Posts Tagged ‘sales tax’

Amazon.com Agrees to Collect California Sales Tax

September 11, 2011

Amazon.com has finally agreed to start collecting sales tax for California beginning 2012. Legislation enacting the agreement was passed overwhelmingly and with bi-partisan support by the California state legislature last Friday and is being sent on to the governor. Amazon.com withdrew their ballot initiative to exclude them from the requirement to collect the tax.

If old age has not eroded my memory, I believe that this struggle began in 1999 at a dinner on Fourth Street in Berkeley with representatives of the Northern California Independent Booksellers Association and Lenny Goldberg, a progressive lobbyist in Sacramento.

The booksellers’ argument; unassailable from perspectives of policy, economics, and even morality, seemed to be doomed by the powerful and implacable forces of the Internet mania of the time, and the political power of Silicon Valley. At first we were treated with a combination of condescension and contempt. But more often we were simply ignored. The democratic majority supported us and passed several pieces of legislation. But there was always unanimous opposition from the Republican minority, who saw it falsely as a tax increase and from governors Gray Davis and Arnold Schwarzenegger, who opposed it for opportunistic reasons.

There was always a modicum of support from larger retailers like Macy’s and Walmart along with the commercial shopping center interests. But they were always reluctant to get out in front of this issue until the very end.

The principle at stake was whether tax rules should be applied evenhandedly.  Paradoxically we had a profoundly conservative position; that is if you consider conservatism as being against government interfering in economic activity, in this case picking winners and losers and distorting the free market through tax policy. I never quite understood why conservatives consistently opposed this principle.

Tax policy is still riddled with special breaks for large interests, probably even more detrimental and egregious  that the Amazon sales tax issue. But it is nice to know that every once in awhile, government will do something right in spite of powerful and implacable forces. It doesn’t happen very often, but  it demonstrates that ordinary people can do extraordinary things.

Thanks California independent booksellers. Now let’s collect some of these taxes due and fix the pot holes and start hiring teachers.

 

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Amazon.com, California Thanks You for Potholes

August 11, 2011

Amazon.com ruined my day today. I was walking around Lake Merritt, as I do every day with my friend, Susan Southwick. I was approached by a dweeby looking guy with a clip board asking me to sign my support for an initiative that would allow Amazon.com to continue evading the collection of California sales tax, as they have done since their inception in 1996. The dweeby guy said that the initiative would lower taxes and create jobs. Instead of walking away, I decided that I would scream at him and proceeded to do so for 10-15 minutes. I accused him of …well, I won’t bore you….pretty much everything in the book.  I felt really great and  energized when I finally told him that I had nothing but contempt for his pathetic, impoverished, morally bankrupt life. I had a few more nuggets to tell him after that, but Susan had become embarrassed by the scene and had started briskly walking away down the path.

 

Let’s back up. Recently California passed a law requiring Amazon to hand over the estimated $83,000,000  in  uncollected sales tax revenue for 2011  and to start collecting from California customers  going forward.  A number of states have decided that it is time to have Amazon do its duty. After all Amazon benefits immeasurably from the maintenance of roads which   allows Amazon to deliver their goods to customers. The company profits  from the sales tax support of public education that creates consumers of books. And let’s not forget that sales tax help  pay for police, fire, and emergency services that give us the basis of an orderly society, without which no commerce – no civilization even — could exist.

 

 When the new California law was passed and signed by the governor, Amazon within hours cut off the thousands of “associates” in California, many of them PTAs and non-profits who direct sales to Amazon and get commissions to fund their good works. In a breathtaking exercise of shameless chutzpah, Amazon claimed that by allowing  the world’s largest online company to evade sales tax so that they can unfairly compete against local business, the state is  harming small businesses and killing jobs in California. Many of the associates who  unceremoniously had their commissions from Amazon cut off with 12 hours notice seem to be buying this argument. A classic example of victims identifying with the executioner.

 

Which brings us back to the dweeb at Lake Merritt. Not content with pulling the plug on the associates, Amazon has bankrolled a ballot measure with a sort of Orwellian name like “tax fairness initiative”. And so the California initiative process, originally created to give power to the people, once again is being manipulated by big out of state business to harm the people in  the state.

