31 March 2011

Paying Dues

The battle to get you to pay sales tax on out-of-state purchases continues, with increasing success.

One obvious question: Why would you ever want to pay more tax? Everyone has limited personal funds to spend on books and things. If you can save sales tax, why not?

Off the top of my head, some good reasons:

One, sales tax pays for schools, roads, libraries, other important things you use or need. Two, if you don’t pay that tax you are hurting people who live and work in your own home area. And the people who depend on them.

The bigger the purchase the grander the temptation. Here in Mendocino County you save 8.25% on your purchase of pantaloons, wrist watch or books. It is good to save money, but that does not make it ethical, moral, or right.

Very small increases in sales – or losses – spell success or failure for local stores. Have you counted up recently the empty store fronts in your part of town?

Sandy Torkildson of A Room of One’s Own bookstore in Madison, Wisconsin, figured out that if a substantial number of her regular customers would agree to buy five more books in the coming year, she would have the wherewithal to sign a long and more expensive lease. They did pledge, and she did renew successfully.

Even such a small effort – just buy a few more things locally – can make a huge financial difference to any store, especially a low-margin, independent bookstore. Shop locally, help your favorite stores survive.

It’s like when someone offers to repaint your house or build a garage. They can do it more cheaply if they don’t pay good wages and employment taxes. If they do the right thing you will pay more. To me, it’s worth it for everyone’s well-being and peace of mind. If you don’t appreciate honest outfits, paint your own house, Mr Selfish.

Two states this month passed “sales tax fairness” legislation. When signed into law, Arkansas and South Dakota will require out-of-state retailers with “online affiliates acting as sales agents” to collect and send in sales tax on orders made by state residents.

The laws in these and other states vary, but in general they’re calling Amazon and other’s bluff.

Some California politicians and opinion makers have long advocated for reform. One LA Times columnist wrote, “Regardless of whether you favor raising taxes ... at least we should all agree that taxes already owed should be collected.”

California Assemblywoman Nancy Skinner said “We’ve got the wholesale support of big retailers and small mom-and-pops. California businesses are finally fed up.”

The NY Times editorialized: “It never made sense to exempt online retailers from collecting sales tax... it's ridiculous.” According to the newspaper, Illinois is losing an estimated minimum of $150 million a year in uncollected taxes and California more than $300 million a year.

Online giant Amazon.com is actively fighting the sales tax recovery movement. Amazon already has disassociated itself from its associates and closed warehouses in Colorado, North Carolina, and Rhode Island because those states sought to recover lost sales tax. Now that Texas has demanded that Amazon.com pay $269 million in uncollected sales tax, Amazon has threatened to leave that state.

According to the money advice site The Motley Fool, Amazon “had gross revenue of more than $12 billion in the past year, which could translate to several hundred million dollars in sales tax revenue” just from Amazon alone, not counting the myriad other companies that avoid collecting sales tax, such as EBay.

Texas loses an estimated $600 million a year from online sales, according to their comptroller's office: “We regret losing any business in the state of Texas, but our position hasn't changed: If you have a physical business presence in the state of Texas, you owe sales tax.”


The “five more books” pledge

Inc.com (formerly Inc Magazine) has helpful hints for online retailers who DO want to collect sales tax:

Transcript of an excellent podcast from the Center on Budget and Policy Priorities (“Amazon is especially aggressive about not collecting sales tax. In fact, it only collects sales tax in five states. But, Amazon or its subsidiaries have a ‘physical presence’ in 17 states.”)

Booksellers testify on the subject

The Boston Globe on sales tax


Raven Deerwater said...

On the reverse side of the coin, Californians are required to pay sales tax on out of state purchases -- it is called use tax, and it is supposed to be reported on your year end tax return (if you have not already previously
filed a sales and use tax return with the Board of Equalization). California consumers who do not pay use tax may be saving money, but they are doing so illegally.

Anonymous said...

Very well stated Tony, many Americans have trouble accepting social
responsibility especially when it appears to affect the pocketbook. Yet, as
you point out, "saving" that relatively small amount adds up to strained
social services and fewer local jobs.
Thank you,

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