The Big Amazon Subsidy is Doomed

But for many retailers it’s too late.

Amazon battled states for years to avoid having to collect sales taxes. Walmart was on the other side of the fight, along with state revenue offices. Walmart had to add sales taxes to all its sales in California, whether online or brick-and-mortar, which at the time ranged from 7.25% to 9.75% depending on location. For shoppers, that price difference was reason enough to switch to Amazon. It was in essence a massive taxpayer subsidy for Amazon.

But Amazon lost that battle and started charging sales taxes in California in September, 2012. State after state followed. By early 2017, Amazon was charging sales taxes in all 45 states that have state-wide sales taxes and in Washington DC.

Still, even in 2016, online retailers dodged paying $17.2 billion in sales taxes on out-of-state sales, according to the National Conference of State Legislatures. For them, it’s a massive price advantage that other retailers didn’t get.

The fight over sales taxes is based on a Supreme Court case of 1992 – Quill Corp. v. North Dakota – that barred states from forcing companies to collect sales taxes if they didn’t have physical facilities in those states, such as stores or warehouses.

For Amazon, this got increasingly complicated as it is building out its distribution network, with warehouses and facilities around the country. So now Amazon is collecting sales taxes.

Problem solved? Nope.

Amazon only collects sales taxes on sales of inventory that it owns (first-party sales). But Amazon is also a platform that sells merchandise owned by other sellers (third-party sales). About half of the goods sold on the Amazon platform fall into this category. Amazon leaves sales tax collections to the 2 million merchants on its platform. But they claim that it’s not their job to collect sales taxes, and most of them don’t collect them. Hence, third-party sales still get the taxpayer subsidy.

Amazon isn’t the only out-of-state retailer or platform. It’s just the biggest one. eBay and many others are impacted by it too. Legally, this remains murky. But states and brick-and-mortar retailers are fighting to get the subsidy scrapped.

“It’s a fairness issue,” Minnesota Senator Roger Chamberlain told Bloomberg. “Right now, there’s an unlevel playing field that disadvantages brick-and-mortar stores.”

And December 1,  just in the nick of time for the holiday sales season, could be a big turning point.

An amnesty agreement in 24 states — including Florida, New Jersey, and Texas but not California and New York — and Washington DC has been hammered out by Multistate Tax Commission (MTC) that would provide Amazon merchants partial amnesty from back taxes if they agree, among other things, to register and collect sales taxes no later than December 1.

Online sellers with potential tax liability could negotiate a settlement that could lead to some or all of their back-taxes being forgiven. The catch? Online sellers must meet certain eligibility requirements and apply for amnesty between August 17, 2017 [and] October 17, 2017. They must also voluntarily disclose their tax obligations by submitting a voluntary disclosure agreement.

“It’s not clear how many merchants will sign on,” according to Bloomberg. “Because so many have complained about the tight timeline, the states are holding a meeting on Wednesday [Oct. 11] to decide whether to extend the deadline.”

And there are more complications – the promise of 50,000 jobs:

Amazon has launched a nationwide search for a second headquarters location that could employ up to 50,000 people. So states taking an adversarial position against Amazon by trying to collect taxes are simultaneously trying to lure the company for a major investment. Sellers fret that Amazon will have leverage to push the tax collection burden onto them.

“Sellers are scared,” Paul Rafelson, a corporate tax attorney advising these sellers on the amnesty agreement, told Bloomberg. “They don’t think they did anything wrong, but they don’t know if they can afford to get caught. They want to know why the states aren’t going after Amazon like South Carolina.”

South Carolina is not part of the amnesty agreement, but is among the states that have taken this into their own hands. Bloomberg:

South Carolina is going after Amazon directly in court, saying it owes $12.5 million in back taxes, penalties, and interest from third-party sales. Amazon has vowed to fight the case.

Minnesota … in June enacted the country’s first law requiring companies like Amazon and EBay Inc. to collect sales taxes on goods sold by third-party sellers. They’ll have to comply in 2019 – or even sooner in the event the Quill ruling is overturned.

Washington followed with a similar law that takes effect in January.

Massachusetts, meanwhile, got a court order forcing Amazon to turn over by mid-October the identities of marketplace sellers doing business on the site since 2012. That could set off a scramble among states competing to collect back taxes, says James Thomson, a former Amazon senior manager who now advises merchants how to sell on the marketplace. “If Massachusetts succeeds,” he says, “it’s going to be a bloodbath.” Amazon has yet to indicate if it will provide the records or challenge the ruling.

Congress could clarify the situation and create a set of rules for all states, instead of letting states create a cumbersome patchwork, but that hasn’t happened yet. So, for now, as online sales continue to surge, it’s up to the states to determine who will be responsible for collecting sales taxes: The platform (Amazon) or the third-party seller.

In this battle, sellers want Amazon to collect sales taxes, while Amazon wants sellers to collect sales taxes. However this will ultimately be settled, they both appear to have lost the two-decade battle to dodge sales tax collections.

