Amazon lobbies to pay more tax in the US

Yes, you read that right.

The American Senate has passed – with a fairly overwhelming 70-24 majority – an early version of the "Marketplace Fairness Act", which aims to give states a route to collect sales tax for goods sold online. That progress will please one of the bill's most surprising supporters: Amazon.

In the US, sales tax for mail-order purchases is supposed to be paid in the state of the buyer, not the seller. This means that the retailer doesn't charge any tax, and the customer is supposed to declare that they owe a certain amount to their state's tax collector. In practice, of course, this doesn't happen, and purchases from out-of-state retailers are essentially tax-free.

Naturally, retailers who do have to pay sales tax – both brick-and-mortar stores and online retailers shipping largely to their own state – are unhappy with this state of affairs, as are the people in charge of trying to plug the multi-billion dollar shortfall that occurs. But the support of Amazon is less obvious: after all, the company takes advantage of tax planning measures worldwide, and ships a huge number of things across state lines, avoiding tax in the process.

But Amazon has fought this battle before. Until a few years ago, it stubbornly resisted paying sales tax, but in Autumn 2011, it switched course. Slate's Farhad Manjoo reports that:

Over the course of the next couple years, Amazon will begin collecting sales tax from residents of Nevada, New Jersey, Indiana, Tennessee, Virginia, and on July 1, it began collecting taxes from Texans. It also currently collects taxes from residents of Kansas, Kentucky, New York, North Dakota, and its home state of Washington.

As Manjoo points out, the reason for the shift is pretty clear. If you're trying to deliver things within a week or two of their being ordered, it makes sense to centralise your operations in one state to minimise your tax take. But if you're trying to deliver within a day or two – or even an hour or two – of the order, you're going to need physical locations in every state, and most major cities. And if that's the case, then you've given up your tax advantage – so it makes sense to get your competitors to give up theirs, too.

So the Amazon of today can't use the sales tax loophole, because it's not shipping out of state any more. And if it can't have it, no one else can either.

That's going to be a shock to brick-and-mortar retailers, who might have hoped that more equitable tax treatment would make competing with the company easier. But fundamentally, they are having the same problems that HMV had: Amazon isn't impossible to compete with because it avoids tax; it's impossible to compete with because it has no real desire to make a profit.

Forcing the company to pay tax may raise its prices slightly; but they will still be lower than almost any competitor could match. And the loops it jumps through to avoid that tax – like not being based in state – are things that competitors can use to their advantage. In other words, small retailers of the world: be careful what you wish for.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Quiz: Can you identify fake news?

The furore around "fake" news shows no sign of abating. Can you spot what's real and what's not?

Hillary Clinton has spoken out today to warn about the fake news epidemic sweeping the world. Clinton went as far as to say that "lives are at risk" from fake news, the day after Pope Francis compared reading fake news to eating poop. (Side note: with real news like that, who needs the fake stuff?)

The sweeping distrust in fake news has caused some confusion, however, as many are unsure about how to actually tell the reals and the fakes apart. Short from seeing whether the logo will scratch off and asking the man from the market where he got it from, how can you really identify fake news? Take our test to see whether you have all the answers.

 

 

In all seriousness, many claim that identifying fake news is a simple matter of checking the source and disbelieving anything "too good to be true". Unfortunately, however, fake news outlets post real stories too, and real news outlets often slip up and publish the fakes. Use fact-checking websites like Snopes to really get to the bottom of a story, and always do a quick Google before you share anything. 

Amelia Tait is a technology and digital culture writer at the New Statesman.