American Independent Business Alliance

The Facts on Amazon.com and Sales Tax Collection (as of April 2018)

The Facts on Amazon.com and Sales Tax Collection (as of April 2018)

Many U.S. media outlets have stated flatly that Amazon.com Corporation now collects sales tax in all states requiring it. This is misleading (as explained below) and we encourage you to correct such errors if you see them in outlets you read or follow. We provide a letter to the Wall Street Journal below as an example and will gladly assist anyone who’d like us to review a draft (see our tips on effective LTEs).

The March 30 Wall Street Journal editorial “Trump Targets Amazon” (subscriber access only) says “Amazon has collected billions of dollars in sales tax in the states that require it,” which is factually accurate but obscures the truth.

Amazon still does not collect sales tax on most merchandise it sells through its “Marketplace.” Despite collecting all payment on those sales — which are then fulfilled by another business — Amazon claims collecting the taxes due is not its responsibility. According to a 2018 report by Civic Economics and the American Booksellers Association, those sales comprised 56% of Amazon.com’s sales in 2016 and are growing much faster than sales for items sold directly by Amazon. 

Furthermore, among the 45 states with sales tax, 37 also authorize additional local levies. Amazon collects only the state portion in many of these. By exploiting these two tax dodges, Amazon almost certainly collects less than half the overall sales taxes due. This anti-competitive advantage results in brick-and-mortar businesses losing sales and ultimately results in either our paying higher local and state taxes to compensate for the revenue lost or seeing public services cut.

On April 17, the U.S. Supreme Court heard arguments in South Dakota v Wayfair. The case revisits Court precedent set in 1992 — before e-commerce existed — that impedes enforcement of tax collection laws on remote sellers. Should the Court decline to update its thinking, Mr. Trump will have the opportunity to show he’s willing to back up his Tweets with meaningful action behind his Tweets. He can pressure Congress to pass the Marketplace Fairness Act and level the playing field for America’s storefront businesses.

Editor’s Note: After the problem noted above was shared with several publications, along with documentation from the Institute on Taxation and Economic Policy, The New York Times, Washington Post (owned by Amazon.com CEO Jeff Bezos) and others subsequently addressed Amazon’s non-collection of local sales taxes in many places, but framed it as if it was opinion, not fact. The Post reported, “Amazon charges state but not local sales taxes in some places, according to the left-leaning Institute on Taxation and Economic Policy …” 

So we’re now left wondering why the largest newspapers in America choose to imply political motives to facts that are easily verified. The Post story was republished in The Chicago Tribune, among others and The NY Times used nearly identical language.

 

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