Senate approves equal collection budget amendment

Senate approves equal collection budget amendment

I’ve written many times about equal collection legislation.

What that would be is federal legislation that would result in large internet retailers (like Amazon) collecting sales tax at the time of sale on purchases in states where they do not have a nexus (essentially, a physical presence, but a sales force counts in addition to buildings). That would make your purchase from an out-of-state retailer seem more similar to your purchase from a brick-and-mortar store: sales tax would be collected when you made your purchase.

It’s very important to realize that this is not a new tax. Generally, purchasers are supposed to pay those taxes (they may be a “use tax” at that point) on their annual state taxes, the same time they pay they income taxes.

We do that every year (I’m still working on our taxes for this year), and it’s been a bear in the past. We have to go through our internet purchases, figure out whether or not taxes were collected, then figure out which purchases are taxable in our state (not all purchases are…e-books delivered electronically, for example, are not subject to sales/use tax in California where I reside…but e-books on a CD would be), then pay one big lump sum.

I was quite happy when Amazon started collecting and then paying the sales tax for me on purchases. That makes it far easier than doing it myself.

However, it is likely that the vast majority of people do not pay those taxes. The states don’t (currently) have a way to know about those purchases, so it’s hard for them to enforce the payment. Oh, I assume they can sock it you for penalties and fees if they catch it on an audit, but that’s an expensive thing to do.

So, people have been introducing equal collection legislation for some time, which would compel the collection (although it’s a bit complex).

How do you think Amazon feels about that?

They are for it…big time.

In 2011, Amazon Vice-President Paul Misener testified before Congress in favor of it, and you don’t send a top executive to do that if you don’t mean it.

Why would Amazon support the company having to collect taxes, therefore raising the bottom line that the consumer pays at the time of purchase (but not the bottom line overall for that consumer, if they properly pay their use taxes later)? Isn’t it more expensive for them? Doesn’t it cut into a competitive advantage?

Yes and yes.

However, if it doesn”t happen federally, then states start passing all kinds of “Amazon laws”, that have different rules and different processes. That’s more expensive.

Amazon already collects sales taxes in a lot of places (the state of Washington, of course, but also a lot of places outside the USA), and has repeatedly said that it doesn’t significantly hurt them.

What they don’t want is to have to do it a whole bunch of different ways.

That suggests that equal collection is inevitable in some form or another, so Amazon is trying to get it into the best form for them.

Now, I need to say that this amendment doesn’t make it law. There is a law under consideration called the

Marketplace Fairness Act

and a vote will likely come on that fairly soon.

Will it pass?

Well, the amendment passed handily, 75 to 24…bilateral support.

It’s being sold by some groups as making a “level playing field” for brick and mortar stores and e-tailers, but of course it doesn’t. It’s still more convenient to shop online, for example, and it’s still possible to get something in a brick and mortar store more quickly (although not by much).

One of the reasons it has support?


Remember, this is money that taxpayers should already (according to the law) be paying. If they start paying it, that will put more money in state coffers, which in turn makes things easier on the feds.

For the Congresspeople who are staunchly against new taxes, this is not a new tax. No one will owe an additional penny in taxes, as I understand it…it’s just that (I would guess the vast majority of) taxpayers will pay more taxes.

It’s not going to save main street. As a former retailer (including having been a bookstore manager), I’ve written about that many times, too. 🙂 You have to make the buying experience such that your customers are willing to pay more money than they would online. You can not sell in a brick and mortar more cheaply than you can online and make a profit. You have literal overhead, and more payroll per sale, and shoplifting losses in a way quite different from an e-tailer. You have to appeal on other bases, and then you’ll survive…and thrive.

As you can imagine, there has been some coverage of this…although I think the issue has been going on for long  enough that the sharpness of any protests have dulled.

I think that this

Forbes article

gets it right, but this

cnet article

doesn’t make it clear. They say, for example, that “The U.S. Senate voted overwhelmingly today to endorse levying Internet sales taxes on American shoppers…” says in their definition (which I am briefly excerpting):

“verb (used with object)

5. to impose (a tax): to levy a duty on imports.”
They are not imposing a tax: they are changing the point in the cycle at which an existing tax is collected, and changing who has to do the collection and submission from the consumer to the seller.
If the MFA (Marketplace Fairness Act) passes, how will affect you?
It probably won’t affect you on e-books delivered electronically, unless your state already has a tax on those. Oh, it’s worth saying…why don’t they tax those? Remember that what you buy is a license to read the book, which is like a contract…you aren’t buying a physical object. Generally contracts are not subject to sales tax.
It might affect you when you purchased an EBR (E-Book Reader), tablet, or accessory from Amazon. Again, it wouldn’t add sales tax, but you would have the sales tax collected at the time of sale.
I think it’s probably pretty obvious here that I’d like to see this passed…it would simplify my life. 🙂 However, I would be interested to hear what you think about it, particularly if you think it should not be passed (and why). Feel free to let me and my readers know your thoughts by commenting on this post.
This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

One Response to “Senate approves equal collection budget amendment”

  1. Man in the Middle Says:

    The main reason for this not having passed already has been the inability of those working on it to find a way to implement nationwide sales tax collection in a simple enough manner for small shops to do so afford-ably. Amazon will be fine with thousands of different sales taxes varying by ZIP code or even within a ZIP code. They’ll pay the price to develop the needed app and then have a competitive advantage over a smaller competitor like the local bike shop where I help out part time, which also sells nation-wide, but has no conceivable way to figure out who owes what sales tax.

    Presumably, once this becomes law, that will be a service the shop has to pay for, kind of like the cut credit card companies already get off every on-line sale. But I suspect the net effect will be to further boost the Amazons over small niche market competitors, only because in the end nobody was willing to agree to even the tiniest simplification of sales tax rules to make calculation more feasible for the little guys..

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