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.


5 Comments | Read Where Are The Consumer Advocates In The Amazon Tax Law Arguments?

  1. Tim Says:

    We have all enjoyed the benefit of tax-free shopping on line. And with more-and-more shopping being done on line and less done from brick-and-mortar shops, the states are taking a serious hit on sales taxes. Practically every state is facing serious fiscal problems, so it’s no wonder that they’re going after the online sales. And, I think it’s right – it’s time we accepted that the freebees are over and start paying our fair share of sales taxes.

  2. Evan Schuman Says:

    Editor’s Note: I actually fully agree. Was merely surprised that the “you’re taking money from my pocket” consumer hasn’t been made more forcefully. Would have expected that.

  3. BeatriceVaccaro Says:

    My opinion is that since, as you point out, there is no dispute that the consumer owes the tax (as self-reported use tax), no consumer group representative would take on that losing argument. Instead, the focus continues to be on the issue of fairness – whether it is fair that only brick & mortar merchants collect the tax; and whether it is fair to ask a remote retailer to calculate and collect the tax.
    Today large internet retailers easily manage millions of items for sale at any given moment, and even the smallest internet retailer can calculate accurate shipping rates to every corner of the country in a blink of an eye. It is no longer too difficult to keep track of a few thousand local jurisdictions. I also think that perhaps consumer groups are shying away from the debate because it is local community services that are losing out on uncollected sales tax as more shopping shifts online. I am surprised though that the Performance Marketing Association and other groups that support the affiliates have not been coming out in favor of Streamlined and federal legislation that would require ALL online retailers, not just those who sell through the affiliate model, to collect sales tax.

  4. A Reader Says:

    You wrote “It is no longer too difficult to keep track of a few thousand local jurisdictions.”

    As you no doubt know, jurisdictions are a part of the pain that is sales tax. Figuring out how to accurately calculate sales taxes in a screwed up state like Texas is a complete nightmare. See for one only slightly heinous document. In case it makes too much sense, here’s a direct quote from their Comptroller’s helpful local sales and use tax bulletin:

    “There are situations where businesses are bisected by
    two local taxing authorities. A portion of the business is physically located within one jurisdiction, while another portion is located outside of the jurisdiction. In those situations, the location of the cash register determines which local sales taxes are collected.”

    Which tells me that if I were to send a package to an address that straddled one of these borders, I’d theoretically have to charge tax based on which side of the building the product would be placed. It’s ridiculous.

    And the things that are taxed at different rates give entire analytical departments fits. In Pennsylvania, clothing is excluded from sales tax, but a swimming suit is not exempted because it is normally worn while engaging in sports. In Minnesota, where clothing is also exempted from sales tax, no distinction is made between a swimming suit and a pair of shorts, as both are considered clothing.

    I understand what your TaxCloud service and the Streamlined Sales Tax Governing Board is trying to do. But there’s no automated identification of items that will tell me if I’m properly collecting tax on each of them. A human still has to categorize each and every item.

  5. Tom Says:

    Perhaps if consumers felt that governments at all levels were using tax dollars intelligently and in the best interests of the taxPAYERs there would be less resistance to paying taxes. However, rather than violating existing laws consumers would be better served by voting ‘professional’ politicians out of office and voting for people who will change the spending priorities and patterns.


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