Amazon’s sales tax stance bankrupting others

SEATTLE — Lunch hour in the South Lake Union neighborhood. Workers walk dogs they can take to the office. Lines form in hip restaurants. Something big is going on here, but the only sure sign of a major employer is the many blue ID cards hanging out of jackets.

The corporate master here is Amazon, the world’s largest online retailer. Amazon does not put its name on its collection of new buildings in these once-grungy environs, not even the trademark smile logo. The reason for this faux secrecy remains subject to speculation.

Anyhow, the king of cyberspace commerce chose a city tied to its identity as a liberal and quirky center of tech savvy. It revels in bistros serving locally grown arugula to young creatives eager to reunite with their corgis. But underneath these soft atmospherics stands a corporation in iron battle against paying state taxes and dismissive of hometown philanthropy, as described in a Seattle Times series, “Behind the Amazon.com Smile.”

Something tells me that Amazon founder and corporate mastermind Jeff Bezos would not dislike that contrast. After all, the company’s business model is based largely on taking the “local” out of shopping.

Amazon’s aversion to paying taxes would play well in conservative America, except for this: The new “Red State model” is to rely less on state income taxes and more on sales taxes. A 1992 Supreme Court decision, written with mail-order merchants in mind, frees cyber-retailers from having to collect sales taxes in states where they do not have a physical presence.

So, with a few exceptions, Amazon does not burden out-of-state shoppers with sales taxes. This gives it a significant advantage over brick-and-mortar stores that must tack on such taxes. Amazon understandably likes it that way.

But this is a major-league problem in states dependent on sales taxes — especially as online shopping gains retail market share. In Kansas, Louisiana and Nebraska, for example, Republican governors want to cut or banish their states’ income taxes and replace the lost revenues with higher sales taxes.

On this matter, Amazon can play rough. South Carolina offered Amazon $33 million in free land, property-tax cuts and payroll-tax credits to build a warehouse there. It even exempted the company from Lexington County “blue laws,” thus letting the warehouse stay open on Sunday mornings.

But Amazon wanted more. It wanted immunity from collecting the 6 percent sales tax on stuff bought by South Carolinians, something the state would be entitled to once Amazon had a warehouse there. The state legislature rejected that request, at which point Amazon stopped construction on the facility and threatened to abandon the project. The state then gave the company a five-year exemption on collecting sales taxes.

Amazon has gone so far as to give its employees color-coded maps, dividing the United States between green and red states. In this case, the red stands not for Republican, but states where the presence of Amazon workers might unleash a tax liability. The employees must seek special permission before venturing into the red areas.

King County is known for strong corporate philanthropy — led by Microsoft, Boeing and Nordstrom — but Amazon has been a relative no-show on contributions to Seattle-area causes. Amazon argues with some reason that it contributes valuable jobs. Yes, but so do the others.

The museums, the symphony and other civic amenities help make Seattle the cultural cauldron from which Amazon finds its cool people. Meanwhile, the laws protecting Amazon and other online retailers from having to collect sales taxes are helping bankrupt many other local governments.

Sure, Amazon is a great success story and has a right to think itself special. It just shouldn’t be that special.

Froma Harrop is a Providence Journal columnist. Her email address is fharrop@projo.com

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