From The Wall Street Journal:
President Donald Trump criticized Amazon.com Inc. on Thursday, lashing at the e-commerce giant over the taxes it pays, its use of the U.S. Postal Service and its impact on brick-and-mortar retailers.
“I have stated my concerns with Amazon long before the Election,” he wrote on Twitter. “Unlike others, they pay little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the U.S.), and are putting many thousands of retailers out of business!”
. . . .
Shares of Amazon slid on Wednesday after a report that Mr. Trump is “obsessed with Amazon” and had explored ways to curb the company’s growing dominance. Mr. Trump also has personally attacked Amazon founder and Chief Executive Jeff Bezos. Mr. Bezos also owns the Washington Post, which has covered Mr. Trump’s White House aggressively.
. . . .
It isn’t the first time the company has faced Mr. Trump’s criticism. In December, Mr. Trump called for the U.S. Postal Service to charge Amazon more to deliver its packages. In December 2015, Mr. Trump, then a presidential candidate, wrote on Twitter that Mr. Bezos’s ownership of the Washington Post enabled him to “screw public on low taxation” of Amazon. “Big tax shelter,” he wrote.
. . . .
Analysts have long estimated that the Postal Service is cheaper for Amazon to use than carriers such as FedEx Corp. and United Parcel Service Inc. In 2013, Amazon started taking most of its packages directly to the Postal Service.
As it grew, Amazon gained a competitive advantage by not collecting sales taxes in states where it lacked a physical presence.
. . . .
Now, as the company has moved toward faster deliveries and established a nationwide network of distribution centers, it collects sales taxes in all states that charges such taxes. However, in many cases it doesn’t collect sales taxes on products sold by third-party firms using its platform.
Amazon also supports federal legislation that would allow states to charge taxes on out-of-state retailers. Congress hasn’t passed such a law.
Link to the rest at The Wall Street Journal
PG will note that a US Supreme Court case titled Quill Corp. v. North Dakota, held that a state that charges sales tax cannot require that a seller located outside of the state collect sales tax when it all the seller does is take orders and use the postal service or a common carrier to ship products into a state.
Under Quill, a business has to have a nexus with a state for the state to have the power to require the seller to collect sales taxes. A place of business located inside a state’s boundaries is the most common type of nexus.
To the best of PG’s knowledge, Amazon has always collected sales tax wherever it has a physical presence, relying on the Quill decision, and sometimes voluntarily collecting sales taxes in locations where it might not be required to do so under Quill.
When the ruling was made, it was a particular help for out-of-state individuals or small businesses in that the various states each have their own sales tax rules and rates (including rules exempting some products from sales taxation) and calculation of the appropriate sales tax rate would be an onerous burden for these businesses, adversely impacting interstate commerce. Computer software has generally addressed this problem and can calculate appropriate sales taxes based upon the recipient’s shipping address.
Among other abuses, a state could potentially structure its tax laws to impose a higher sales tax rate on out-of-state sellers than it imposes on in-state sellers.
Under current law, whenever an individual or company purchases products or services from an out-of-state vendor that doesn’t collect sales tax, the purchaser is supposed to pay a Use Tax which is equivalent to the sales tax the purchaser would have paid through an in-state vendor had the purchase been made from that vendor.
Needless to say, most individuals and small businesses neglect to pay a use tax when they purchase from a seller that is outside of a state. To the best of PG’s knowledge, absent a state tax audit of a business or individual, states haven’t figured out a way to efficiently collect use taxes from forgetful taxpayers.
Since TPV is not a political blog, PG respectfully requests that comments about President Trump that don’t relate to sales and use tax policy be posted elsewhere
All of what Trump said about Amazon is factually wrong. But so what? That is not what this fight is about.
This is a deck measuring contest between Bezos and Trump. Pop some corn and watch the show.
Sean Connery said it best.
Let’s not forget the real reason Amazon is a target:
Bezos.
Of course Bezos is the target. He chose to jump into a political fight, and this is how the game is played.
