[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.