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Prediction for Cyber Monday: new Amazon taxes won’t help Main Street stores

Today is Cyber Monday, where analysts are busy predicting online sales growth and political types use the day to advance policy  remedies for the so-called “unfair” advantage held by online retailers like Amazon.

Advocates for new Internet sales taxes will cite Cyber Monday sales when claiming to defend Main Street small businesses, or to plug the massive budget holes facing states (see Michelle Quinn’s piece in POLITICO today).     Like most complex policy issues, the truth is far more nuanced and the “fix” won’t be anywhere as beneficial as advocates promise.

Take for example California’s recent deal with Amazon to begin collecting sales taxes for online sales.  Amazon has physical facilities in California and is therefore required to collect taxes under existing law, but tax advocates heralded the deal as a big win for small businesses losing out to online retailers.

Yet in their most recent earnings call, Amazon execs shrugged off any notion that the new taxes were having an impact on sales.

Analyst: “I know it’s early, but is there a noticeable impact on sales of having to collect sales tax in California?” 

Amazon CFO: “You’re right that it’s early. Only thing I can say is that we collect sales tax or value-added tax in over 50% of our revenue today.  We have very good businesses in those states and geographies where we do collect.” 

So, if forcing the world’s largest online retailer to collect online taxes in its largest state market doesn’t put a dent in their online sales, how could anyone claim that imposing new taxes on Internet sales will help Main Street?  Truth is, shoppers go online for  superior selection, lower prices, and  greater convenience — not to avoid paying sales taxes.   That’s been true for years, and Cyber Monday stats will only prove the point in states where Amazon has only recently begun to collect sales taxes.

For a thorough explanation and debunking of this and other myths surrounding the Internet sales tax, watch this recent CSPAN debate.

The CSPAN debate provides context and insight to help lawmakers make intelligent choices about this massive new tax regime.  It will also help voters understand when they’re being sold reality vs fantasy, a practice all too common here in Washington.