An ongoing fight.
Most smart people run away screaming from political catfights.
Bezos is a smart guy but right now I can see two decisions he’s made coming back to haunt him. Not reining in the WP vitriol is the one that’s relevant here.
There is a great line in the Game Of Thrones.
“When you play the Game of Thrones, you win or you die.”
Mostly die.
In painful ugly ways.
Fact checking the charges:
https://www.nbcnews.com/business/business-news/president-trump-right-about-amazon-here-s-reality-check-n861176
“Trump claims Amazon is paying little to no state and local sales taxes in some places. He is likely referencing the fact Amazon doesn’t collect state sales tax from third-party sellers in parts of the United States. In some cases, those sellers are required to collect the tax.
Additionally, Amazon collects sales tax in the 45 states that require it. However, there is a patchwork of regulations at the local level that dictate whether or not taxes are collected and if so, whether it is the job of Amazon or the third-party seller.
Sound confusing? It is. Amazon has expressed its support in the past for federal legislation to create a uniform plan for collecting sales online, but there has yet to be movement on that front. ”
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“Amazon ships millions of packages around the U.S. each year, but Trump’s claims that the retailer is unfairly using the United States Postal Service and causing “tremendous loss” is incorrect.
The USPS is losing money, but delivering packages has been the bright spot in its annual financial report. Last year, mail volume declined by 5 billion pieces, but the number of packages increased by 589 million — some of which is certainly attributable to Amazon.
Amazon’s partnership is reviewed each year by the Postal Regulatory Commission, which requires the agreement be profitable for the postal service.
It’s also worth noting that Amazon doesn’t use the postal service the same way most people and small businesses do.
Instead of relying on the postal service to move parcels across the state or country, Amazon relies on its network of fulfillment and sortation centers to get everything ready and then deliver the parcel to the post office that is closest to the customer. The postal service then takes care of the last mile or so, making sure the order gets into the hands of the customer. ”
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President Trump Right About Amazon? Here’s A Reality Check
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BUSINESS
Is President Trump right about Amazon? Here’s a reality check
Trump says Amazon’s use of the United States Postal Service is “causing tremendous loss” to the country, but the numbers say otherwise.
by Alyssa Newcomb / Mar.29.2018 / 6:36 PM ET
A combination photo shows Amazon CEO Jeff Bezos, left, and U.S. President Donald Trump at the White House in Washington, DC.Shannon Stapleton; Jonathan Ernst / Reuters
President Donald Trump stepped up his attack on Amazon on Thursday, firing off a tweet that accused the internet retail giant of having a detrimental effect on the U.S. economy.
Trump claimed the retailer was not paying its share of state and local taxes, was putting retailers out of business and was sucking much-needed resources from the United States Postal Service.
Amazon declined NBC News’ request to comment on the tweet.
Related
President Trump is going after Amazon and Jeff Bezos, again
Amazon has long been Trump’s favorite corporate punching bag on Twitter, and this is not the first time the president has laid into Amazon regarding taxes, jobs, and its use of the postal service. However, the tweet comes one day after Axios reported that Trump wants to “go after” Amazon, despite reports there are no current plans to enact new regulations or taxes against the retailer.
The news rattled investors. Amazon shares dipped 4.4 percent on Wednesday amid fears of regulation and general volatility in the tech sector brought about by Facebook’s data privacy scandal.
Taking the president’s tweet at face value would be incorrect. When it comes to Trump’s statements about Amazon, there’s a bit more to unpack.
STATE AND LOCAL TAXES
Trump claims Amazon is paying little to no state and local sales taxes in some places. He is likely referencing the fact Amazon doesn’t collect state sales tax from third-party sellers in parts of the United States. In some cases, those sellers are required to collect the tax.
Additionally, Amazon collects sales tax in the 45 states that require it. However, there is a patchwork of regulations at the local level that dictate whether or not taxes are collected and if so, whether it is the job of Amazon or the third-party seller.
