Friday, December 21, 2012
Texas cracks down on Amazon.com sales tax controversy
The Alliance for Main Street Fairness says a "true free-market" requires ... regulation.
Amazon has been compared to being the giant sucking sound in retail business. Not anymore.
At least that's what the state's traditional brick-and-mortar retailers hope will be the case now that the online colossal agreed to pay sales tax in Texas. Amazon has long drawn hackles from traditional retailers that claim the Seattle-based Web mammoth enjoyed an unfair advantage because it has not been required to charge sales tax.
Due primarily to the efforts of State Comptroller Susan Combs, Amazon began paying sales tax in Texas on July 1. For many retailers, the start date couldn't have come sooner. They hailed the move, though more than a few expressed bewilderment.
"The end of special treatment for online retailers in the Lone Star State sends a strong message to Washington, D.C., that a true free market requires federal e-fairness legislation," said a statement from Alliance for Main Street Fairness, a coalition of business owners.
Local business owners feel the same way.
"I don't see how some of these online businesses have gotten away with it as long as they have," said Ronald Rodenbaugh, owner of Rodenbaugh's Flooring America and Appliances in Allen. "The way it's always been is that if you have infrastructure within the state, then you should pay sales tax. So if a company is going to put in a warehouse to distribute their products that are sold because of their online sales, then at that point they are doing business in Texas with a physical presence.
"But I think if a company is going to sell in a state they need to pay the sales tax.
"There are a lot of companies that sell consumer electronics, and I've been told they have a lot of customers who come in to be able to feel and touch and to scout a potential purchase that way," Rodenbaugh said. "Then [the customers] go home and buy it online. So for those type of merchants I can see where this would be a big plus."
In addition to selling relatively inexpensive products like books, Amazon deals in big-ticket items such as jewelry and electronics. Those items represent a substantial loss of income for the state, according to Irwin Miller, a counselor at SCORE, a group of retired executives who advise small business owners. "I think this will help both the State and small businesses tremendously," Miller said.
Wells Fargo analyst Matt Nemer offered the opposite view, saying that it may not matter all that much.
A recent survey by Nemer showed that consumers in Texas essentially haven't changed their buying habits since the online sales tax went into effect. Nemer found that among 1,000 Texans surveyed, 27 percent shopped regularly on Amazon.com, down from 30 percent in June.
"That's within the margin of error of 3 percent to 4 percent," he said.
Nemer added the survey found convenience was more important to Texans' shopping habits than the lack of a sales tax.
According to the agreement between the Comptroller of Public Accounts and Amazon, the company plans to create at least 2,500 jobs and make at least $200 million in capital investments in Texas over the next four years, in addition to paying sales tax. The agreement resolves all sales tax issues between Texas and Amazon.
"We thank Amazon for partnering with us to find a solution that works for our state," said Combs in a statement. "This is an important step in leveling the playing field in Texas; however, Congress should enact federal legislation that will give states access to revenues that are already due, which would resolve this issue fairly for all retailers and all states."
R.J. DeSilva, a spokesman for the comptroller's office, said he had no updates on when or where Amazon would begin creating those jobs or making capital improvements in Texas. Neither did Scott Stanzel, a spokesperson for Amazon.
"Amazon looks forward to creating thousands of new jobs in Texas and we appreciate Comptroller Combs working with us to advance federal legislation," said Paul Misener, Amazon vice president of global public policy, in a statement. "We strongly support the creation of a simplified and equitable federal framework, because Congressional action will protect states' rights, level the playing field for all sellers, and give states like Texas the ability to obtain all the sales tax revenue that is already due."
Stanzel somewhat underscored Nemer's earlier assertion when he added that despite having to pay sales tax on purchases, consumers will continue to shop with Amazon because it offers low prices, large selection and fast delivery. For every $100 purchase, the added sales tax is projected to cost shoppers about an additional $8.
Though Amazon chief executive Jeff Bezos maintained in a recent interview with The New York Times the sales tax exemption the company previously enjoyed was not much of an advantage, its regulatory filings told a different story. Those filings noted that collecting taxes could "decrease our ability to compete."
Amazon's retail sales in the U.S. this year are on track to be roughly comparable to those of enterprises like McDonald's, Sears and Safeway, according to the report by the Times. And while Amazon's sales are only about 12 percent that of Walmart, the reigning retail kingpin, they are increasing much faster.
Amazon is currently undertaking a multibillion-dollar building frenzy to construct distribution warehouses across the country in order to try and salvage whatever advantage it may have had prior to having to pay sales taxes. If Amazon can truly deliver on its ambitions, said Sucharita Mulpuru, an analyst at the research firm Forrester, "it will be the dominant retailer in the decade to come."
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