Amazon tells South Carolina to Go Pound Sand

I usually have a well formed opinion about just about everything, but this one vexes me.

This week, the South Carolina legislature voted to not allow a sales tax exemption to Amazon for Internet sales to South Carolina residents. Amazon promptly halted construction on their 500,000 sq. ft. facility already in progress and removed the hiring notices from their web site.

Yes, there are states that have no sales tax, but have income tax. And some states have no income tax, but have a high sales tax. As much as most of us hate taxes (well, at least we all hate paying taxes), the states have to make money somehow.

I am actually pro-FAIR Tax, where we all pay a consumption tax of 20-something percent but have no corporate or personal income tax liability. This way, we all pay our "fair" share. If we purchase $10k per year our tax is $2500 dollars. If we purchase $1Million per year, our tax is $250K The more you make (and spend) the more you pay taxes. If you don't spend it (and assuming you don't stick it in a mattress), then that money is working and helping the economy. We all need to contribute to the well-being of our state and our nation.

(A major component of the FAIR Tax is that imbedded corporate taxes will work their way out of the supply chain, causing actual prices to fall significantly. I think that this will happen but probably not to the extent that Neil Boortz and other proponents imagine.)

Having said that, as a retailer it is my opinion that it really isn't fair for any mailorder or Internet company to get out from under the whole collecting sales tax deal. The difference in price of ordering from the Internet is partially offset by shipping costs, but there are so many free shipping deals, that this differential is negated. Internet prices are usually lower than local companies.

Here is another twist. What if I, in Virginia, purchased something from Amazon, or Zappos, or whoever, and sent it to someone in Texas. Who would get the tax? Afterall, it is a SALES and USE tax. I bought it but someone from Texas is using it.

Oh, and what about all of the personal sales on eBay? Who is collecting that tax?

Probably the only reasonable way to make it equitable for all and not a total administrative cluster would be to declare a 5% "state reimbursement fee" that is collected on ALL internet sales and sent to the state of the Sold To address. If the Ship To and Sold To are different states, then split the difference.

Gosh, I feel like King Solomon when he is about to decide who gets the baby...


Craig Hollins said…
In Aus we have three levels of govt. Federal collects income, company and sales tax, in agreement from the states and pay the states a proportion of what they collect. In an ideal world if a tax is collected in a state then it should be paid to that state but that's a different argument. The point is, there is no way you can avoid income, company or sales tax by locating to a different state.
I too am a fan of consumption taxes only but I think you'll find it has to be around 30% to completely remove the other two.
States collect all the mining royalties (very large sum of money in my state) and property taxes. Local councils (or counties as you'd call them) collect rates.
I think people are confused by the taxes, don't understand how much they pay and feel they are taxed at every turn. A single simple tax, payable by everyone with no exemptions, would significantly reduce the cost of collection, enforcement and compliance. Thousands of lawyers and accountants can be redeployed to contributing to society instead of leaching off it.
When they make me emperor...

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