Where Are The Consumer Advocates In The Amazon Tax Law Arguments?

Written by Evan Schuman
April 6th, 2011

Arkansas’ Amazon tax went into effect on April 1, making it the fifth state to require E-tailers with in-state affiliates to collect sales tax. The PR battle in support of such laws has been amazingly effective, especially when you factor in that the state politicians’ bosses—consumers living in those states—are the ones who will have to cough up much of the extra cash.

Never before has a tax increase—a sales tax increase, to be precise—been so easily accepted by taxpayers, with hardly a newspaper editorial or a consumer group protesting. Rightly or wrongly (OK, it’s wrongly), consumers in those states have been avoiding paying state sales tax and that’s about to end. We would have expected at least a whimper from consumer groups.

But even more surprising than the silence from consumer advocates (including newspapers and politicians seeking re-election) is the remarkably muted defense from the E-tail community, beyond Amazon. Overstock, one of the few chains to also vigorously oppose the state changes, attacked the law on Monday (April 4) in a most baffling way.

Instead of making the argument to consumers—who are both Overstock’s customers and potential customers, in addition to the bosses of the politicians they are fighting—Overstock tried turning it into a marketing promotion and made a non-consumer-friendly Constitutional argument.

Why make that argument when there is a much more compelling “the states are trying to balance their budgets by taking it out of your pockets. And these guys work for you” case to be made? Here’s what Overstock did: It said “that it will award free Club O accounts ($20 value) pre-loaded with $10 in Club O Reward dollars to top customers in states where the company canceled ad contracts because of unconstitutional Sales Tax Laws.”

Overstock’s rationale continued: “We have decided to sever our relationships with thousands of marketing affiliates in those states, take the money we would normally pay those affiliates, and use it to reward our best customers in those states. Any customer in these states who has spent more than $300 in the past year will receive a free Club O membership (normally priced at $20) and their membership account will come preloaded with an additional $10 balance. Those qualifying who are already Club O members will instead have $20 added to their existing Club O Rewards account. There are over 150,000 customers meeting this description, to whom we are in effect transferring $30 of value, for a total economic value of over $4.5 million.”

Yeah, that will turn these states right around. Amazon pulling major operations out of the state—along with a ton of jobs—didn’t do it, but this program should.

The bottom line is that, eventually, E-tailers will have to collect these taxes and everything will then even out. And that’s not even the wrong outcome. But for every month that this switch can be delayed is a month of incentives for consumers to shop online and additional profits for E-tailers. Why consumer forces haven’t weighed in yet—and newspapers that have weighed in have overwhelmingly sided in favor of the tax increase to be paid by its readers, which is stunningly adult of them and a move rarely seen in election cycles—is a huge compliment to the brick-and-mortar marketing and lobbying efforts. Sears, your NRF dues seem to be paying off.


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.