Should Amazon Charge Sales Tax?

Borders bookstores are closing and laying off 10,700 employees.  Bookstar closed months ago.  Record stores are almost gone.  How many other retailers are going out of business not because of the recession, but because of Internet sales?  And I have to admit I love Amazon and buy most of my books there, and when I bought CDs, I bought them mainly from Amazon.  I also buy my underwear, running shoes, pet supplies and other stuff from them too.

How can people not want to shop Amazon with it’s deep discounts and no sales tax, and if you buy $25, no shipping.  It’s a lean mean selling machine.  But is Amazon and other Internet retailers good for the economy?  My state, Tennessee, like so many others is really hurting for revenue.  If everyone bought locally the state would have more sales tax and maybe more people with jobs to pay even more taxes.

Taxes are considered satanic now, but I can’t help but wonder how much Tennessee would gain if they could collect taxes from Internet retailers.  Amazon has taken a rather arrogant approach to this – fighting states every way they can not to  charge sales taxes.  I don’t know why, I’d still buy from them if they charged sales tax, they offer deep discounts that are hard to resist.

The other thing I have to ask myself, is why am I buying more online when I should be buying less?  When I visited Borders last week I was shocked by changes I saw there, a store I’ve been shopping at for years.  It’s a national company like Amazon, so why should I feel any different about it going out of business rather than Amazon?  I think one reason we don’t pay sale tax with Amazon is because they are going to set up two distribution centers in Chattanooga, employing 1200 regular and 2000 seasonal people.  But does that offset the sale tax revenue and does it make up for all the jobs lost to Amazon’s competitors?  Isn’t this the same story as Walmart, but without the big superstores?

It’s way too hard to understand the subtle economics behind this issue, but I would love to see a well researched documentary on the subject.  I did find this video but it’s heavily bias.  I need to see an in-depth NOVA episode devoted to this issue.

Evidently, sometimes jobs are worth more than sale tax revenue, or so this article from The Tennessean suggests.  It hurts my head trying to understand this problem.  Should I feel good about shopping with Amazon, or should I not?  So Tennessee has made a deal and gets jobs instead of sales taxes, but what about all the other states that don’t get distribution centers?

I admit I have no answer for the question I asked at the top of the page.  Maybe it’s just too complex to answer.  Maybe I should just accept what my state law makers have decided, assuming they know best.  I don’t know.

Yet, I have one last thing to wonder about.  What if everyone bought everything they could online?  Besides book and record stores, what other kinds of merchandise can online retailers take away from local businessmen?  Mail order businesses have been around since the 19th century – do they show the limits of what people will buy sight unseen?  Could it be that book and record stores are disappearing because physical books and records are disappearing?

If that’s true, what’s going to happen to Amazon?  Well, they selling Kindles, MP3 songs and downloadable movies and TV shows.  If physical book and CD sales are down, then why do they need so many distribution centers?  Well, Amazon is selling other stuff.  I’ve also bought things like a HDMI cable, a Blu-ray player, computer parts, and TV antennas from Amazon, as well as running shoes and underwear.

Maybe the Amazon sales model is just progress and there’s no going back.  I still feel bad about Borders and Bookstar though.

JWH – 7/18/11

3 thoughts on “Should Amazon Charge Sales Tax?”

  1. My state, Missouri, has been discussing the whole online sales tax thing. I’m torn, of course. I love not paying those taxes and I do think they would hurt smaller business, like those people who sell hand-crafted items on Etsy and similar sites, but I do believe that it would be very beneficial if states charged sales tax on big businesses like Amazon.

    I went to a talk by one of our legislators a year or so ago and she made some statement about 80 million (or billion? can’t remember) was estimated to be lost annual to internet sales not being taxed. Either figure represents a lot of money, and tax money in particular affects my job in the mental health industry as many of our programs are funded by tax levy funds.

    As much as I love the savings of Amazon, I have always spent more money at the brick and mortar stores. I half discount memberships to both Borders and Barnes and Noble and I take advantage of coupons, so I still save a bundle and I have the thrill of shopping for myself and picking out pristine copies of the books I buy rather than relying on Amazon’s terrible packaging (at least here in MO). Even though Borders was farther away from me I probably spend more money there every year because of the amount of coupons that they send in emails. Breaks my heart that they are closing. I feel bad for the people losing their jobs and I feel bad for me. My bookstore options have now been effectively halved.

    And Barnes and Noble increased coupons over the past year because of the competition they received from Borders and I suspect that practice will diminish unless they feel it is a strategy that helps them compete with Amazon.

    Some people are of course pleased to see a chain store die because of what they did to the independents, but let’s face reality. Are independent bookstores going to suddenly come roaring back now that part of the competition is gone? Heck no. And I for one have always like big bookstores with a lot of variety and discounted prices, chain store or no. Maybe that is insensitive of me, but that is the reality and at least I am not hypocritical about my attachment to these big chain bookstores.

    Back on topic, I would somewhat grudgingly be okay if my state decided to tax my Amazon purchases. But I would be sad if they also taxed small potatoes artists who sell me cool stuff for cheap prices.

  2. I think sales tax is a matter of fairness. Why discriminate against local businesses? That just makes no sense at all.

    But when it comes to other issues, it can be complicated. When you spend less money on books, you’ve got more money to spend elsewhere. You might just buy more books, but that still supports authors and publishers.

    One thing I don’t do is buy a book at Amazon.com after looking at it in the local bookstore. If I’m going to take advantage of the benefits of buying locally, I won’t cheat them by buying it cheaper elsewhere. Still, I suspect that bookstores will disappear entirely soon enough. And the move to ebooks will only accelerate that process.

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