Thursday, July 14, 2011

Amazon VS the Sales Tax

The time for great face-off of brick and mortar retailing vs the online retail industry has begun! Jeff Bezos of Amazon last week said he hopes there will be a federal solution to the matter of whether the online retail industry should collect local sales taxes in the various states Amazon and its affiliates sell merchandise in. Bear in mind that retailers do not pay the tax; they merely collect and remit it to the various states they do business in. However, Amazon, in a demonstration of defiance of the new California law requiring online sellers of Amazon's size, begin to charge the sales tax to California residents and remit monthly like any other retailer in this state - has refused to do so, and is not collecting the tax from its CA customers. This means they are openly running the risk that they may be forced to pay the sales tax they should have collected, if the CA courts later determine they should indeed have followed the law.

This is no small matter. The cost to Amazon will eat into their low gross margins: the heart of their business plan. Further it is a blatant violation of the new CA law. Why is it fine for one of the largest US corporations to disobey a tax law, but a US citizen will do this at the peril of being sent to prison for tax evasion?

Amazon yesterday said it would support a referendum which it hopes to have on the CA ballot in February to impede and overturn this new law. What do you think abou Amazon's cheekiness in not collecting the sales tax in the first place, and now, openly funding a referendum in a state where they claim they have no "nexus" (basically sufficient business presence to warrant  a claim they are operating a "trade or business" there)?

We look forward to your thoughts....

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