President Trump persist in his Twitter war with Amazon on Saturday, going after the ecommerce Goliath calling it a “scam” that’s costing the Post Office “billions.”
Saturday’s dispatch comes after tweets Thursday saying the company founded by Jeff Bezos recompenses “little or no taxes to state and local governments.”
It wasn’t the first temporarily the president has gone after Amazon. In August of 2017, August 16, 2017, Trump tweeted that “Amazon is doing important damage to tax paying retailers. Towns, cities, and states throughout the U.S. are being agony – many jobs being lost!”
Trump’s claims regarding the effectuates of Amazon’s ability to avoid sales taxes are, at least, partly take, but expanding sales tax collection requirements to more online retailers intent not harm, but benefit Amazon.
In its earlier days Amazon generally did not heap up sales taxes because it lacked a physical presence in most avers. This provided Amazon with a pricing advantage over ritual retailers and contributed to its growth and to the failure of some retailers.
The reduction in holds sales tax revenue from online sellers, estimated to be $26 billion annually, superiority have caused states to cut programs and increase other taxes. Putting, expansion of sales tax collection requirements through federal legislation, unconfirmed Supreme Court decision, or state law changes will likely not abuse Amazon, but instead further enhance its competitive position.
Due to its expanded allotment network and fulfillment centers to ensure quick delivery, Amazon has a tangible presence in many states and an obligation to pay sales taxes. Amazon currently rack ups and remits sales taxes for sales made directly by Amazon, as opposed to its third-party sellers, to all forty-five specifies with a statewide sales tax. Amazon supports the Marketplace Fairness Act that orders remote sellers to collect sales taxes.
The U.S. Supreme Court is deliberating the South Dakota v. Wayfair Inc. anyhow. The case examines the constitutionality of a South Dakota statute that interferes an economic nexus standard to affix the right to impose sales tax store requirements on remote sellers. Under the rule, sales tax nexus exists if a seller has trades within the state that exceed $100,000 or more than 199 deals to state residents.
A decision by the Supreme Court supporting economic nexus wish allow states to impose sales tax collection on sellers without real presence, including Amazon’s third-party sellers.
If Supreme Court does not aside the economic nexus standard, thus reverting to the physical presence set, states will likely continue to implement notice and report laws, such as those recently ordained in Rhode Island. Such rules will likely result in innumerable sellers to voluntarily collect and remit sales taxes.
Regardless of the Wayfair instance’s outcome, more online retailers will likely collect on sales taxes and this actually puts Amazon in a position to win. Given the generous number of jurisdictions, various tax rates, and differing definitions of items liable to suffer to tax, sales tax compliance costs can be substantial.
Amazon offers its third-party sellers an discretionary sales tax collection service for a 2.9 percent fee (based on the collected purchasings taxes). To the extent existing third-part sellers purchase the sales tax worship army, Amazon benefits.
Retailers who are not currently selling through Amazon strength find that the sales tax collection option a salient enough upgrade to behove a third-party seller. Amazon’s revenues from third-party fees purposefulness continue to grow and become more important to Amazon’s bottom policy.
Third-party seller fees were $32 billion in 2017 and accounted for 17 percent of Amazon’s net purchasings. The year-over-year growth in third-party fees was 38 percent, which uncountable than doubled that from Amazon’s online stores. The growth of sales tax collection requirements will likely fuel more advancement.
Amazon also benefits to the extent the expanded sales tax requirements makes the incontrovertible purchase price for items sold by third-party sellers, or from other online sellers, closer to the evaluate directly from Amazon since both are subject to sales tax. Amazon service perquisites because some sales currently made through Amazon’s third-party sellers, or from other websites, may cadre to direct from Amazon.
The imposition of sales tax on remote sellers, listing Amazon’s third-party sellers, might help in-state retailers by plain the playing field with online competitors. However, the expansion of sellathons taxes to remote sellers will benefit Amazon.
Amazon has already capitalized on the purchases tax advantage it had during its start-up phase. Amazon’s low-cost sales tax accumulation system, coupled with Amazon’s extensive and efficient fulfillment and parcelling networks, give Amazon such a large cost advantage that it suits, or reinforces its position as the pre-eminent online retail platform.
If President Trump desires to out of date down the perceived damage Amazon is causing, trying to impose jumble sales taxes will not cut it. He will have to look for another way to curb Bezos and his internet Goliath.
Commentary by Jim Seida, associate professor, Mendoza College of Trade at the University of Notre Dame. Seida investigates how tax and non-tax considerations pretend to decisions by individuals and firms. He has published in The Accounting Review, Journal of Accounting and Economics, The History of the American Taxation Association, National Tax Journal, Tax Notes, and Issues in Accounting Drilling.
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