Sound confusing? It is. Amazon has expressed its support in the past for federal legislation to create a uniform plan for collecting sales online, but there has yet to be movement on that front.
In a memo on Thursday, Lloyd Walmsley, a Deutsche Bank analyst, said the “ship has sailed’ when it comes to quibbles over Amazon collecting state sales tax, a practice the company enacted last April.
“In a way, we think charging sales tax has been a boon to Amazon because it now has extensive fulfillment facilities close to consumers such that it can lead the way in offering faster and more reliable deliveries,” he wrote, according to CNBC. “Whether Congress enacts a special tax on Amazon, simply because President Trump wants it, remains to be seen.”
IS THE UNITED STATES POSTAL SERVICE BEING RIPPED OFF?
Amazon ships millions of packages around the U.S. each year, but Trump’s claims that the retailer is unfairly using the United States Postal Service and causing “tremendous loss” is incorrect.
In a December tweet, Trump said the USPS is losing “many billions of dollars a year” and should be charging Amazon more money.
The USPS is losing money, but delivering packages has been the bright spot in its annual financial report. Last year, mail volume declined by 5 billion pieces, but the number of packages increased by 589 million — some of which is certainly attributable to Amazon.
Amazon’s partnership is reviewed each year by the Postal Regulatory Commission, which requires the agreement be profitable for the postal service.
It’s also worth noting that Amazon doesn’t use the postal service the same way most people and small businesses do.
Instead of relying on the postal service to move parcels across the state or country, Amazon relies on its network of fulfillment and sortation centers to get everything ready and then deliver the parcel to the post office that is closest to the customer. The postal service then takes care of the last mile or so, making sure the order gets into the hands of the customer.
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WHERE ARE ALL THE RETAIL JOBS GOING?
Then there’s the question of how Amazon is affecting U.S. retail jobs. Trump has previously accused Amazon of hurting retailers. “Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!” he tweeted.
In reality, while brick and mortar retail may be struggling, Amazon and the e-commerce sector has more than made up for the job losses, according to a report from the Progressive Policy Institute.
“We found that the e-commerce sector added 355,000 jobs from 2007 to 2016 — more than enough to compensate for the 51,000 jobs lost in the general retail sector,” the report said.
Additionally, wages and salary payments to e-commerce employees increased by nearly $18 billion from 2007 to 2016, with the same payments in general retail increasing by less than $1 billion, according to the report.
Amazon has created more than 200,000 jobs in the United States, said the company investor relations team. ”
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Let’s not forget the real reason Amazon is a target:
Bezos.
Bezos runs Amazon.
Bezos personally owns but doesn’t run tbe WP, which is virulently anti-Trump. Since Bezos doesn’t rein in tbe WP he is presumed to support its campaign, ergo he’s an enemy.
Trash talking Amazon depresses the stock and is supposed to hurt Bezos.
More realistically it moderates the “irrational exhuberance” of some investors. Bezos might even be thanking the prez.
I do as much shopping as I can outside of Tucson city limits. No, I don’t bother paying a “use tax” when I cross the limits coming back.
The BIG upside for consumers to have Amazon packages delivered by USPS is when they are stolen! An Amazon package delivered by Amazon and stolen is just a misdemeanor. When delivered by USPS, we can report the stolen item and if the thief is caught, then it’s a felony. This is especially good as a police report can be filed and items are replace more easily/quickly on Amazon’s side, I’ve noticed.
Just my 2 cents of experience.
I always love how everyone refers to Amazon “paying” sales tax. Just to be clear, companies don’t pay sales tax. The customer pays sales tax. Companies remit it, acting as unpaid bookkeepers for the various state governments. And it can be complex. Washington state, for instance, allows the cities, counties, AND the transit zones to tack on additional taxes that must not only be correctly tagged and remitted (In WA, if you mail the product, you must charge based on where the customer lives). This means the company has to have some sort of reference that knows whether each specific address falls within one of those zones. This is not easy or cheap. And Washington state is not the only state that does this.