 

Let’s engage in a mental exercise. California claims that Amazon owes $83,000,000 for sales tax for 2011 alone. Let’s estimate that in the last five years Amazon has evaded conservatively $300,000,000 in sales tax collection. Here is what California could have done with the money.

 

  • Hired 3000 elementary school teachers.
  • Hired 2000 police officers
  • Funded music programs in 1000 schools
  • Fixed 3,000,000 pot holes
  • Hired 2000 university professors
  • Provided academic scholarships  for 7500 students
  • Saved the lives of 1,500,000 puppies
  • Funded 1000 homeless shelters
  • Paid for school lunches for 300,000 needy kids
  • Bought 10,000,000 books for schools and libraries (And if those books were bought from local independent book stores, it would create thousands more jobs for people who pay taxes to California. And I might add allow those stores to survive and thrive and offer a richness to local communities that Amazon cannot match.)

 

Tax fairness, indeed!

Helping small business, indeed!

More jobs in California, indeed!

 

Northern California Independent Booksellers Score Big Victory Over Amazon

June 30, 2011

the Winners

Yesterday California Governor Jerry Brown signed a bill      into law that requires Amazon.com to collect sales tax on all sales made to California customers. The state stands to collect $200,000,000 owed by Amazon for unpaid back taxes. Amazon countered by cutting off all their  California affiliates (people with those nifty click -throughs on their websites that funnel sales to Amazon).

This was a long fight, and it was pretty much carried by the Northern California Booksellers Association. Although paradoxically, they did have some –uh– bigger allies. Like, for instance, Walmart, and later Barnes and Noble.

California followed some other states in this: notably New York and Illinois.

I’ll try not to bore you too much with legal theory, but here’s the somewhat simplified back story. The controlling Supreme Court decision on Internet sales tax collection is a case called Quill v. North Dakota, decided in 1992 before there was such a thing as Internet commerce. The court ruled that under the Commerce Clause of the Constitution states could not require out of state corporations to collect state sales tax. Of course, the devil is always in the details, and the big question is what exactly is an out of state corporation. All tax experts agree that if there is some sort of substantial presence by an out of state corporation in the state, that is enough to trigger the sales tax collection requirement. Sometimes it can be as simple as teachers selling books to students from the Scholastic Book catalogue or even a commissioned sales rep wandering into the state periodically to collect some orders.

The Losers

I think this all started with a meeting of Northern California booksellers in 1999. The meeting was attended by Hut Landon, Bill Petrocelli, myself, and George Kiskadden. Also attending was a particularly supercilious lawyer from the California State Tax Board. Bill had done some pretty intense legal research and laid out his theory about “affiliate nexus”. It was pretty much the theory that New York, Illinois, North Caralina, and now California have used to justify Amazon’s tax collection requirement. The supercilious lawyer responded superciliously that tax policy is extremely complicated and should be left to the tax policy experts.  He looked at us, more in sadness than in anger, and told us it was a pity, because he agreed with our sentiments.

At the same time on the federal level, an unholy alliance of small business people, huge commercial real estate corporations, and big box stores were at work attempting to get federal enabling legislation that would accomplish the same goal. This has never happened.  But there was a national debate raging at the time, and Internet-mania was dominating public discourse.  I remember being on the same talk shows as Internet gurus who were saying that the Internet was the most important invention since the wheel (I’m  not kidding!).

Amazon had 3 or 4 arguments about why they shouldn’t be required to collect sales tax. The 2 most cited arguments were: 1)Internet commerce was a frail bird that needed to be protected from the crushing weight of sales taxes  and 2) Internet commerce was the economic juggernaut that was driving the “New Economy” and creating jobs and wealth. I liked to point out how puzzled I was about how Internet commerce could at the same time be both a frail bird and an economic juggernaut.  I never received a satisfactory answer.

