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

Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.