I have no idea what companies who sell purely digital products do about this since they may not ever see their customers’ physical addresses.
If you go to your Amazon account page and select your orders, your digital orders (it’s a tab) — at least on mine, it shows no taxes paid on any given order.
A lot of digital content on Amazon in licensed. That’s not the case for all digital content.
Credit card validation uses zip codes attached to the card.
Lots of online payment pages ask for the billing address (or at least the zip code) as well as the shipping address. If the two aren’t the same it triggers extra scrutiny.
For digital they probably use the billing address though some places track the incoming IP address. This is most common with streaming video.
I do not give my credit card to most places. If they don’t take Paypal, there’s a good chance they won’t get my business. Too many places have crappy security. And that includes big stores.
Heh, and until they are treated as a bank and have to abide by the same rules banks do, I’ll avoid paypal.
I know of a fellow writer that paypal suspended his account for months for no reason (or at least they refused to tell him), only to reopen it (again with no reasons forthcoming on why it was ever closed in the first place.)
At the time he had several thousand dollars in his paypal account, an account people could no longer pay him through –
nor could he pay people (a couple of artists) for their work – until paypal decided to reopen the account.
(Why, yes, I do happen to trust Amazon with my banking info more than I would paypal. 😉 )
YMMV
I only make payments through them. They don’t get to sit on my money. And the idea that you can’t pay people without paypal is myopic. It may not be very high tech, but there’s the old fashioned method of writing a check and mailing.
The point is, however, that I’m not scattering my credit card info to dozens of sites. Not two months after I refused to give my credit card to Home Depot for them to refund an online purchase (paid for via paypal), Home Depot was hacked. So while paypal has it’s issues, I have no doubt they take security very seriously because that’s a major component of their only product.
That would be because they’re just a brand/division of eBay. Their other products get different branding.
If the government really objects to AMAZON using USPS, they can afford to expand their own inhouse shipping arm.
Or go buy DHL or whatever.
Even UPS.
USPS needs Amazon more than Amazon needs them.
Virginia has an AMZN “nexus” (love your use of the word, PG!), hence my AMZN orders are taxed. No biggie to me except for the terrible service of the USPS, but that’s another topic. Where are the drones?!
The NYT story described the issue as being tax from third-party sellers on Amazon which is about 50% of their sales. I guess I don’t understand why that tax isn’t being collected from the seller when they account for their sales on tax reports. Thinking back to my own sales of ebooks and purchases of audiobooks, I don’t charge tax nor pay it for either. I believe that’s because they are considered rentals rather than ownership.
Alec – If the third-party sellers aren’t required to pay the sales tax, it makes financial sense for them not to do so. Even if computer programs can calculate the out of state sales taxes, why bother with the time and hassle involved if you don’t have to do so?
Besides, what has New York done for a third-party seller in Montana (which has no sales tax)? A Montana seller pays the state and local taxes it is required to pay under Montana law and correctly concludes it has paid enough taxes.
If the Montana seller advertises online and uses UPS, Fedex or the USPS to deliver products to New York, the shipping companies don’t collect or pay sales tax on the value of the products sold from Montana. As a matter of fact, unless there’s something illegal inside that package, the shippers don’t care or know what’s inside the boxes they deliver or how much the buyer paid for the contents.
I’ll note Amazon and its third-party sellers are not alone in this behavior.
There are some very large (and price-competitive) camera stores located in New York and New Jersey. These stores mention that they don’t collect sales tax for buyers outside of NY and NJ prominently in their advertising.
I can think of no reason a guy in Montana would want the NY state government to even know he exists.
I can think of several where he would want them to *forget* he exists. 😀
Doesn’t the Postal System devote a lot of marketing money to convincing people to use them as that very thing?
Isn’t that sort of what they *do*? Deliver objects?
I’m confused by that. I thought delivering things was their raison d’etre.
