President Trump has caused Amazon’s stock to drop some $53 billion by opining on the company’s tax status. As Katelyn Caralle has recorded for us, this is because of the president’s musing that it should be collecting sales taxes more forcefully than it currently does. The amusing part of this being that Amazon would just love such a law enacted – what you want as the scrappy upstart is rather different from what you’d like as the industry leader.
The report started at Axios, where we’re told that “Trump hates Amazon, not Facebook,” which is at least refreshing from the president, to be out of step with the definition of who is the current public whipping boy. The “why” of the complaint is that they’re not collecting sales taxes as other retailers do. Yet, that’s not in fact true these days. Sure, it used to be because Congress said so, but it isn’t today. As CNN points out, this is not the current state of affairs – “Amazon has been adding to its national network of distribution centers, and last year it announced it would start charging sales tax in every state”.
When Amazon was young and new, it gained an advantage by shipping from out of state, thereby not having to collect sales taxes. Now that it has warehouses in just about every state, that loophole isn’t available to it. But it is still available to smaller Internet retailers, which is why Amazon has switched on the more general exemption as well. They’ve said in the past that they think all online businesses should be collecting sales tax now. Just as we’d predict, behavior changes when the upstart becomes the market leader. No one else should continue to enjoy the privileges that it did.
When we come to marketplace taxation, third parties selling through Amazon, taxation is not always collected. This accords with what the law currently is, to be sure. But Amazon would be equally happy, perhaps more so, if all third parties on every platform had to collect. Because, again, it’s the dominant player here, and a general imposition would hurt others more than it would hurt Amazon.
To be frank about it, Amazon would probably just love it if sales tax collection were imposed upon everyone.
Trump’s other concern, that the company pushes many Mom and Pops out of business, well, yes that’s more grounded in reality. But this is the point of economic growth and technological advance, that people who have a better way of doing things put the old and inefficient method out of business. No, we cannot even say that people prefer the mom and pop stores — if they did, they’d still be shopping there and Amazon wouldn’t be bankrupting them. The very fact that they’re going out of business means people, you and I, prefer Amazon. And why would we change any law to prevent that?
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
