Taxing Internet sales is a matter of fairness

When things aren't going well, President Donald Trump likes to go on Twitter and attack those who sees as adversaries. Last week, he directed his ire toward Amazon in an apparent effort to stick it to CEO Jeff Bezos (most likely because Bezos owns The Washington Post, which has closely covered the administration's missteps and particularly the behind-the-scene drama in the Trump inner circle).

In the wake of the Charlottesville protest and terrorist attack, the tweet didn't get all that much attention from the public. That's a shame because it should have.

Here's what the president wrote: "Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt — many jobs being lost!"

Like most of Trump's social media postings, he got a lot of that wrong. Amazon does pay taxes. Most likely, the president was trying to imply that Amazon doesn't collect sales tax on Internet transactions, a common complaint of brick-and-mortar retailers. And that was certainly true five years ago, but it's become far less true over the years. This spring, Amazon expanded its sales tax collection to cover the District of Columbia and all 45 states that collect some form of sales tax (Delaware, Alaska, Montana, New Hampshire and Oregon don't have one).

The company does not, however, collect sales tax on behalf of third-party companies that sell products on its website. Nor is such a tax collection obligated by law. Under a 1992 Supreme Court decision, Internet sales aren't subject to state sales taxes unless the vendor has a physical presence where the product is being shipped, so Amazon actually should be applauded for going above and beyond the legal requirements.


As for the business about job losses, Trump has a point, to an extent. As Amazon has grown, other companies have diminished, particularly big-box retailers. Amazon isn't the only successful Internet competitor (and Internet competition isn't the only factor shaking up the sector), but it's the 800-pound gorilla of retailers.

If Trump is serious about Internet sales and Amazon, there are at least two real remedies he could advocate. The first would be to support legislation pending in Congress to require all online sales to be subject to the appropriate state sales tax (although Senate and House versions differ somewhat). They are the Remote Transactions Parity Act (H.R. 2193) and the Marketplace Fairness Act of 2017 (S.B. 976). Both have bipartisan support.

Trump's support might make a difference. Congress has been sitting on this issue for years. There are billions of tax dollars at stake but, alas, it's all to benefit the states and none the federal budget, which has likely tempered support particularly given Republican anti-tax dogma. But it isn't really a tax increase but a closing of a loophole that should be done simply as a matter of fairness. Why should an Internet purchase be tax exempt? Why should local mom-and-pop retailers face the tax burden when so many of their competitors do not?

Meanwhile, there is a legitimate question about Amazon's size and potential to become so dominant a player in the retail industry that fair competition is no longer possible. That's why antitrust laws exist and why the federal government ought to be prepared to take action if Amazon's share of e-commerce grows too great. At the very least, that means more closely scrutinizing its pending takeover of Whole Foods.

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