Other retailers have never been able to benefit from this vast taxpayer subsidy. They have to compete on price without it. Some of them have been driven out of business. Sales taxes are no fun for consumers, but a level playing field will give other retailers belatedly a better chance to fight off Amazon, but only after Amazon has already gotten so big, in part due to this subsidy, that practically no one can fight it off.

After Amazon acquired Whole Foods, the first thing that happened was a panoply of strategic price cuts, promoted by the media with enormous hoopla. It was ingenious marketing. The media fell for it. And consumers flocked to Whole Foods to see for themselves. Here are the numbers. Read… Amazon-Whole-Foods Already Rattling the Grocery Sector

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  120 comments for “The Big Amazon Subsidy is Doomed

  1. michael says:

    I have never been into a whole foods and I have no plans to ever do so in the future.

    • Frederick says:

      Went into one once, took a look around and left promptly never to return Overpriced and not impressed by the merchandise they offered

      • chris Hauser says:

        “our prices are insane!”

        with a nod to crazy eddie.

        three bags anywhere else = 1 bag at the WF.

        • alex in san jose AKA digital Detroit says:

          I like WF. Lots of things are cheaper there than in Safeway. I can go on a Friday evening after depositing my weekly paycheck, dish up a nice dinner (typically roast beef, mushrooms and zucchini etc) with a $2 tall can of PBR and sit down and eat it.

          That being said, though, I can also on a Friday night go to Cafe Stritch, get “The Burger” with no fries just the coleslaw, have a $3 PBR, and it works out about the same money, about $12. I just don’t eat the burger buns, and it’s “slop your own damn condiments” so I slather it with mustard and mayo.

  2. Marty says:

    The sales tax issue is about “fairness?” Don’t be ridiculous. It’s about rapacious govt. It’s easy to solve the problem, abolish sales tax. Can’t get any more fair than that.

    • Wolf Richter says:

      Yes, a dive into the good ol’ times of no taxes, no roads, no schools, no laws, no law enforcement, no fire department, no property rights (who would protect them?), no national defense, no health care, no transportation beyond riding on horseback…. Life expectancy was maybe 35 years for the lucky ones. Gosh how I miss those times.

      • Hiho says:

        The invisible hand, wolf, the invisible hand. Laissez faire and do not worry. Eventually, somehow, roads will pop into existence out of nothing. You just have to have faith. Gonna see it.

      • chip javert says:


        Marty didn’t say abolish ALL taxes (no roads, schools…riding horseback) – he said no sales tax (which is a pretty regressive tax to begin with).

        A quick Google shows sales tax (about $375B in 2016) is 5% of the total government tax take ($6T+)

        • mikey says:

          Sales tax is not really regressive. Usually food and clothes are exempt and higher income people spend more on other things and therefore pay more in theory. In reality, they quickly find ways to buy expensive items from other states in ways that cannot be easily tracked.

        • Wilbur58 says:

          I’m in the unusual position of alignment with Chip on this one.

          Sales tax is most definitely regressive. A far greater percentage of the poor and middle class’s income goes towards purchases that get taxed. Mikey, it’s not gross dollars, but percentages.

        • Wolf Richter says:

          He says the same thing when income taxes come up or any taxes. That’s his thing. And I respond the same way (unless I block the comment as a “broken record”).

      • Lion says:

        Wonder how Amazon does in the Sales-Tax free states versus the high tax states like California.

        Was their impact on Brick and Mortar the same ? or significantly less ?

        • alex in san jose AKA digital Detroit says:

          Arizona has higher sales taxes than California, and as my friend said, “They’ll tax your banana” they tax food. Really! Food!

          Now, I pay 20% of my gross into what I call “taxes” but almost all of it is SS/Medicare, but it’s still a healthy bite for someone making $12K a year. I don’t even want to think about how much more sales tax makes my real tax rate. A new tool box. T-shirts. Socks. The roll of anti-slip tape I just ordered on Amazon. Toothpaste. Mouthwash. Vitamins.

          My “keto” diet has me buying a lot of, lol, whole foods so I’m not paying the sales tax on prepared foods nearly as much as I was, but the little guy like me pays a lot of sales tax.

      • Frederick says:

        National ” defense” huh Wolf Isn’t that a bit of an Oxymoronc statement? Last I checked nobody is threatening to invade North America

      • wkevinw says:

        More discipline is needed when people talk about the enumerated functions of government- think uniforms and/or highest/best use of real estate or other physically limited commodities (like electromagnetic spectrum).
        Thus, definite role of government:
        -roads (spectrum and easement usage for line-based utilities), national defense, police, probably fire department (although you can have private security and fire protection too!) Note that property rights are protected by the government; judicial and executive branches mostly (e.g. police/law enforcement).
        – questionable government activities: health care, schools- note that there are many cases where these have been delivered by the private economy quite successfully

        The US had taxes prior to the federal income tax- mostly excise taxes. Also local taxes provided for national defense (via state-based militias that got together to protect the nation in wartime).

        • Matt P says:

          Because of its inelastic properties and the interest of everyone in having a healthy population, healthcare should definitely be the charge of the federal government. Our country will eventually figure that out.