The national alliance of big and small businesses needed a public spokesman who could engender warm and fuzzy feelings. This excluded the vice president of Walmart who was the key figure financing this endeavor. They decided that they needed a colorful small shop keeper and so chose me.  I remember they sent  me off to Washington to debate Grover Norquist, a truly despicable person and anti-tax nut, at the Federal Society. I had no difficulty dispatching Norquist’s shabby arguments by showing that government tax policy should not be picking winners and losers in the marketplace by allowing some favored businesses to sell tax free. It was a perfectly respectable conservative position and it was true and fair. My dirty little secret that I have never admitted until now was that my expenses for that trip were paid for with a check from Walmart.  Strange bedfellows, yes?

Anyway, this has been one of those David and Goliath stories.  In  America the Davids haven’t been having much success these days. I hope California will take Amazon’s $200,000,000 and put it back into the educational system of the state.  An educated population is a book buying population. In the long run,  it will prove a good investment for Amazon and all of us.

It’s nice to know that in this age of economic giantism, sometimes little people are still able to do big things.  Thanks, Northern California booksellers.

Fighting Against History Part 2

January 11, 2010

I used to do a lot of public speaking, and in some pretty big venues, too. I  also seemed to be on a lot of  media people’s rolodexes (yes, that is what they had back then). When they needed a quote about the virtue of local business or “bricks and mortar” stores, they could always get a good sound bite out of me. By the way, I  hated that term: “bricks and mortar”. I could spend a lot of time boring you by deconstructing the sub-texts associated with that expression. Not to put too fine a point on it, the term was condescending and cast us as historical curiosities.  I preferred to call   these stores  “community-based businesses.”  But “brick and mortar” seemed to catch on even with those of us who were  the object of this patronizing metaphor.

 I  spoke about how local bookstores, all local businesses in fact,  made for interesting public spaces. I was influenced then (and now) by Jane Jacobs’ The Death and Life of Great American Cities. It is a remarkable book, published in 1961,  and even more prophetic now than then. Jacobs was reacting against the then fashionable  theories of public planning  that emphasized urban renewal and public open spaces. Contrary to conventional wisdom,  Jacobs didn’t like “green spaces”.  She argued that the neighborhoods that work best were neighborhoods with interesting and diverse uses, neighborhoods with vibrant street life, neighborhoods designed for pedestrians. This meant then, and still means today, main streets and business districts dominated by independent businesses. There were no big box stores back then. Shopping malls were a novelty. Imagine what she would have said about the big box centers of  today with the mega-stores that are designed to overwhelm and exhaust the human spirit and that are oriented around vast parking lots. Imagine what she would say about internet retailers, that are oriented around the cubicle.

Maybe I became seduced by my own bombast, but I used to say that the marketplace had been the center of communal life since the time of the Greek Agora. And it was under threat by the internet. This was always a good point to make in  debates with  internet gurus who  thought of history as something that reached its apotheosis   with them. Cultural literacy was not their long suit. Most of them thought that the “Greek Agora” was the place down the street for Spanakopita and ouzo.

I got a call in 1999 from a Japanese journalist. He wanted to feature me in a book with writers and social commentators from all over the world addressing the meaning of internet commerce.  My article was  the only thing I ever wrote that appeared first in Japanese. But it was published in a number of languages and was read by quite a few people worldwide.  I was just looking over this article. It was called: “Warning: E-commerce May be Dangerous to the Health of Your Community.” Some of it sounds hysterical and hasn’t survived the test of time. But I think it is still worth reading. You can probably find it on-line somewhere. Here is how I summed it all up:

The Internet industry likes to talk about “revolution” and uses the traditional language of the political left to describe the changes it is making to the way America does business.   The images which it employs are invariably hip and filled with iconoclastic visual references to the youth culture.

In fact the reality of electronic commerce is quite different.  Its growth is driven by values which are more associated with the political right, or perhaps the corporate ethos of Wal-Mart:  the fetish of commodities, the primacy of Wall Street, the desire for monopoly power  and the indifference to diversity and community values.

There, internet churl. I throw down my gauntlet!.

In 2000, one of the big news stories was whether internet commerce should be taxed or, to be more precise, required to collect sales taxes payable by consumers. If you delved into the issue  too deeply, it could get pretty arcane.   It tended to turn on some badly written US Supreme Court decisions and terms of art like “nexus”. But the real issue was pretty simple. Local businesses were forced to collect sales tax. Out of state internet businesses weren’t. This gave a significant competitive advantage to these internet companies.  It all came down to this: Shouldn’t tax policy be based on a level playing field? Should the government be picking winners and losers through discriminatory tax policies?  Shouldn’t internet customers do their part in paying taxes to support the local services that they benefit from? By the way, the issue is still very much alive. Amazon.com is the largest sales tax evader in the United States.

