Amazon’s lingering tax fight
Trump’s Twitter posting comes at a tumultuous period in his ties with corporate America
SEATTLE: President Donald Trump waded into a longstanding scrap between online retailers and their brick-and-mortar rivals with a Twitter posting Wednesday about Amazon.com Inc and taxes.
And he has a point – though the Seattlebased online giant has taken steps to reduce its tax advantage in recent years – retail industry specialists say.
Amazon began collecting sales taxes on purchases in all states that levy them earlier this year, despite an exemption that allows online retailers to avoid collecting them in places where they don’t have a physical presence. But Amazon still avoids charging shoppers sales taxes when they buy from one of its third-party vendors – sales that make up about half the company’s volume.
Untaxed third-party sales might provide an advantage over brick-and-mortar retail chains, which have their own robust online operations but have to collect sales tax on all purchases in states where they have physical presences. Many large chains have stores in almost every state.
“Amazon is doing great damage to tax paying retailers,” Trump said in a pre-dawn Twitter post Wednesday.
“Towns, cities and states throughout the United States are being hurt – many jobs being lost!”
Amazon founder Jeff Bezos owns the Washington Post newspaper, which Trump has frequently attacked over its investigative coverage and editorial criticism of his campaign and administration. The president has repeatedly targeted the retailer in tax-related Twitter messages.
A spokesman for Amazon declined to comment.
Trump’s latest broadside against Amazon comes at a tumultuous period in his relationship with corporate America.
Citing remarks in which Trump equated neo-Nazis to counter- protesters, several corporate executives quit White House advisory groups this week before the president said Wednesday the groups would be disbanded.
It was unclear whether Trump’s remarks about Amazon signal his willingness to campaign for federal legislation to address online sales taxes. But any support for brick-andmortar retailers should help, said Jim Taylor, chief executive officer of Brixmor Property Group Inc, which owns open-air shopping centres.
“It’s tough to predict what may or may not happen,” Taylor said.
“Yet, there is an intrinsic idea of fairness here that appeals to most people about the collection and payment of taxes.”
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In its early days, Amazon capitalised on its status as an online retailer and built warehouses in small states like Nevada and Kansas close to big states like California and Texas. That allowed Amazon to sell goods to shoppers in those populous states without collecting sales taxes since it lacked a physical presence. As Amazon grew, its focus shifted to quick delivery, requiring it to build warehouses closer to big cities and in big states. It owes sales taxes in those locales.
Despite a 1992 Supreme Court ruling that established the precedent for exempting online retailers from sales taxes, various states have enacted “Amazon laws” to tax online sales the same way that brick-andmortar sales are taxed. About two dozen states have signed on to an agreement that allows retailers to voluntarily collect sales taxes, and Amazon is one that does so.
At the federal level, several bipartisan bills have been introduced to allow states to mandate collection of the taxes, with the most recent one re-introduced this year and endorsed by Amazon. A previous bill passed the Senate.
The sales-tax treatment for third-party merchants is the next tax fight looming for Amazon. Independent merchants that list items on Amazon’s web store pay the company a sales commission as well as fees for packing and stowing products.
States and local government lose approximately US$5bil a year in taxes from Amazon marketplace commerce because merchants don’t collect them and shoppers don’t pay them after the fact, said James Thomson, a former Amazon employee who is now a consultant for e-commerce merchants.
In many states, the burden of paying sales taxes for online purchases is on the buyer, who is supposed to list online transactions on tax returns and remit any taxes due. In practice, few shoppers do this and states don’t enforce it.
Merchants who pay Amazon to stow and pack their products don’t know precisely where their inventory is stored, since they delegate that to Amazon, Thomson said. They can pay Amazon a fee to collect taxes for them, but few are even aware of that option, said Thomson.
“Amazon has no interest in communicating this to its sellers because that means potentially higher prices,” Thomson said. “Amazon implicitly creates this problem.” — Bloomberg