      • Wolfbay says:

        For the big government fans who understand the need for taxes how about raising the taxes just enough to actually cover government expenses at least on the local and state level let alone federal. That way we can cover infrastructure, pensions , education and on and on. Our wonderful government doesn’t seem to be honest about our actual obligation and will kick the can at any opportunity.

        • Kent says:

          We do that in Florida. But I’m not sure we would qualify as a “big government” state. Which is probably fairly subjective based upon one’s beliefs.

        • mickey says:

          Very little should be left to Government, those that run government are good at recklessly spending OPM. There is no accountability.
          That’s why capitalism is good–if I have a business, I am careful about spending each dollar. If I am in government I could care less. I want higher pensions for the common person as that translates into higher pensions for me, same for healthcare and eyecare and dental care–if the rank and file workers get great benefits at early retirement, Its doubly good for me.
          Balancing the budget has never been a concern for govt.

      • mickey says:

        On the other hand, when I graduated college n 1969, IL sales tax was 4%, and there was no income tax until August 1969-

        Yet we had roads and pretty good schools and college tuition in state was $1,000 per year. We had inexpensive public transportation.

        A new Chevy Impala SuperSport cost $3,000. 4% tax was $120 bucks.

        Now IL has a 5% income tax on individuals and its run rate cash flow loss for the first 75 days in new budget year was 6 billion. After the tax increase.

        Sales tax in Chicago is 11.75%-And a Chevy Impala costs over 30k. and the sales tax on that is $3,525 and the City, Schools, County and State do not have enough in tax revenues.
        Where has the money gone, at least in IL?

        To Pensions. Early retirements, spiked earnings. etc gaming the system.
        California has 14 of the 20 counties with the US highest pension deficits. IL only has Cook County.

        soda taxes now. Utility Taxes, taxes on internet
        the reach of govt has gone too far. the question is what do we get for the money,

        • Wolfbay says:

          In a democracy you get what you deserve. These days if a politician talks about cutting any service or pension there career is probably over. They also would not raise taxes to cover actual expenses because voters would revolt. The can is going to be kicked and kicked as long as possible.

      • Michael Fiorillo says:

        Yes, those Glibertarians are big on getting something for nothing, and insisting on the provision of resources that they refuse to pay for.

      • John Ariola says:

        The inability of one state to tax goods from another state was meant as a way to promote free commerce between the states, helping unify them. One state could not institute prohibitive taxes on the goods of another state, making them unaffordable. Each state was sovereign, and able to tax only the produce of its own citizens. It was called liberty. Yes, “the good old days“.

        Property taxes pay for schools, police, and firefighters, tolls and gas taxes pay for roads, sales taxes are “for the children”.

        I’m sorry- where are all those income taxes going?

      • c graviss says:

        All of those things you mention that the govt provides, it provides poorly and at much higher cost than the private sector would. And many of those things you suggest didn’t exist were provided perfectly well w/o govt. Over the years I have found your work insightful and well written, but I never thought you were a Statist before now.

      • Silver Dimes (Change you can believe in) says:

        National Defense is a laughable oxymoron. National Offense is more like it.

      • David Krenshaw says:

        He’s talking sales tax… and you bring up national defense and “no laws.”
        Why not mention more hurricanes and lightning strikes, too.
        C’mon. SMH.

      • Carlada says:

        Wow, where to begin?
        I’ll touch on only one subject, because you as a numbers-person should know better.
        “Life expectancy was maybe 35 years for the lucky ones”. In recent times (past 120 years), that “number” was 45-50, and NEVER 35.
        In the 1840s (“the bad old days” as you seemingly allude to), if a person lived past 5 years of age, they would likely live to ***55+***.
        You’re including infant mortality rates in that “number”, which is not a REAL indicator of life expectancy.
        I have all the info on my ancestors for the past 500 years—very few died untimely deaths, most living 70ish years.

        • Wolf Richter says:


          Read my comment again: “no roads, no schools, no laws, no law enforcement, no fire department, no property rights (who would protect them?)” … that’s a references to ancient times, not 120 years ago.

          Most of these things existed in the Western World in well-documented form since the Roman times and earlier. So well over 2,000 year ago. And much earlier in Egypt and prior cultures. To go back to a society without roads, you have to go back to the times before the wheel had been invented.

      • LLB says:

        It was not Amazon getting the subsidy. It was the local brick and motar business’s that got the subsidy.

        Every dollar that was not collected in sales tax by the internet sales was a dollar that remained in your local consumers pockets and could be spent at your local businesses.

        Those dollars now will flow into governments pockets and will not be spent in local brick and mortar stores.

        The consumable income available to be spent locally in just my small state of 600,000 will shrink by over $200 million in this transfer of monies to the state governments.

        This isn’t rocket science but any brick an mortar business that supported internet taxation has not only shot themselves in the foot, but have also fallen prey to the flim fam man and bought the Brooklyn Bridge.

      • Randy says:

        Our school system is a joke. There are way to many laws. The police think there God’s. National defense? you mean the military industrial complex. Our health Care system is ranked worse than 3rd world countries and is the most expensive in the world. So what’s your point?

