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.

Getty
Show Hide image

Leader: The great revolt

The vote for Brexit has plunged Labour and the Conservatives into crisis.

Britain has taken a great leap into the unknown. More than four decades after joining the European Economic Community, it has turned its back on a union of 27 other nations and 500 million people at a time of profound crisis in Europe. For the European Union, which has helped maintain peace and security in Europe for half a century, it is a great blow. The shock waves are being felt across the world.

We respect the wishes of the 17 million people who voted for Leave but strongly believe it was the wrong decision. Britain will be a diminished force for good in the world, unable to influence and shape events in Europe and beyond. The UK’s reputation as a proud, outward-looking, liberal and tolerant nation has been damaged. Many Britons feel that they no longer recognise or understand their own country, while foreign nationals living in Britain feel similarly perplexed, and even afraid. Young people, who voted overwhelmingly for Remain and will have to live with the consequences of Brexit the longest, are understandably aggrieved. Yet we should not condemn those who voted for Brexit, especially the less fortunate; rather, we should seek to understand and explain.

The only good thing to say about the referendum campaign is that it is over. Seldom have facts mattered so little, and nastiness and smears been allowed to carry the day. The Leave campaign was built on half-truths, false promises and more than a whiff of xenophobia. Its leaders dismissed warnings of negative consequences of Brexit – for the economy, and for the unity and political stability of the UK – as “Project Fear”. The Remain campaign’s intention may have been to scare voters with the claims, but that does not make them untrue.

Since the result became known, the pound has tumbled to a 30-year low against the US dollar. The FTSE 250 index of shares – the best proxy for the British economy – is down 11 per cent, even after a bounce on Tuesday. This is worrying for anyone who has a pension and is near retirement. Companies that were considering investing in Britain have put their plans on hold. Several big banks are weighing up whether to shift their operations abroad. Inflation is likely to rise and economic growth to fall. A recession is looming and many jobs will be lost. And for what? A vainglorious attempt by a feeble prime minister to settle a long-burning feud in the Conser­vative Party, and to satisfy the demands of Nigel Farage’s UK Independence Party and the xenophobic right-wing press.

Investors hate uncertainty, but uncertainty is about the only thing that can be guaranteed. The breaThe vote for Brexit has plunged Labour and the Conservatives into crisis.k-up of the UK, only narrowly averted in 2014, is perhaps inevitable, with all the consequences for Britain as a world power. Scots voted to stay in the EU, and who can blame First Minister Nicola Sturgeon for agitating for a second independence referendum? Why should the Scottish people be dragged out of the EU against their democratically expressed wishes?

The vote for Brexit has plunged Labour and the Conservatives into crisis. David Cameron, who so recklessly gambled the country’s future on the referendum and will for ever be defined by his calamitous error, will be gone in September, his premiership an abject failure. His successor may well be the preposterous and mendacious Boris Johnson. Wit, ­energy and bombast are poor substitutes for truthfulness, honour and competence.

In his £5,000-a-week column for the Daily Telegraph on 26 June, Mr Johnson said that the Leave victory was not driven by fears over immigration, and the pound and the markets were stable. Both claims were false, as he well knew. His assertion that Britons’ rights to live, study, work and own property in Europe would be unaffected was equally misleading – this will have to be negotiated.

Not only are the Leave leaders in denial about the consequences of Brexit, they have given scandalously little thought to how Britain’s new relationship with the European Union might work in practice. The EU – which, as we said two weeks ago, is a troubled and failing institution – is in no mind to grant the UK any favours. Nor should it.

Mr Johnson wrote that Britain’s “access to the single market” will continue. As any of the “experts” of whom the Leave leaders were so dismissive during the campaign could have explained, for a non-member to obtain access to the EU’s single market, of the sort that Norway enjoys, it must accept freedom of movement. Perhaps Mr Johnson, who some suspect was a reluctant Brexiteer at heart, may be willing to accept this compromise if he becomes prime minister, as seems likely. Yet the majority of Leave voters will not: if it is forced upon them, their rage will make the anger that fuelled Brexit look like a child’s tantrum.

This article first appeared in the 30 June 2016 issue of the New Statesman, The Brexit lies