OK point taken, but this in not unique to Amazon. Technically taxpayers should pay a use tax but it probably rarely happens. Does American Prospect charge sales tax on subscriptions?

Bezos is one of the most inflated of inflatable gasbags around. He's contagious, too. His employees are infected. As a Seattle resident and dot-com participant, I've grown quite tired of listening to the trumpeting of Amazon.com's legendary stock prices from his employees, who until just a few years ago stumbled miserably when asked when the company wsa actually going to become profitable. Most of Bezos' amazing rise to stardom took place in a profit vehicle (Amazon.com) that lost money every quarter for nearly the first 10 years of its existence, including post-IPO existence. This is a record that hardly supports the Napoleonic attitudes of Bezos and his followers/employees.

As for the tax subsidy that has allowed Amazon.com to become profitable, I can understand very much that the subsidy allows Amazon.com to continue to serve its customers. That doesn't seem like a bad thing to me. I can also understand that the lost revenue would probably help out the impoverished state governments an awful lot and I am sure also that people go someplace to shop because they don't have nice expensive computers and broadband connections at home would love to have such a subsidy reflected in their prices, too.

Tom,

Are you suggesting that American Prospect charge its customers sales tax on an item even if it is currently legally a non-taxable item, because of Dean's opinion on tax policy?

It's one thing to say AP and/or Dean should be advocating for a policy change that would impact their bottom line as well...which is in fact what it seems Dean is advocating.

It's another thing to say they should charge tax on a non-taxable item. And do what with the tax collections? Donate them to the government?

Maybe I misunderstood your point, but it doesn't make sense to em.

Isn't sales tax a pass through? The store collects the money (.0715 here in Minneapolis) from their customers and then pays the state. People may buy from Amazon in order to avoid sales tax, the way Europeans are reputed to fly to Minnesota to shop at the Mall of America, rather than shop at home and pay European sales taxes. So in that sense state governments are subsidizing Amazon and probably not liking it.

Technically, no mail order business is obliged to collect sales tax in the districts where it ships its products unless it has a geographical "nexus" within that state -- a store, a business office, etc. So the same exemption benefits catalog mailers, telephone soliciters, home-shopping networks, as well as internet businesses. Which makes brick-and-mortar stores that much less competitive than mail order businesses.

There's a sort-of rationale for it: a company doing business in a community uses the community's services -- police, fire, streets and highways, public transport, and so on. Where a company doing business in another state doesn't benefit as directly if at all from the local services.

Fair or unfair, this isn't a subsidy Amazon invented, although the internet has arguably exacerbated the problem. I'll join you if you want to cry about all the dead bookstores in my neighborhood, but that's not necessarily an economic complaint.

Eleanor wrote, Isn't sales tax a pass through?

Not necessarily.

Who really pays for a particular tax doesn't depend on who remits the tax, but rather what the incidence of the tax is, which depends on the elasticity of supply and demand.

For a sales tax, for items which aren't all that necessary, some of the tax will fall on the supplier. For really necessary items, an increasing proportion will fall on the consumer.

Other examples:
* Many (I hear claims of "most" but am not sure) economists claim that the employee really bears the burden of both the employee and employer share of payroll taxes.
* Landowners cannot pass any portion of a land tax onto tenants, because the supply of land is fixed in advance.

Under current law, having to pay state sales tax would be a serious burden for small mail-order and internet businesses - the incidental cost of the bookeeping and transfer of the tax for 1 or 2 sales obviously far outweighs the value of the taxes. This applies to the state and local bureaucracies as well.

Some serious reform of the system would be required, beyond simply requiring payment of taxes in the consumer's locality.

Liberal,
I think that the sales tax is a pass-thru tax. Though skeptonomist has a point that it costs accounting/tax/book-keeping issues. The sales tax is paid with funds from the customer and who buys the product. But this doesn't work because basically this would be a monthly loan by gov'ts to companies that they have the money collecting interest. They collect the tax in one month, then pay in the second month. Though I don't think this offsets the additional accounting costs.
Could this "tax-break" also affect whether Amazon pays sales tax? In other words, if Amazon buys all their supplies over the internet, wouldn't they also not be paying sales tax too?

Do away with sales tax altogether and redistribute a fair share of federal corporate tax revenue to the states -- whatever a "fair" share might be -- and you'd have something nearer a level playing field.

States in which Amazon has a physical presence recieve the sales tax and income, property, etc tax from local employees serving a mostly out of state clientele.

The real losers are states whos citizens buy from Amazon so as too avoid local state sales tax. They get nothing.

In the future, we will buy directly from China, then the playing field will be leveled for all states.

First of all, subscriptions are subject to tax exactly the same as books. This is a common misconception.

Second, Dean is missing a very important point here. Sales tax is a product of State tax laws and State tax laws are only enforceable where there is jurisdiction. He is trying to imply that we should give each state the right to go into any business anywhere and mandate rules and regulations on it. I don't want California doing that here in Missouri, and either did the founders.
The use tax, already in place in the majority of states, is the answer to this problem. If Dean really cares about fair competition, he should encourage State's to enforce their existing laws.

I've always figured that the lack of an internet sales tax was more or less offset by the need to pay shipping. Of course, that money doesn't go to the states, it goes to the delivery companies. If I had to pay sales tax and shipping, I'd buy a lot less stuff on internet.

I agree that tax rates should be applied similarly but I still don't see that the exemption qualifies as a meaningful subsidy unless you're being very technical in calling it a subsidy. That is, your stated linkage between the amount of the so-called subsidy and their annual profits implies the profits are being subsidized by the tax break. I think that substantially overstates the csse. I just don't find it plausible that very many decisions to shop via Amazon rather than drive to local retailers are affected by the tax. So I think Amazon would probably more or less the same profits on more or less the same transactions, with or without the tax.

Now obviously I recognize that means that I am arguing that the taxes should be enforced, so we're probably agreeing for different reasons. I think the better argument is that a) loopholes of all kinds breed resentment and corrode the relations between a government and the people even where they do not distort economic decisionmaking, and so should be avoided unless a compelling case can be made; and b) specifically here, non-shoppers at Amazon are being penalized unfairly by bearing a disproportionate share of the tax burden charged to purchasing activities. But I think we should have a VAT too and no one listens to me there either.

There was only one other comment that brought up the point of the cost of S&H, but I was wondering how the cost compares with sales tax. If they are about equal, the consumer wouldn't have any reason to buy from Amazon with other things being equal. That means that the playing field really is level, and if it is, then Amazon really deserves its kudos. On the other hand, if S&H is markedly lower than sales tax, then the playing field is not level. But if the consumer would have to pay both sales tax AND S&H, then the playing field would be raised against Amazon.

Actually, the dollar is immediately borrowed by the Government and put to use in all the things they do. In a way the Trust Fund is a type of forced savings. The payee eventually gets back the principal with interest when he retires or is disabled. Any kind of retirement savings does the same thing, though private retirement funds obviously invest much more in the private sector.