  3. Mark says:

    I’ve been to a Whole Paycheck – once. Discovered Almond Butter there… a 12 oz jar for $19.99, which I bought and found out I liked. A few weeks later, I discovered Aldi, which opened a few miles from Whole Paycheck. Stopped in there and found the exact same brand of almond butter for $5.99. So, so long Whole Paycheck. Haven’t been back since, and won’t ever go back again.

    • chris Hauser says:

      the prices are ridiculous, but amazon will figure out a way to barely eke out a small profit.

      as to sales tax, the seller is obligated to collect where and when they are under the obligation to do so.

    • Seattle Cranes says:

      Just went into the flagship Whole Food here in Seattle. Haven’t been in there since the takeover. Same old high prices $4 for a bag of tortilla chips [on sale] & $3/lb for apples [on sale], in the apple state! They also installed new lighting & it is super bright now. Wondering if they’re getting ready for facial recognition software to track people as soon as they walk in the door… ooh please track me Amazon, make my life so much easier ;)

  4. mvojy says:

    Shouldn’t matter who’s sale it is. Amazon and third party merchants should be collecting and remitting sales tax after what they’ve done to brick and mortar stores and retail jobs. Having consumers pay use tax doesn’t work.

    • chip javert says:

      Well then get the law changed.

      If everybody just stands around bloviating about what everybody else ought to do, exactly nothing gets done.

      That’s why we have laws – so there are defined rules and adequate enforcement.

      • Tom Welsh says:

        “Well then get the law changed”.

        And there’s the rub. If you lived in a democracy, or anything resembling one, that would be realistic advice.

        Unfortunately, in the USA only those who are rich and powerful have political influence. See, for example,

    • mikey says:

      A lot of third party sellers are quite small. It should only be required for large ones. It took me about twenty hours a year to do the nj sales tax forms. Since 99 percent of my sales were not in nj, i only paid about twenty dollars a year. The state probably spent a lot more then that to process the forms. Multiply that by fifty.

      • Bobber says:

        My understanding is Amazon offers a sales tax collection and administration service for a fee. Companies that aren’t collecting taxes are simply evading taxes, assuming collection of the sales tax is required.

        • alex in san jose AKA digital Detroit says:

          Bobber – Companies that don’t *pay* the sales tax are evading taxes. Companies are *allowed* to pass the cost of the sales tax on to the customer, but they are not obligated to.

          This is why you have “Pay No Tax!” sales and things like that.

      • Beard681 says:

        I don’t know why small sellers even bother with Amazon. Web hosting is so cheap and the web tools are so much better than 15 years ago when I opened up a web business writing html and php with notepad.

        States are only going after Amazon BECAUSE they are big enough to make it worth their while.

        • alex in san jose AKA digital Detroit says:

          I’ve sniffed around the idea of selling on Amazon and wow … it just seems really klunky. We well on Ebay and have been doing so for, my employer and myself also, 20 years now. Ebay’s got it’s problems, but Amazon just seems to be eating glue sometimes.

          And I’ve been doing my part to keep ’em hopping, ordering stuff and yes, many Amazon returns.

  5. Gian says:

    The insatiable tax man strikes again. I built a house in WA this past year, where sales tax is approximately 8.5%. Unfortunately, this state taxes labor and materials, costing me $40+K just in sales tax, which adds zero value to my house. This is in addition to permit fees, stormwater fees, water and sewer hookup fees and all the other bend-me-over fees the government parasites can suck out of you. Now, I can look forward to the reassessment of my property and pay more taxes.

    • J Dubyah says:

      My solution: 1200 sq ft.
      I eventually concluded/decided I did not need to pay rent (eternal taxes) for my pride in how big a house I live in anymore.

    • Wolf Richter says:

      The joys of homeownership. Homeowners are sitting ducks. They can’t just pack up and leave when taxes get too high. But they also take the subsidies without too much complaining, including the deduction of mortgage interest from their income taxes and the benefits of government guarantees on their mortgages that bring mortgage rates down even for those who don’t have government guaranteed mortgages.

      • intosh says:

        Many people only remember what’s taken away from them, never what they receive in return.

      • R Davis says:

        Co-operatives are the answer:
        People working together to achiever home ownership A.S.A.P.
        You need a creative & compelling broker to negotiate loans.
        You buy one house at a time & pay it off quickly principle.
        Under the umbrella of a business / corporate title if necessary to accrue negative gearing & capital gains concessions of course.
        Tax deduct rental losses.

        • R Davis says:

          What was that you thought !
          A criminal mind – me ?
          One avails oneself to the opportunities given so generously.
          In this world where making money is at the fore – that no one has realized that their is legal money to be made at every turn.

          What has happened to Prof. Yanis Varoufakis ?
          He wrote a book.
          He did a promotional interview of said book.
          He locked himself in a cupboard ?
          Given his experiences as Treasurer of Greece ‘for a time’ there should be a running commentary from him – he has amassed expertise in the workings of the EU Group etc.
          Pou ise ver ?

