amazon sales tax exempt warehouses

Corporation That Paid No Tax, Got Refund Back
instant gratification same-day delivery corporate tax rate

Could Taxing Amazon Sales Crush Local Retailers?

The sales tax lets one firm destroy others, the income tax lets some escape via loopholes, leaving others holding the tax bag -- at least until reformers take a look at rents. We trim, blend, and append two 2012 articles from (1) Slate, Jly 11, on Amazon, by F. Manjoo, and (2) AlterNet, Jly 21, on tax evaders by T. Waldron.

by Farhad Manjoo and by Travis Waldron

When I buy a $1,000 laptop from Wal-Mart, the company is required to collect local sales tax from me, so I pay almost $1,100 at checkout. In most states, Amazon is exempt from that rule. For most people, then, most items at Amazon are significantly cheaper than the same, identically priced items at other stores.

In response to pressure from local businesses, many states passed laws to force Amazon to collect sales taxes (the laws do so by broadening what it means for a company to have a physical presence in the state). So Amazon fired its marketing affiliates in Colorado, North Carolina, Rhode Island, and California. It also launched a $5 million political campaign to get voters to turn back the California law. And when Texas’ comptroller presented Amazon with a $269 million sales tax bill last year, the company shut down its distribution center in Dallas.

But suddenly, Amazon has stopped fighting the sales-tax war. It currently collects taxes from residents of Kansas, Kentucky, New York, North Dakota, and its home state of Washington. After all the tax deals go into effect, the company will be collecting taxes from the majority of its American customers.

Now that it has agreed to collect sales taxes, Amazon has a new game. The company can set up warehouses the largest metropolitan areas in the nation. That way, they can get stuff to you immediately -- as soon as a few hours after you hit Buy.

Same-day delivery has long been the holy grail of Internet retailers, something that dozens of startups have tried and failed to accomplish. But Amazon is investing billions to make next-day delivery standard, and same-day delivery an option for lots of customers by making its warehouses much more efficient.
* It purchased Kiva Systems, a company that makes cute, amazingly productive “picking robots” that improve shipping times while reducing errors.
* It set up automated “lockers” in drug stores and convenience stores. If you work near one of these lockers, the company will offer to drop off your item there. On your way home from work, you can just stop by Rite Aid, punch in a security code, and get your stuff.

Currently Amazon can send me stuff overnight for free without a distribution center nearby. It’s not hard to guess what it can do once it has lots of warehouses within driving distance of my house. For $5 extra, you can have that laptop waiting for you when you get home from work. Wouldn’t you take that deal?

Physical retailers have long argued that once Amazon pays sales taxes, and its prices were equal, you’d go with the “instant gratification” of shopping in the real world. However, it takes time to get in the car, go to the store, find what you want, stand in line, and drive back home. Meanwhile, ordering something in the morning and getting it later in the day offers gratification that’s even more instant. If Amazon can pull that off, physical retailers are doomed.

To read more

JJS: Taxists need to bear in mind that taking another’s property, even for a good cause, can actually backfire. And is it success we should envy or is it how the profits were amassed that we should examine? On a level playing field, wealth could not so easily be concentrated.

Susan Ford, a senior executive at Corning Inc, told the Congress that their high corporate tax rate was putting her company at a disadvantage. However, over a four years period from 2008 to 2011, Corning was one of 26 companies that managed to avoid paying any US income taxes, even though it earned nearly $3 billion during that time. In fact, the US Treasury gave the company $4 million refund from 2008 to 2010.

Competitors headquartered in foreign countries do uniformly face a lower corporate tax rate than U.S. manufacturers, and virtually all operate under territorial systems which encourage investment both abroad and at home.

Further, the United States does, indeed, have one of the highest marginal corporate tax rates in the world. In reality, however, few corporations pay it, and the nation’s effective tax rate is far lower than the rate in other developed countries.

To read more

JJS: Taxists constantly complain about some individuals and businesses becoming rich. Taxists want to levy those successful entities. And taxists grow very annoyed when those profiteers escape the taxman’s noose.

Yet should taxists pay so much attention to the end result -- the accumulated wealth -- or pay more attention to how that wealth was accumulated in the first place? Nobody can accumulate a massive fortune by themselves, they must have the help of the government (the “nanny state”), which means they must have the help of society, of voters, and of the very taxists who’re doing all the complaining.

How do politicians make favored insiders rich? Our rulers give the elite money. Congress gives them sweetheart contracts, it gives them loans that are often forgiven, and it gives them money outright, or, subsidies for conducting their businesses. Besides giving the elite money, government also does not collect money that the rich owes. It carves out huge loopholes, fails to enforce contracts or levy fines for wrongdoing, and -- most crucially -- lets them keep the socially-generated value of land and locations.

The value of locations and commodities like oil -- the worth of Earth -- are crucial because they are the items for which society pays the most. Everybody needs them. They do not cost anything for anyone to make (the earth was here before we were). And it’s not owners but society that makes them valuable, by demanding them. Hence, if you can corral a society’s spending for oil -- as did Rockefeller -- or for land -- as does the banking cartel via mortgages, then you can set yourself up as the filthy rich elite.

Or, if you care about distributive justice, about sharing fairly society’s surplus and nature’s abundance, then you should forget about taxing the rich and instead focus your efforts on what makes people rich: subsidies, contracts, and rent. (“Rent” in economese refers to all the money that a society spends for the nature it uses.) If you redirect all those funds into the public treasury upstream, then you preclude the possibility of undue fortune downstream and can abolish taxes on persons and corporations, since there won’t be any filthy rich any more. Every cent they have will have been earned. Plus, there will be many more businesses, of human scale, less able to corrupt government. But it takes more than complaining. It takes understanding the fate of surplus in society.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

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