Although for me, I do wish that the “Trash Day” system from “Lucifer’s Hammer” was in place: the mail man comes once a week with the accumulated junk mail that you place directly in the trash. The rest of the week you get real mail. Next best thing to getting no junk mail at all.
Well, I walk about 30 feet to the mailbox, and 30 feet back. The recycle bin is on my way back. The only thing that gets into the house is one grocery flyer.
Personally, I think that if a small business can’t be or remain competitive on its own, it’s pointless to “protect” it from failure.
Smells like a cost accounting approach vs a financial accounting approach. Load the venture with a full overhead allocation and it is a loss. Fence it off and consider only the marginal costs associated with the venture, and it makes money.
The profit maximizer fences it off. But, the government agency will face a huge political problem if there is a demonstrated difference in treatment of users.
It’s easy to make the political argument that other users are subsidizing the fenced off venture. It’s hard to explain why the fenced off venture is the best approach.
Assuming Amazon pays the same rate the USPS charges everyone, I see no foul. Assuming they pay a negotiated rate that the USPS charges only high volume customers, both parties agreed to it, and no foul there either.
As I’ve two brothers that deliver the mail, the words from the USPS is that they ‘love’ Amazon using them.
There are special rates if you’re shipping enough, but those rates were there before Amazon and were being used by other large companies.
There’s no legal law they can use against Amazon that won’t hurt other companies as much – if not more.
“Assuming Amazon pays the same rate the USPS charges everyone, I see no foul.”
It may not be a foul, as the USPS wasn’t tricked into signing the agreement, but according to this report on Seeking Alpha Amazon pays a flat rate 50c per package whether its a flyweight DVD or a 30lb pack of dog food.
https://seekingalpha.com/article/4157601-amazon-com-dog-stock-without-hidden-government-subsidy
The USPS also doesn’t deliver the package over long distances, as it does with first-class mail or parcel post. ‘Last mile delivery’ is a different beast from traditional mail order.
Amazon is paying the USPS to take packages from local post offices to the delivery address. That’s it.
So yes, a flat fee is about right for this limited service.
Here’s an explanation from critics of the deal:
“About Parcel Select
Since details about NSAs are typically kept secret, one can only speculate about the Amazon deal. But thanks to retired postmaster Mark Jamison, who went sleuthing through the dockets of the Postal Regulatory Commission back in late 2013, when the Amazon NSA was being reviewed, some information about the deal has come to light.
Though heavily redacted, as is usual with NSAs, the documents Jamison found in the PRC docket revealed that Amazon’s Sunday deliveries used Parcel Select, not the speedier Priority Mail we one might think would be necessary for Sunday delivery.
Parcel Select is a workshare program that provides the Postal Service’s lowest-cost ground shipping option. It’s also the means by which FedEx and UPS use the Postal Service for “last mile” delivery of their packages. The big mailers, consolidators, and private shippers presort the parcels and deliver them to the Destination Delivery Unit (DDU) or another entry unit from where they are often delivered in a surprisingly speedy way.
Parcel Select generally takes two to nine days, but if the shippers get the parcels to the DDU by a certain time — Early Bird DDU — the Postal Service can often provide same-day delivery. Regular DDU — dropping off the parcels after the carriers have left — usually means next-working-day delivery.
For orders placed on Friday, then, Amazon just has to get the parcel to the DDU on Saturday to be reasonably certain of Sunday delivery. That’s about as fast as Priority Mail but much less expensive for Amazon, since under the workshare system, Amazon can do the presorting itself in its giant warehouses, where non-union workers are paid far less than USPS employees. The deal also means that the Postal Service must depend on its lower-paid CCAs, since it couldn’t give Amazon a low price if it had to pay career carriers to work Sundays. ”
http://savethepostoffice.com/we-deliver-amazon-postal-services-new-priority/
Note that the big gripe is who performs the work, not the process or the cost.