A lot of people who didn’t like each other very much got together to try to see that internet commerce wasn’t given favored tax treatment. The group included big box stores, commercial real estate interests, and little booksellers like me. I developed a pretty high profile as a spokesperson. I suppose I had better symbolic value as a talking head than the Vice President  for Tax Administration of Wal-Mart. I got flown around the country a lot. And my reimbursement checks seemed to be coming from  Bentonville, Arkansas. Well, I guess tax policy makes strange bedfellows.

I had a really good time going around giving speeches. I debated Grover Norquist, the satanic anti-tax nut and Washington kingmaker, twice. Once was at the ultra-right wing Federal society.  I think I got the better of him. I also made it onto Crossfire and had to stand up to a withering attack by Mary Matalin.

Internet companies strenuously opposed collecting these taxes for their own reasons that had more to do with competitive advantage than tax fairness. The most errant nonsense was coming from Amazon.com. They seemed to be making two points: 1)Internet commerce is in its infancy and is a frail bird that needs to be protected from burdensome taxes. 2) Internet commerce is the juggernaut that is driving the new economy, and it shouldn’t be throttled by unpleasant things like taxes. I liked to point out at every opportunity how puzzled I was that the internet could be both a frail bird and an economic juggernaut  at the same time.

Well, of course we were right. But we still lost the war. Since the 1980’s, independent bookstores have faced a perfect storm of problems. Competition from chain stores and big box stores, competition from internet booksellers, competition from free information available on line, and now competition from e-books. I suppose we could talk about the decline of  cultural literacy as well. We’ll rail about that on another blog post.

All this brings us back to the point where we started. That is the sad thought that bookstores are not going to be around much longer.  The market share of independent stores has really tanked since the 80’s. Indies now account for about 5% of all book sales. This is a  sad statistic. Pretty much everyone in publishing who remembers will tell you that independents represented the heart and soul of bookselling. They still do, but there aren’t that many left.

Someday soon there will be a sort of “tipping point”. The world will turn to e-books with breathtaking speed.  Community bookstores, even chain bookstores, have always excelled in offering customer service or just a place with a warm feeling to hang out.  When books become simply downloadable “digital content,” then the  bookstore will go the way of the blacksmith’s shop. The game will be over.

Sure, e-books and e-book readers will offer remarkable advances in convenience of delivery and options for display. But the romance of the bookstore will be a thing of the past. It is a little like the convenience of getting to Europe in a few hours by getting sardined into the main cabin—instead of getting there on Queen Mary. Yep. It’s convenient.  But, God,  what has been lost? It’s a pity.

Audacity of Greed Part 3 – Amazon. Com and the Governor of California

July 3, 2009
 Well, apparently Amazon.com’s threat to shut down their affiliate programs in states that are cracking down on Internet sales tax evasion is succeeding. On July 1, Governor Schwarzenegger vetoed the budget bill that included the provision for Internet merchants to be required to collect the same sales taxes that are required of local merchants.

In doing so, the Governor made an additional comment addressing specifically  his position on sales tax collection on Internet commerce. He spoke of Overstock.com, a shabby, bottom-feeding  Internet company which, like Amazon.com,  is also threatening to cut off their California Affiliates.

Here is what he said:

“Governor Schwarzenegger Remains Committed to No New Taxes, Announces Overstock.com Will Continue to do Business in California

 

“After passing the largest tax increase in California history, it makes absolutely no sense to go back to the taxpayers to solve the current shortfall – that’s why yesterday I vetoed the majority vote tax increase passed by the legislature. With unemployment at an all time high, we should be doing everything we can to – keep jobs and create jobs – in California. That is why my Administration immediately contacted Overstock.com when we learned of this news and, I am pleased to announce Overstock.com has reversed its decision and will continue to do business with affiliates here in California. I will continue to fight to keep jobs and businesses in California.”

