Friday, July 22, 2011

Good, not great summary of Amazon sales tax issue

See Kevin Drum in his morning post.

Drum fails to mention shipping costs. When we buy online, we, not Amazon.com, pay for shipping, usually at least $2.99, mostly $3.99. To be exempt from shipping costs, we have to buy more than $25 at Amazon.com directly, not one of the used or new book or product dealers that hook onto Amazon's site. This discussion over whether to tax online retailers cannot get to the heart of things without talking about online retailers' shipping costs that are already passed onto the customer. This is not the end of the argument, however, but the beginning, and it can still lead us back to taxing Amazon purchases at least in-state.

In discussing shipping costs, we should begin by noting that brick and mortar retailers have to pay for at least some shipping before they put the products on their shelves--and presumably that is included in the price we pay. The physical store retailers, however, tend to get good shipping prices because they buy in bulk, but they pay up front for shipping, and have to hope to sell it in a reasonable time since there are less obvious (to us customers) costs of warehousing. Still, Amazon has those costs too, but can rationalize shipping/warehouse costs because they can have a facilities warehouse and send products directly to a customer's home, whereas brick and mortars have to have products housed where we shop, or at a regional facility.

Next, let's remember that we are arguing over expanding the scope of a regressive tax, i.e. sales tax, charged to customers. But I think it is wrong for us who receive products or services delivered to our home not to be subject to a sales tax simply because it is purchased through the medium of the Internet. When pizza is delivered to our home, we pay a premium and a sales tax. I don't see why we don't pay our State's sales tax if Amazon delivers to us a book from within the State in which we reside.

One or more commenters at Drum's site brings up other good aspects to shopping at Amazon, not least of which is the "Search Inside" mechanism and Customer Review sections. Still, one is a mere software code and the other is regular folks contributing book reviews for no pay. On the other hand, if we lose most of our brick and mortar bookstores, we miss true browsing. Amazon and others have not figured out how to help me find something I was NOT looking for when I enter their sites the way I find things I was not looking for when physically browsing in a brick and mortar bookstore...That should count for something in not disadvantaging brick and mortars by making them charge a sales tax, but not online retailers.

Overall, as much as I detest sales taxes, I see them as necessary to having decent state and local government services. So I philosophically favor a sales tax for intra-State purchases on line, even if it costs me.

Still, practically speaking, in CA, I'd rather lower all sales taxes and then apply them to online retailers as well, raise the top marginal income tax rate, institute an oil extraction tax that all other oil producing States have, and start a split-roll property tax where businesses pay market rates for property taxes. That would do people better than simply taxing online retailers along with brick and mortar retailers.

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