Amazon (NASDAQ:AMZN) CEO Jeff Bezos has painted himself into a corner regarding the sales tax.
The biggest Internet retailer recently offered to hire as many as 7,000 workers at two proposed California distribution centers if the state postponed — for two years — efforts to collect Internet sales taxes. State officials roundly condemned Amazon’s naked political aggression. Shareholders should condemn Amazon’s move for another reason: its stupidity.
By offering to add jobs for an Internet tax deal, Amazon has left itself open to being asked to repeat its offer by state and local governments around the country asking for the same deal. How many distribution centers does it need? Surely not one in every congressional district.
California officials have not been swayed by Amazon’s offer. Assembly Speaker John Perez is quoted by the Los Angeles Times as saying, “We’re not going to allow the notion of jobs that may or may not materialize dictate our position on an issue of fundamental fairness to all businesses in California.”
What gets lost in the debate over the Internet sales tax is that the Web technically isn’t tax-free. Amazon customers are supposed to pay taxes on goods they purchase on the site to the states where they live. The problem is few people ever bother to do it. With a potential $10 billion in tax revenue at stake, it’s little wonder that the idea of taxing the Internet is gaining popularity even though the U.S. Supreme Court has ruled that states cannot tax firms that lack a physical presence or nexus in their states. Legislation has been introduced to overturn the decision.
Amazon, though, has fought back hard, suing New York and shuttering a distribution center in pro-business Texas after officials presented the Seattle-based company with a bill for $269 million in uncollected sales taxes. States have argued that Amazon should collect sales taxes because they have a “physical presence” in many states because of its affiliates. In response, Amazon has cut ties to affiliates in states with “Internet sales taxes” such as California. The issue shows no signs of dying down.
“… I wouldn’t be surprised to see the whole issue land in the lap of Congress — which has been ducking the controversy for 20 years,” wrote Howard Gleckman of the Tax Policy Center in a blog post earlier this year. “That would be just the thing for anti-tax Republicans who’ll get squeezed between their governors and local retailers on one hand, and the e-tailers on the other.”
Jonathan Berr has no shares in any of the aforementioned stocks.
