I went online to [cough…] Tires, selected the tires, ordered and paid for them, and arranged for them to be shipped to and installed at the local [cough…] Tires located about 2 miles from my house. The nice thing about my order? I saved $41.25 in sales tax – 8.25% – by ordering online.<\/p>\n
For Christmas, Tenacious G acknowledged my inner guy-ness and let me get a 46" Panasonic Viera plasma TV, and a new Denon receiver (we needed something that switched HDMI, of course!) – all in all, about a $2K purchase, with a savings of $165.00 in tax that Amazon didn’t want to collect. At the rate of sales tax that my city collects – 1.75% of the 8.25% total – that’s $43.75 out of the city budget.<\/p>\n
I’m about to make myself professionally unpopular. I work in online technology, which is driven by two engines – advertising and commerce.<\/p>\n
One of those engines is becoming less effective (advertising) and the other is getting a subsidy from my kid’s school, which makes me unhappy. And ought to make you unhappy as well.<\/p>\n
Let’s toss some numbers around.<\/p>\n
The best estimates I can find for online retail in 2008 range from $130 billion to $175 billion. The Department of Commerce estimates it at approximately $130 billion, or 4% of all retail sales (up from 2.2% in 2004). Per the Census data for 2002, California represented about 11.6% of the retail sales for the nation, so figure that California had about 11.6% of an estimated $155.5 billion in total online retail sales for $18 billion in online retail sales.<\/p>\n
The best estimates I can find suggest that less than 10% of online sales collect sales tax, so assume 90% are not taxed – for untaxed online retail sales of $16.2 billion.<\/p>\n
At 8.25% – the base rate statewide (many local jurisdictions have higher rates) – we’re looking at $1.34 billion dollars in taxes that were avoided because people like me made economically rational choices.<\/p>\n
Or to look at it another way, the Best Buy down the street from me would have had to sell the same TV and receiver for 9% less than Amazon to match their pricing. Meaning that not only does my kids school lose out on the money that might have been collected, but my neighbors high school age daughter can’t get a job because business at Best Buy is too slow.<\/p>\n
To put this into perspective, the structural deficit in the California budget is now stated to be about $14.5 billion\/year. Simply collecting the taxes on things people already buy would cover almost 10% of that – not chump change.<\/p>\n
As a practitioner in the online space, I think it’s time to level the playing field as well. For a long time, I’ve argued that the ‘hidden subsidy’ makes online merchants lazy and prevents real competition between online and offline merchants. It makes a lot of online merchandising simply regulatory arbitrage.<\/p>\n
I’ll add some thoughts on the California finance crisis and then the national stimulus bill later this week.
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Why doesn’t Amazon collect sales tax, anyway?<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"_links":{"self":[{"href":"http:\/\/marcdanziger.com\/index.php?rest_route=\/wp\/v2\/posts\/1999"}],"collection":[{"href":"http:\/\/marcdanziger.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/marcdanziger.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/marcdanziger.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/marcdanziger.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1999"}],"version-history":[{"count":0,"href":"http:\/\/marcdanziger.com\/index.php?rest_route=\/wp\/v2\/posts\/1999\/revisions"}],"wp:attachment":[{"href":"http:\/\/marcdanziger.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1999"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/marcdanziger.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1999"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/marcdanziger.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1999"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}