 

The Governor has really jumped down a rabbit hole on this one.

 

The Governor’s statement implies that his opposition is due to his unwillingness to have a tax increase. He knows very well that the Internet sales tax issue is one of collecting an existing tax that is being evaded by Internet merchants like Amazon.com. The sales tax  is not a new tax. It has been on the books for half a century.

 

The Governor also says that he reassured Overstock.com (and presumably Amazon.com)  that he would continue to support their tax evasion [my words, not his] in order to  to protect California jobs. But neither Overstock.com nor Amazon.com employs workers in California. Instead he is giving them a tax advantage over local companies and depriving those companies that do create jobs in California to compete on a level playing field.

 

As Tennessee Williams famously said: “I smell the smell of mendacity in this room”.

 

Audacity of Greed Pt. 2. Amazon.com seeks to hijack California tax policy

July 1, 2009

There is beginning a backlash against Amazon’s efforts to  intimidate Calfornia into  maintaining a tax break that is probably illegal. I am quoting a statement from Kristen McLean, executive director of the Association of Booksellers for Children. She makes a telling point.

An Alternative for Ex-Amazon Affiliates Jun 30, 2009

The following “open condolence letter to former Amazon affiliates” comes from Kristen McLean, executive director of the Association of Booksellers for Children:

Boy, it sure sucks to be dumped.

There you are, doing a great job of recommending awesome books, handing Amazon the sales, and they just up and leave the party.

To add injury to insult, I’m sure it didn’t feel good to hear from the Wall Street Journal that collective sales from your sites only “account for a relatively small slice of Amazon’s traffic, so the move isn’t likely to cause major damage to the company’s business.”

It’s like the morning after the prom, when in wrinkled dress and wilting corsage you realize they’re just not that into you. At least, not when they may have to collect millions in state sales tax that could help fix bridges, keep schools open and fund libraries at a time when your states are truly suffering.

And they seemed so nice.

Well, I want to invite you to the indie party. While the flashy prom has been happening at the country club, we’ve been holding our own get-together in the gym. What we lack in glamour, we make up for in charm. Like you, we love to recommend books. We think it’s cool that you’re recommending books, and with us there’s no such thing as too small. We won’t marginalize you. And we all pay our local taxes.

Best of all we have an affiliate program too! It’s called IndieBound, and we’d love to have you be a part of it. You’ll get a reward for using it, your readers can keep getting their books off your site, and your state will benefit in the end. Everyone wins.

Again, we’re sorry that you lost your date. (We never really liked them anyway.) We promise we won’t leave you hanging.

The Audacity of Greed –Amazon Threatens the State of California

June 30, 2009

This is really the bottom of the barrel. California has a bill in the legislature that will require Amazon.com and other out of state Internet retailers to collect sales tax on transactions where the buyer lives in California. For years now, Amazon has been evading collecting these taxes. And the State of California has been turning a blind eye. This deprives the state and cities of much needed revenue to support education, police and fire services. It also gives Amazon an unfair competitive advantage over California businesses that are required to collect the taxes. Thus the state has been supporting out of state business at the expense of local business and community services. In essence, California has been giving a tax break to citizens who buy products on-line. It is a disgrace and is probably illegal.

But it gets better. At last, the State of California has started to get cojones and try to get Amazon to do its duty and collect the taxes. God knows we need that revenue. A similar law has already been passed in New York and is being considered in North Caralina and Hawaii. Yesterday Amazon sent a letter to the California state legislature. (read about it here). Amazon warned the legislature that if California tried to get them to collect sales tax, they would stop doing business with all Amazon “affiliates” in California. Amazon has hundreds of thousands of these affiliates. These are the websites that link to Amazon and get commissions back for all sales originating from the link.

So this is rich. Not only has Amazon evaded collecting California sales tax, thus adding to the burdens of state services; but in retaliation they are going to cut off these affiliates who drive business to Amazon and get money back in return. Most of these affiliates are non-profits and PTA’s, the very entities that are already being hurt by the California economic crisis and by tax evading large corporations like Amazon.com.

I don’t know what the rest of you think about this. But I think it stinks.

Jeff Bezos ought to be ashamed of himself.