person to keep track of each purchase they made during the year and hard for the state to check and see if they'd actually accounted for each of their purchases.

In other words, most people choose not to pay the sales tax since it's hard to pay and even harder for the state to come after them.

On the other hand, if you make a large online purchase, it's going to be a lot easier for the state to come after you for at least the sales tax on that particular purchase.

Here in Kansas, if you purchased anything from out of state that you didn't pay taxes on, you have to pay a tax based on your annual income on your state income tax return, unless you can prove that you were taxed. This is the first year that I've seen that.

 

[waht]

Amazon pulled out of Illinois a month ago because of this tax dispute; taking with them millions of dollars in taxes generated from ad revenues and affiliates contracts.

 

[turbo]

Here in Kansas, if you purchased anything from out of state that you didn't pay taxes on, you have to pay a tax based on your annual income on your state income tax return, unless you can prove that you were taxed. This is the first year that I've seen that.

Maine has had that for many years. It is more convenient than trying to collect receipts all year long, and sorting out which sellers charged you sales tax and which ones didn't.

 

[BobG]

Here in Kansas, if you purchased anything from out of state that you didn't pay taxes on, you have to pay a tax based on your annual income on your state income tax return, unless you can prove that you were taxed. This is the first year that I've seen that.

Maine has had that for many years. It is more convenient than trying to collect receipts all year long, and sorting out which sellers charged you sales tax and which ones didn't.

So both states have already started down the road towards converting their sales tax into an increase to income tax. And the only disadvantage is that, if you're paying a set tax based on income, you may as well make your purchases online from out-of-state companies rather than purchase locally and pay a sales tax on your purchases.

Local vendors get penalized.

Which means the sales tax on them also has to be converted to an income tax so they can compete on a level playing field as the out state vendors. In fact, considering shipping costs, local vendors enjoy a slight advantage if the sales tax is eliminated.

No sales tax is a nice perq for larger purchases. It may not be the deciding factor, but if I can find two TVs that are essentially equivalent quality and price and can buy one of them on the local military base which has no sales tax, plus a guarantee to match any off base retailers selling the same TV, then it's not too hard to decide which TV to buy and where to buy it from. And, in this case, federal law exempts the purchase from sales tax regardless of which state you live in.