In the latest battle in a broader war over taxation of internet sales, Amazon.com has cut 10,000 California affiliates in an effort to avoid having to pay sales tax on the billions in sales it makes each year to California residents. The money at stake is large, and the savings from delays equally so. We can therefore export the Amazon lawyers to try whatever strategems they can to ward off the day when their sales are taxed just like regular stores. This is a pity. As I noted in a blog post last year, there is no obvious societal benefit of subsidizing internet firms over local stores (brick-and-mortar or otherwise). The latter are far more likely to hire local workers, and through their taxes, to help finance public life and services in local communities. Danny Sullivan, who has tracked the evolution of the search engine industry for years, outlines a variety of reasons for Amazon to change its position in an open letter to Jeff Bezos.
A friend travelled to a DC rally last year carrying a sign that read "Grownups Pay Taxes." I quite like the sentiment, for while we'd all like more efficient governance, and to pay less taxes, the world has yet to find a way to govern itself at no cost. We will do well to find the most neutral, least distortionary ways to raise the tax revenue we need.
The internet has certainly grown up, and has captured a growing share of retail sales. It is high time that these sellers started to carry a fair share of sales tax burden as well. Many states (including California) already have use taxes that parallel their sales taxes. The liability to pay taxes on the sales that Amazon is trying to avoid already exists; it is merely the collection point that is changing.
Amazon can track its millions of customers, their purchases, and their potential desire for related purchases with ease. Cross-site tracking of complex online behaviors across sites on the internet is now common, with firms such as DoubleClick (now a subsidiary of Google) able to profile users with increasing resolution, though at a large (and largely unrecognized) cost to personal privacy. Different portions of websites, such as payments, are quite standardized, and often contracted out to third parties even for small sites. Arguments that collecting taxes in multiple jurisdictions would be unduly burdensome may have had merit 10 years ago; they no longer do.