      • mean chicken says:

        It’s like winning the lottery if you’re an H1B home owner

      • RD Blakeslee says:

        It’s not in your world, Wolf, but it IS, in my part of it.

        Built my own house in a low cost, unregulated place.

        I’m anything but a sitting duck!

    • Tom Welsh says:

      But for pity’s sake! How do you expect your government to go on killing enough people in Asia to meet its quotas, without your tax dollars? And then there’s the whole thermonuclear arsenal needing to be rejigged, at an estimated cost of $1 trillion (in other words, at least $3-5 trillion).

      A trillion here, a trillion there – pretty soon you’re talking real money.

      Be reasonable.

    • Kent says:

      “where sales tax is approximately 8.5%. Unfortunately, this state taxes labor and materials, costing me $40+K just in sales tax”

      So that would bring the labor and material price of your house to $470,588, not including land. That’s a heck of a house their Gian. I have a 3/2 2000 sq ft house in Florida and labor and materials for construction was about $64,000. And that includes 6% sales tax on materials and all permitting fees.

      • chris Hauser says:

        state of washington has its charms, but lack of regulation and low fees aren’t numbered among them. oregon, california……yow.

    • Corbin Dallas says:

      You’re welcome to go build a house in a place with no “bend me over” fees and see how that fares for you – tax havens like Dominica or Dubai!

      • RD Blakeslee says:

        Corbin, you don’t have to go abroad – just to one of many rural counties in the U.S.

        • Ed says:

          I went to high school in a sparsely populated rural county & there was no way they could even maintain their roads with their tax intake.

          Most rural counties are heavily subsidized by sate and Federal tax dollars. That’s the typical case, though not universal. I wonder if people appreciate how many of other people’s tax dollars end up in their pockets.

  6. JungleJim says:

    If Amazon wins and the third party merchants are forced to collect sales taxes it will probably put a lot of them out of business entirely. Many are Mom & Pops. For sellers that small, the administrative burden of collecting sales taxes for 45 states would be the kiss of death. Amazon could do kt easily with their computer horse power, but my experience with Amazon is that they are a strictly one-way company.

    • Scott says:

      There are software programs that are used to calculate taxes. Retail chains and other businesses with large presences have to comply with them all of the time. It’s not really that big of a deal. It’s simply another cost of doing business.

      You’re right Amazon could do this incredibly easily, especially given that they already calculate the taxes for each location

    • fajensen says:

      Amazon could just run the whole thing as a service and charge the sellers either per transaction or flat fees for a range of transactions. This is well known tech, Amazon could probably procure the service from a 3’rd party and “re-skin” the interface to make it look more “Amazon-ish”.

      When I had a company, I used an online accounting and billing service ( One pays them the equivalent of USD 15 per month and their software will do all the VAT calculations, taxes, duties and whatnot. The best part of “accounting as a service” is that it is updated by “other people”, when rules change, I don’t have to deal with it, they are the ones paid to suffer and worry!

      Using this system, all I had to do, tax administration-wise, was to send bills, book payments received, send the amounts the machine say to the IRS “accounts” the machinery says it goes to once every 3 months. One can give the accountant an account to slurp the data and do what he/she has to do also.

      There are many equivalent on-line accounting services with similar or perhaps better functionality, this is just the one I used.

      • mickey says:

        it is regulations like these which are killing the small business person-something that helped grow the country. Yeah, you can still have your local family owned restaurant, and not have to be concerned with complexity of sales taxes but in the on line era thats kaput.

      • Kraig says:

        Yup there’s a few in California too specialising In this kind of thing. Amazon is in the position of being able to buy the technology and developers if it wants too. Then it can integrate the technology as it wants(or it can offer the service to.third parties as an on top)
        There is an issue in the us I believe they have to file in each state rather than just where they are incorporated although for Amazon that easier, and there are joint filing for a few they could promote that which would help

    • Beard681 says:

      No. If you are not in a state they can’t make you pay sales tax. It is the responsibility of the buyer to pay the tax. The issue is that Amazon is everywhere and when you buy on Amazon, who are you really buying from. Best bet is drop Amazon and get a web hosting account on GoDaddy or some other service and use some tools to build your own website.

    • alex in san jose AKA digital Detroit says:

      Ebay collects sales taxes for us just fine and was doing so just as smoothly 10 years ago when I was a one-man operation. It’s a non-issue.

  7. John M says:


    When you sell in California we have different sales tax rates for hundreds of neighborhoods. Multiply that by 45 states and a small company isn’t in business it’s now started a new corporation inside it’s company figuring out how much and where to send the collected taxes. Frankly it’ll a be a nightmare.

    • Wolf Richter says:

      It doesn’t go by “neighborhood” in California, but by city, county, and state. So there may be three different sales taxes that apply to one sale. But software figures that automatically based on the address.

      Granted, if you’re a very small merchant, and you’re doing this by hand, it’s a nightmare. But it’s a breeze for larger sellers.

  8. Wilbur58 says:

    F Amazon, period.

