(Update: Amazon advertising has been restored to this blog after a one-month boycott, part of the necessities of doing business on the Internet, but this blog remains of the opinion that Amazon should stop shirking its tax responsibilities and stop penalizing associates based on location).
Imagine a business that never pays taxes to the state. Then imagine one day the state tells that business that yes, they too, have to pay taxes just like everyone else. Roads, police, public schools, hospitals, and municipal government all needs to be paid for. Instead of agreeing to support the public in a time of rising deficits, the business fires its employees and moves offshore to another state.
There you have Amazon.
Illinois has just become the latest state subjected to Amazon's growing list of blackmailed states that it is pulling business operations out of in order to avoid charging sales tax for its local sales. To do so, they have fired all 9,000 of their Amazon Associates in the state. Only New York, too large to lose, has not been subject to this policy- New York's sales tax is instead being challenged in court. CNET reports on the latest development:
The Internet retailer notified its affiliates in Illinois yesterday that it would sever their business relationships after Illinois Gov. Pat Quinn signed into law a bill that would require in-state affiliates to collect state sales tax on purchases made by Illinois residents. Affiliates place ads for retailers on their Web sites and get paid when customers make purchases via the ads.
Amazon, which has opposed similar efforts in other states, informed its some 9,000 Illinois affiliates in a letter that it would terminate the program on April 15.
Even Roger Ebert has been fired. Ebert's Amazon tweets were downright annoying (good riddance), but I have a feeling the sudden firing also impacted a few sales associates who were not making money through a newspaper column, television show, book and film royalties and personal appearances.
This blogger does not live in Illinois and was not personally effected by the policy. But as protest I will be removing all Amazon-related ads from the main page of this website for a month and replacing them with advertisements advising the public about Amazon's efforts to blackmail state governments on the sales tax issue.
This blog will also be adopting the position that other states should begin to charge Amazon sales tax, too. Yes, I know, it is inconvenient to pay any taxes, sales tax included. But there is no reason why Amazon should be freed from an onus that every brick and mortar business has to face (and mom-and-pop Internet operations that can't afford to play musical states).
“It’s a time-honored custom to not pay taxes,” Susan Combs, the Texas comptroller, told the New York Times. “A lot of people try not to, but it’s up to the state to make sure that there’s tax fairness.”
Meanwhile, with state governments in New York, Texas and elsewhere clamping down on Amazon, Amazon is pressuring Congress to create new loopholes so it can avoid fulfilling its fiduciary responsibilities. California could be next on the list- Amazon is threatening to fire all California affiliates if California institutes an online sales tax that encompasses the retail giant.
Ebert to his credit wrote on the new sales tax, "There's a movement to protest that law, but I haven't joined it. I think it's a fair law. Let's face it. Illinois needs money even more than my web site... I feel a certain relief that I can no longer post Amazon links after April 15. I have a real job and a real life, writing for my site and helping to produce 'Ebert Presents' on public television. I don't have the time to plunder Amazon for links I think might sell. Also--well, it wasn't dignified."
The Seattle Times writes:
... But we do not approve it continuing to dodge this tax. Amazon is taking an irresponsible position.
Amazon is essentially a mail-order retailer. These have been around for more than a century. When they sold across state lines they did not charge sales tax because no federal law made them, and because of the paperwork in calculating the tax.
All that was fine as long as sales taxes were tiny and mail order was not a significant competitor to free-standing stores. And that has changed. Amazon is a giant. It has helped drive hundreds, and maybe thousands, of bookstores out of business. The Internet retail industry already has a cost-of-real-estate advantage over free-standing stores. It should not have a tax advantage as well. On its face, such an advantage is wrong.
Last year, Farhad Manjoo wrote in Slate:
Unless you live in Kansas, Kentucky, New York, North Dakota, or Washington state, you'll pay no sales tax on many purchases from Amazon. (There are exceptions for goods that other merchants, like Target and Dow Jones, sell through Amazon.) This gives Amazon a huge—and largely hidden—price advantage over most other national retailers...
So, is Amazon's tax-free status unfair? Of course it is. As Mazerov points out, Amazon has physical operations in 17 states in which the company and its employees enjoy the fruits of local taxes—police and fire protection, roads, hospitals, and other infrastructure that make its operations possible. Yet Amazon skirts tax collection in most of these places through clever legal tricks. For instance, it has incorporated its warehouses and Web site as separate legal entities in order to argue that it doesn't really have a presence in Nevada, Texas, and other states. The Kindle offers another example of that strategy—the e-book reader was developed at Lab126, an Amazon office based in Cupertino, Calif. But that office is actually a legal subsidiary, freeing Amazon of collecting any taxes in California.
One note of warning for online shoppers: Even if Amazon doesn't collect taxes from you at the point of purchase, you're still likely responsible for paying taxes on your items. That's because most states impose a "use tax" on goods purchased from out-of-state retailers. Technically, then, if I buy a $1,000 laptop from Amazon, I'm supposed to pay a $90 use tax when I file my taxes to my home state of California at the end of the year. I've never done this, and I bet you haven't either—almost nobody does, because states have no good way to enforce use tax collection.