President Donald Trump posted a confusing statement Wednesday morning about retail behemoth Amazon and taxes.
“Amazon is doing great damage to tax paying retailers,” Trump wrote on Twitter. “Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!”
Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!
— Donald J. Trump (@realDonaldTrump) August 16, 2017
Amazon pays sales taxes in every state that has a statewide rate and has for several months now. Surely Amazon is collecting, paying and remitting payroll taxes and one would expect that, unless given special deals by regions in which it operates, it also pays its state income and local property taxes. It is not immediately clear how Amazon has a tax advantage over other retailers.
Many online retailers do not pay sales taxes and are not required to unless they have a physical presence in a state the collects the tax. Perhaps Trump was making a statement about online retailers in general and picked a bad example.
Is this his push for an internet sales tax bill? Several efforts to require online retailers to collect and remit sales tax have failed to pull even symbolic support in congress.
Opponents say that forcing retailers to collect rates for hundreds, if not thousands of different city, county and states is a burden that smaller retailers would be unable to handle. Different forms, processes, and rates in each state would also complicate their ability to do business.
Supporters of the measure believe that online retailers who do not collect sales tax are offering the same products as local retailers but at an automatic discount. Considering the effort the local retailer has to collect, process and remit sales tax monies, there is a cost at the local level that many online sellers do not have to deal with.
The complication of sales taxes in an online world may not be as onerous as opponents claim. Software, such as TaxJar, integrates with e-commerce software and automates the collection and remittance processes making it transparent to the seller and consumer.
Another possibility is that Trump was referring to Amazon’s size and business model that make it impossible for local businesses to compete. That’s what happens when a new way of doing something overtakes the old. Capitalism promotes change, modernization, and efficiency all of which Amazon’s model offers.
The downside to such changes is that brick-and-mortar retailers can’t compete on selection, price or convenience. Even huge sellers such as JC Penny and Macy’s are facing the consumer shift to online that book stores and music vendors saw a decade ago.
Either way – such is our economic model and the government should not interfere lest the entire nation become less competitive with China’s Baidu or whatever online retail giant the EU might prop up.
While it is not completely clear what the president meant by his tweet, Amazon may not have been the best target.