    They’re now opening retail stores in which one’s online searches for competitive pricing will be blocked. They run slave labor that’s not unlike the days of Sinclair Lewis’ The Jungle. What an unethical monopoly.

    Here’s good ol’ Sinclair:

    “This country has gone so flabby that any gang daring enough and unscrupulous enough, and smart enough not to seem illegal, can grab hold of the entire government and have all the power and applause and salutes, all the money and palaces and willin’ women they want.””

    • Wilbur58 says:

      Oops, got Upton Sinclair and Sinclair Lewis mixed up. Sorry! Wolf, we need the edit function.

    • chris Hauser says:


      try searching an item/price in amazon, closing it out, wait 15 minutes, and go back in.

      do it 10 times, 10 different things.

      see for yourself. you’ve been algored. i claim copyright…..i know it’s been used, just not this way. or, better yet, algoed. i claim copyright.

  9. steve says:

    When you can go to aliexpress and get the same item cheaper, despite it needing to be shipped half way round the world, it seems there are easier targets to aim fire at.

    but I guess china gets a free pass…..somehow

    • Flying Monkey says:

      I live in Germany. Most anything declared over 20 euro or so imported gets a 10% import tax and the VAT of 19% added on. You might be able to get the seller to fake the invoice to be under 20 Euro but that will only work for borderline, obscure items. Otherwise Customs is not stupid.

      • R Davis says:

        In Australia, come pay day & the government, riddles with an insatiable greed, are all over us like a rash.
        It must be our fault – where did we go wrong here ?

      • steve says:

        I’ve never been hit with customs duty, not even once. As far as I can tell nothing is ever checked. The price is always fake, no need to ask, they even lie about goods not suitable for air shipping like lithium batteries, the last one claimed to be a paper cutter(?)

        • Lee says:

          I was hit once years ago on a shipment from the USA. The place I bought the items from was “kind enough” to place a big fat customs label on the envelope telling everyone in the world how much it was worth. Paid the tax and got the items.

          I still wonder how Australia is going to implement the new system where everything coming into the country by mail is going to get hit by the 10% GST………

          Haven’t heard much about the program since it was put off until later…………

          Is it going to be next year?

          Just imagine the paperwork and checking needed for that. No doubt the program will cost way more to implement and regulate than they make in revenue.

      • fajensen says:

        Customs officers are all overworked and underpaid, as part of the neoliberal campaign against anything that regulates or enforce any legislation!

        Very rarely will a package be interfered with, the exception for me is Amazon US which always gets nailed. Possibly because the labelling is machine readable or because US couriers like DHL and UPS will narc on you.

      • mean chicken says:

        It’s perfectly acceptable for Germany to have import duties but not acceptable for the US.

        b/c it’s good for the consumer, lol!

      • David G LA says:

        @flying monkey-
        It must be nice to live in a country with an efficient, logical, ethical and working government! It’s the Wild West out here… nothing surprises me these days.

      • alex in san jose AKA digital Detroit says:

        Speaking as a seller, I hate people who want me to lie, to my government, just so they can save a little money. These days, Ebay puts what the item is on the form but in the old days, I used to write in things like “Missile Parts”. And somehow they were always very valuable.

  10. raxadian says:

    Too little, too late.

    Still is better than nothing I guess.

  11. wkevinw says:

    Two “subsidies” for Amazon:
    1. Tax- they have been collecting in my state for a couple of years now
    2. Financial Market funding – they don’t make profits but pay their people with stock-based compensation (I have a niece that works for them)

    Both of these are “unfair” in my opinion in that you have traditional businesses that don’t have access to either, and are being run out of business by Amazon because of this.

    When the stock market corrects, I think you will see another cycle of retail turmoil as Amazon has to cope with doing business like everybody else. Maybe they won’t be able to buy newspapers, and rocket companies after that.

    I buy almost only distressed or specialty items from them- they lose money off my purchases for sure. But, I can’t stop the stock price from increasing…

  12. Halcyon says:

    Wait !!! What about the huge advantage that retailers get ? Walmart and others get the legal right to keep millions of dollars in sales taxes when it builds a store in a town. The “incentive” from the municipality to build involves giving the sales tax to Walmart etc.

    • Kent says:

      Well, the deal is that Walmart builds on a large, empty plot of land, usually zoned agricultural (or similar). That zoning means the municipality maybe brings in a few hundred $$$/acre.

      The zoning gets changed to large retail or something similar which brings in 20 times what the ag designation brings in. So the city council gives Walmart 1/2 off the property tax rates. Sounds awesome for Walmart, but their tax bill is still in the thousands per acre. And the city is making way more than it would otherwise. Those tax breaks generally have an end of life too. Usually 5 – 10 years. Which is why you see a lot of empty old Walmarts: they move to a new location after the old tax breaks sunset to get new tax breaks plus a shiny new store.

      It appears to be a short term goody for the city council, but then they find that Walmart runs out all of its competitors in town, wipes out the old downtown, and you get net job losses. But the council members can brag about building the new fire station and elementary school and get elected to a higher office.

