State & Local Tax Blog May Incur the Wrath of the Media

Misunderstanding the tax law and how it works, does not mean a newspaper editor will refrain from bashing a company. Dean Baker wrote an editorial for the Chicago Sun Times on November 4, 2007, entitled “How Amazon got rich on our tax dollars”. The title presages the content. Here’s a few of the blistering quotes:

  • “The business press has written numerous stories explaining how Jeff Bezos, Amazon’s founder and CEO, is a truly brilliant businessman. This may well be true, but the secret of his success is not in the futuristic world of the Internet, rather it’s in the old-fashioned world of tax avoidance.”

Whenever a writer uses the word “loophole”, it’s never good for the company being attacked.

  • “Thanks to a loophole in the law, Amazon is not required to collect sales tax on its sales. Amazon effectively splits this tax bonanza with its customers, giving them an incentive to keep coming back.”

But isn’t this a “win-win” situation? The company benefits and the customer benefits, right? I think so, but what I think doesn’t add up to much. What the buying public thinks is a big deal. Will they be influenced by this type of vitriol?

  • “While Amazon and its customers can both be happy about this situation, this is not a classic win-win story. The sales diverted to Amazon and other Internet retailers came at the expense of old-fashioned brick-and-mortar retailers who haven’t mastered the 21st century skill of tax avoidance. These old-timers are losing business and profits because of Amazon’s tax subsidy.
    State and local governments are also losing tax revenue. This means these governments must either cut back services provided to their residents or they must raise other taxes. Of course, buying goods over the Internet does not reduce the demand for services from state and local governments. So, when politicians promise not to tax the Internet, they are in effect promising to impose higher taxes on items other than Internet purchases.”

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