According to the New York Times, Governor Spitzer (of New York) is trying to pass a law that would force Amazon.com to collect sales tax for customers in NY:
To help fill New York State’s budget gap, Gov. Eliot Spitzer has revived a plan to impose sales tax on some goods purchased online that are not currently taxed, notably things bought from Amazon.com. The state estimates this will bring in $47 million a year.
Right now, of course, sales tax is a mess. Buy the latest John Grisham book at Barnes & Noble in Union Square in New York, and you’ll pay 8.375 percent sales tax. Buy it from Amazon and you won’t pay any tax. But order the same book from Barnes & Noble’s Web site, and you do pay the tax because any company with operations in the state must collect tax.
Actually, the buyer of the book from Amazon technically owes the tax to New York State, but Amazon isn’t required to collect it for them, according to a 1992 Supreme Court ruling.
The NYT article goes on to discuss the legal subtleties of trying to enforce this law should it pass.
Here’s our carefully considered opinion of Spitzer’s plan:
“Barf.”
Amazon Plays Dumb in Internet Sales Tax Debate [NYT]
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I guess Gov. Spitzer hasn’t read any Adam Smith, Milton Freidman, et al. Free trade is our salvation.
When you buy your John Grisham book on Amazon .com, you will have to pay shipping. If you spend enough, Amazon.com will pay the shipping. That cost of shipping pays for the shipping company to hire people to deliver your package to you. Amazon.com pays taxes. The shipping company pays taxes. The employees of both pay taxes. The cost of the book includes the cost of taxes of making the book. Taxes are being paid left and right.
Let’s say the customer pays $25 for the book to get free shipping. If they don’t have that option and are faced with $25 + ~9% tax, they might decide that it costs too much and wait for paperback or get it used or at the library. All of which costs Amazon.com and the shipping company income. If enough people make that decision, Amazon.com and the shipping company may decide to lay off workers to make up for reduced income and less work available. That makes less taxes paid and fewer taxpayers.
Bah! Tax the rich (read: people who can read and afford to buy books)! They’ll be glad to work for free so that lazy illiterate people can stay home and watch Oprah.