      • MC says:

        Do you know if Walmart directly builds and owns their stores, if they use a “Chinese boxes/Matrioshka” system or if they use outside developers?

      • David G LA says:

        Suburban car dealerships have the same strategy.

    • Wolf Richter says:

      Wait till you see the offers Amazon will get from cities and sates to build its second headquarters with those 50,000 highly-aid jobs dangling out there like the biggest carrot ever.

      Foxconn offered to build a factory in Wisconsin that might eventually create 3,000 jobs – and the state offered $3 billion in tax incentives. So that’s $1 million per job. I think they’re negotiating now with various municipalities for the precise location, and more incentives might be squeezed out. This gives you a feel for what the Amazon deal might add up to.

      Heck, Twitter got massive employment tax relief when it moved its headquarters a few blocks within San Francisco. It had threatened to leave SF otherwise. Extortion comes to mind.

      This is totally nuts.

      Obviously, no one cares if I offer to move the headquarters of Wolf Street Corp into some state. They don’t even talk to me. They just send instructions on where and how to pay taxes.

      • GS says:

        Wolf, you should rename your company as Social, Cloud And Mobile Wolf, get the ticker symbol SCAM , do an IPO with staggering losses, get a 5 billion dollar valuation and then ask for a tax break. Then you will get it. What the fed has brought on is complete nuts. Sad thing is when this ends, a lot of 401Ks are going to be decimated.

      • Paulo says:

        They (Amazon) are also looking at Canada for sites, or at least Canadian cities are bidding for recognition. The thought is with today’s politics being what they are, it might make a pretty good Bezos statement. It could happen and man what a furor that would start!!

        re Taxes: I have never minded paying taxes for services and benefits such as our single-payer medical, excellent school system, whatever. What does stick in my throat is tax money waste, particularly at the muncipal level. However, living rural we pay for our own water (wells), sewerage via septic. Our fire dept is volunteer. No streetlights, no sidewalks, and basic snow removal. We have an ambulance stationed in a nearby village with EMT on call and are just 45 minutes from an excellent new hospital. We pay $150/year for garbage PU, which is mandatory. Included is a 4X yearly free dumping sevice for all household waste that builds up and is too big for the cans.

        I worry about fire so I always keep a hose ready to go; even in the winter I ensure there is a freeze-protected tap and hose available at a moments notice. (When I was a kid our neighbour’s house burnt up and everyone died but the dad who was held down by the firefighters and couldn’t run back in. 5 kids died that night and I saw the whole thing and have never forgotten it.)

        Property taxes pay for our schools and a well- educated population is a benefit to all. The only real complainers are those whose homes have skyrocketed in value during this last bubble. Like the above poster…build a smaller house if it bothers you. :-) Or, live rural and do for yourself on services.

      • TJ Martin says:

        The problem when it comes to WalMart is … once their loverly little tax breaks run out … so do they promptly abandoning what ever current property in the town/city they’re in moving elsewhere after having destroyed the town / city they were in .

        All bets are Amazon will do the same ( as does everyone else )

        And errr … Wolf ? From what I’m hearing and seeing them there ‘so called ‘ 50,000 ( yeah right .. dream on ) highly paid jobs are anything but . 80% of them barely breaking into reasonably comfortable Middle Class status . The fundamental SNAFU when it comes to all the Alphabet Soups . Lots o’ potential jobs most with sub-standard in relation to the cost of living paychecks . Boulder’s dealing with that now that they’ve ‘ paid up ‘ big time to Google

        But if its extortion you wanna talk about … have a look see at GM’s massive levels pf extortion on multiple towns and cities across the land . My personal favorite ? Telling KCKS to not only not charge them any property taxes for the next ten years .. but to pay for the building of a paint shop and an extension on the plant as well (ALD AW WSJ etc ) Now that … is extortion at its finest

      • TJ Martin says:

        PS; If you’d like to consider moving Wolf Street to CH .. I can probably help … with some extremely favorable terms on offer depending on the canton/city . Cause unlike most US cities and towns … CH loves the little guy . Especially little guys such as yourself . Shave a decade or so off mine and my wife’s ages and we’d be there in a heartbeat .

        Apologies for the multiple comments but I forgot to include this . little diddly .

  13. prepalaw says:


    to be fair to all sides, the subject of taxation is political and should not be a focal point on a financial website. The collection of tax makes the tax collector an arm of the state.

  14. Anon1970 says:

    The big Amazon subsidy may be doomed, but smaller online merchants like Overstock which do not sell through Amazon will continue to enjoy an advantage by not charging tax on out of state sales. Congress could have fixed the the tax laws decades ago but has chosen not to.

  15. raxadian says:

    Wolf, Amazon wants to automate everything, so any jobs they create won’t even last five years. And almost everyone will be with temp / trash contracts.

    Besides they are in a prize war, they don’t have time to build new places, just acquire existing ones.

  16. Petunia says:

    My sales tax rate is 10%, but I rarely pay it. I just don’t buy anything unless it is discounted at least 10%. Which translates into the merchants subsidizing the state and local sales tax collections. Maybe this is why brick and mortar retail is in the toilet.

