[eykanal]

The message being sent is simple; Amazon is receiving an unfair competitive advantage by not paying taxes (all their prices can be lower), and the legislature is trying to figure out some way they can "force" Amazon to have a local presence through people like you. Amazon, being the 800-lb gorilla they are, just said the equivalent of, "I'm taking my ball and going home."

They did this because you were the "arm" of Amazon the legislature was trying to attack. In Amazon's eyes, it's easier just to cut off that arm than to try to support it and pay higher fees.

[thaumaturgy]

> Amazon is receiving an unfair competitive advantage by not paying taxes...

I don't understand this reasoning. They have to pay a shipping tax -- that is, regardless of the price of the item, the buyer is going to have to have it shipped to their home. If Amazon's offering free shipping, that just means they're choosing to absorb the cost, which eliminates a competitive advantage; if the buyer pays shipping, then that increases the total cost of the item, and again, that eliminates Amazon's competitive advantage.

I don't think this has anything to do with unfair competitive advantages, and everything to do with states simply looking for ways to grab more tax revenue ... so that they can turn around and offer it as cuts to other businesses, of course.

[true_religion]

> They have to pay a shipping tax ... that eliminates Amazon's competitive advantage.

Not really because Illinois based businesses have to ship their goods into the state as well and then have their customers pay Illinois sales tax on top of the shipping cost reflected in the sales markup.

[thaumaturgy]

Those costs are usually absorbed by the wholesaler, not the retailer.

[btilly]

Here is an explanation.

Residents of Illinois owe sales tax on their purchases. The state knows that people won't choose to pay this, so the state makes merchants collect the tax. If the merchants are based in the state, the courts say the state can do this. If the merchants are not based in the state, then the courts have ruled this to be interstate commerce, which is something that only the federal government has power over, and therefore the states can't do it. (The issue is hardly new. It was settled over a century ago with catalog companies.)

Note that the tax is theoretically owed by the residents of the state regardless of where the merchant is. But in practice people wind up paying the tax at Walmart, and not at Amazon. Which gives Amazon an advantage.

[thaumaturgy]

Amazon sells Item X for $19.99. An Illinois retailer sells the same Item X, also for $19.99.

Your claim is that the buyer will purchase from Amazon because there is no sales tax:

Amazon: $19.99 Retailer: $21.24

Except, the item must be shipped from Amazon to the customer. If customer pays shipping, then:

Amazon: $24.99 Retailer: $21.24

If Amazon pays the shipping, then the shipping costs must be deducted from their profit on the item, further reducing their margin. If there's enough margin at $19.99 to make this feasible, then the retailer might choose to sell the item for just $1 less than Amazon:

Amazon: $19.99, shipped. Retailer: $20.18.

I don't see the unfair advantage here. To me, it looks like Amazon has the exact same advantage that any warehouse retailer has: lower overhead and (massively) larger volume, which allows them to operate on smaller margins. That is an advantage, but it is not an unfair one.

In case I'm still not making sense, let me try one other approach: because Amazon must pay to ship items from their warehouses to the items' points of destination, does that mean that in-state warehouse retailers have an unfair advantage? Should we start levying a "shipping tax" on any in-state retailer that does not have to pay to ship their merchandise to the customer? If not, then how is this different from attempting to tax e-retailers, in the context of "unfair advantage"?

Again, I can see this being a revenue issue for states. I so far do not see it as an unfair advantage issue.

[btilly]

You forget that the retailer has several additional costs that you have not considered. The warehouse retailer has to transport goods, run the store, and (very importantly) has to maintain much higher stocks of each product in their stores to guarantee that, no matter which store a customer goes to, the popular item is present. (Do not underestimate the value of this factor. Volume retailers of all kinds are incredibly focused on reducing the turnaround time from when goods are purchased to profits realized from the sale.)

On the whole the advantage is definitely with Amazon, as can be verified from the prices for end consumers.

Now we get the question of fairness. People often argue about fairness as if it was an absolute fact. It is not. Fairness is a subjective opinion. Rather than trying to argue about what is fair or not fair, the best you can do is to try to understand other people's point of view.

There is a point of view from which Amazon is inducing Illinois residents to break Illinois law, and spend their money in a way that creates no Illinois jobs. Every piece of this hurts Illinois, and is not fair to companies that are forced to abide by Illinois law. You clearly do not share this point of view, but is it that hard to accept this mindset?

By contrast your point of view seems to be that Amazon is obeying US law, and it isn't Amazon's problem if Illinois wishes to foist stupid rules on its people that the people don't want to follow. That's a fair opinion, but having that opinion should not prevent you from understanding that there are other points of view out there.

[thaumaturgy]

That's actually not my opinion at all, but I don't know how to state my opinion any more clearly than I already have.

[yummyfajitas]

So the fundamental problem is that Illinois has passed a law which a large number of their citizens feel is unjust and which they break whenever they have the opportunity?

Seems like out of control politicians are the real problem here.

[burgerbrain]

"advantage" != "unfair advantage"

[btilly]

The reason why this is seen by some as unfair is because Amazon's advantage comes from making it easy for Illinois residents to break Illinois laws. If Illinois residents weren't willing to break Illinois laws, then Amazon would have no advantage.

[burgerbrain]

What these government numbskulls don't seem to understand is that what Amazon is doing isn't fundamentally any different from what Sears was doing over a century ago with their mail-order catalog.

Amazon it's receiving an "unfair" anything, they are operating well within the law and long established acceptable business practices. Politicians are just being greedy, plain and simple.

[A1kmm]

Operating within the law doesn't imply something is fair - especially when we are talking about a law change.

I think that the law should fairly target mail-order companies as well as Internet-order companies.

Of course, levying taxes based on where the buyer lives makes things difficult for the seller in terms of compliance costs; I think the best solution would be for the federal government (or even organisations like the WTO) to request that jurisdictions provide a register of who taxes should be paid to, and enough information to automate tax payments, by geographic region. The private sector could do this, but a government or International Organisation backed solution might see more participation in the scheme by tax jurisdictions.

[chopsueyar]

An International Organisation to keep track of taxes owed on internet purchases?

Who is in charge of that?

What sort of conflict resolution would exist if one disagrees with the tax owed?

Just suggest a world emperor and be done with it.