Amazon has built its empire on the legitimate advantages it has over retail shopping: an endless range of products at a steep discount and stunningly good customer service. But it has also benefited from one unfair advantage over its bricks-and-mortar competitors: it does not have to charge a sales tax, which American states levy in varying amounts on consumer goods. Depending on where you live in the US, this can save you up to 12 per cent on purchases, making it foolish not to buy online when you can.
Twenty years after Amazon was founded, the US Congress is finally addressing this loophole with a bill that would allow states to require online retailers to collect tax. What is interesting about this is not the debate around the Marketplace Fairness Act, which is expected to pass the Senate next week. There really isn’t any – even Amazon concedes in principle that the playing field ought to be levelled. It’s what the delay tells us about a political system so compromised and sclerotic that it cannot correct even the most straightforward economic unfairness in a timely fashion.
Online businesses have been able to avoid collecting sales tax based on state laws dating from the era when local shopping was the norm. Companies without a “physical presence” in a state did not have to charge tax if they shipped goods from elsewhere. It was up to customers to pay “use taxes” on purchases instead. Few have been scrupulous enough to do so and states have no means to track dodgers.