Have you seen those priority mail boxes at the post office? If it fits it ships for the price on the box, be it the USB stick I sent to a friend because it was too thick for an envelope, or the same box filled full of lead fishing weights. The USPS might think it all balances out – if that story is actually true.
As to the rest of that Seeking Alpha blog, if Trump kills the type of deal Amazon is using with the USPS, it will also kill the deal with a lot of other companies – and in turn hurt those companies as well as the USPS.
Parcel Select existed long before Amazon signed up with USPS. 2011, to be precise:
https://www.logisticsmgmt.com/article/usps_introduces_parcel_select_regional_ground_service
If anybody is interested, these are the terms of the lightweight workshare version.
https://ribbs.usps.gov/shipproductsservices/documents/tech_guides/PSLWUser.pdf
Might be useful to authors selling pbooks via their own website.
Amazon recently agreed to collect sales tax for the bankrupt state government of Puerto Rico though they have no physical presence on the island and no obligation to serve as tax collector. It is seen as a goodwill gesture.
They do sell a lot of product there and especially books after Borders closed and B&N never saw fit to do business there. (The two Borders stores were very profitable and the mall operator housing the bigger of the two offered to buy it lock, stock, and employee contracts but the creditor BPHs refused. It is now a high traffic P.F. Chang’s. Amazon picked up the slack.)
Drop the income tax and substitute a national consumption tax, and the problem goes away.
A sales tax is a consumption tax.
A sales tax is a consumption tax.
Correct. The scope and implementation of the consumption tax, and how it substitutes for other taxes is what would allow the problem to go away.
Of course, there would be side effects.
Desirable in some eyes, naturally…
…less so in…others… 🙂
That’s what the politicians in Germany said. Now they have an income tax for certain brackets, as well as an ever-creeping VAT. It wasn’t so bad when it was 10 percent, but now its 20 percent and climbing.
Somehow the old taxes never completely vanish. They just get buried under new ones. Odd, that.
Germany, like other European countries uses both a VAT and income tax. That is just a recipe for increasing taxes. The proposed consumption taxes replace all other federal taxes.
But not state or local ones.
For a lot of people, those are the real pocketbook assassins.
Of course, the solution there is to vote with your feet. If you can. It’s one of the reasons retirees leave their lifelong communities to go to Florida or Texas.
Correct. State and local taxes are the business of states and localities. But, collection is the problem. Let states piggyback on the fed consumption tax with a tax equal to what their citizens pay. Vendors send in one check per month with a list of sales per state. Municipalities don’t get to play.
It solves the state’s tax collection problem but imposes a financial burden on the consumer. Sales/consumption taxes are a regressive flat rate tax that negatively impact the middle class and working poor harder than upper income earners/consumers.
Burden on the consumer? That’s where all taxes eventually fall. But the consumer would no longer be paying income tax, social security, or Medicare tax. No federal tax would be deducted from his pay check, and he would file no federal tax return. Nor would employers be withholding tax and sending it to the feds.
Sales taxes as currently implemented are certainly regressive. But that is a function of the implementation.
Consumption tax proposals include a prebate that eliminates tax for many, and makes the entire system progressive.
Problem is, government couldn’t hide the total tax burden by piecemeal-ing it the way they do now.
And capturing all the money they need for income redistribution and vote buying on top of the proper government functions would require a sales tax on the order of 100% or more.
Depending on the implementation, base, and prebate levels of the consumption tax, it ranges in the 22-28%. Whatever it is, everyone would know exactly what it is. (There are also two ways to calculate the percentage.)
It’s too much to get into the details here, but anyone interested can follow it by searching for Fair Tax. It’s an awful name for today, but was chosen before all the calls for people to pay their fair share.
IF and it is an enormous if, a floor were put on small businesses, sole proprietors trying to sell on the internet, say “If you do less than $10,000 business/year” you were exempt, I could see overturning Quill.
As it stands, I don’t think the states’ attempts will garner enough revenue to offset the lost small-business income and greatly increased bureaucratic salaries and enforcement costs.