    I may be different from most consumers, but I doubt it. The politicians keep imposing fees and taxes and consumers are tapped out. I don’t buy anything at full price anymore. If the politicians were smarter they would eliminate sales taxes altogether. The higher the rate, the higher the subsidy, the merchants have to provide to attract business.

    • Dos Tacos Mas says:

      “The politicians keep imposing fees and taxes and consumers are tapped out. I don’t buy anything at full price anymore.”

      As the baby boomers continue to retire, you’re going to see lots more “tapped out” folks who won’t be spending for much more than essentials. Lots of them are also going to be unloading lifetime accumulations of “stuff” in the garage sale of the millennium – the kids just aren’t interested. I bet you’ll be seeing lots more folks shopping flea markets, thrift stores and garage sales and not paying retail OR taxes!

      • Jeff says:

        When you count people looking for something to buy and resell for a profit and also things they can use, what you outlined has already become the new National pastime.

  17. TJ Martin says:

    ” Congress could clarify the situation and create a set of rules for all states, instead of letting states create a cumbersome patchwork ”

    Ha …. haha … ha … Errr .. ha … pardon me while I fall off my chair laughing my fool ___ off hysterically to the point of pain !

  18. r cohn says:

    Even with the “sales tax subsidy” Amazon has made little to no money on its retail sales .

  19. Leave it up to the states to collect it from the buyers. The method would be similar to how they figure tips on restaurant workers. That would be the best solution for the vendors which suggests to me that it must be a really good idea.

    • prepalaw says:


      it’s called “use tax” – a tax imposed on something bought out of state that is used in state. It is an impossible tax to collect. States gave up on use tax a long time ago

      • No its not, you index it by income, (a standard payment) demographics, and you also allow the taxpayer to file his own report, which will be provided by Amazon like a 1099 on state sales tax. Its really a lot simpler than collecting the tax then issuing monthly payments and having the transactions audited. Simplify by including it in the state income tax form, if you have no liability you pay no sales tax. The state board of eq is not equipped to chase online purchases around the globe (hey China where’s my sales tax?) they only worry about what people are doing inside the state.

  20. ft says:

    Taxation is an abomination that sucks up an inordinate amount of resources from individuals and companies alike. So we all play the game of tax avoidance and the big outfits like Amazon are in the best position to succeed. So, what else is new?

    • Kent says:

      And because people play the game of tax avoidance, governments come up with ever more complex rules to follow increasing the burden further.

    • mean chicken says:

      In this case since Amazon is undercutting everything on earth (Your margin is my opportunity), municipal coffers are losing revenue stream while their costs are still increasing.

      Apparently in a socialist economy, this practice is embraced and encouraged b/c somehow “it’s good for the consumer”.

  21. D says:

    Wolf, please see my comment here, as you’ve utterly missed major Federal Tax Legislation in your commentary regarding Federal Sales and Use Tax Regulation and INTENT:

    This is not at all an attack, I appreciate your highlighting of the issue, and don’t have a clue how old you are. I notice your archives appear to begin in 2011, I’m referring to 1998 Federal Legislation, which of course is highly obscured in current day internet searches. It took me about three hours to track down the exact Congressional Bill which was passed as the 1998 Internet Tax Freedom Act.

    (Sorry if I don’t respond immediately to further comment, but I’m hours now passed what I needed to do today. Again, thank you for highlighting the issue, too bad people still insist on using Amazon when they need not.)

  22. Paul Gibson says:

    Online taxing to “Level the playing field” is a BIG fallacy.
    A brick and mortar store only has to remit sales tax to ONE state – the state and locale it is physically is located in.
    But online retailers would have to submit tax remittances to up to 50 states. And each state tax rates have county and local components meaning there are 1000’s of tax rates in the US. i.e. within a street – one address can be taxed at one rate and just down the road on the same street it is taxed at a different rate because locale is different.
    Plus, most states vary the tax rate base on what is being purchase such as food so that add another layer of complexity.
    So how is putting the uneven burden on online leveling anything.

    It is so difficult to managed that pricey online software is required that updates constantly in order to manage the collection. Once again brick and mortar doesn’t have to worry about that headache.

    States needed to agree to a common rate for online interstate transaction with simplified reporting but that hasn’t happened, so until they agree to it, it should stay as is.

  23. hikusar says:

    The states can start collecting sales tax on all US online retail sales. However, I will continue to avoid paying sales tax for many items by buying manufacturer direct from China with websites like newfrog and DHgate. The items are way cheaper and free shipping too on most items! Sometimes, items on these websites show up on ebay for a markup. The only downside to manufacturer direct is the 3-5 week shipping time.

  24. Kreditanstalt says:

    I fail to understand how you can call the ability to avoid a government impost a “subsidy”.

    Following that reasoning, you’d have to claim all tax avoiders and evaders were being “unfairly subsidized” and, furthermore, that low tax states are taking advantage of higher tax jurisdictions…

    Bass ackwards. Brick-and-mortar retailers are in fact being forced to subsidize governments.

  25. S and P 500 says:

    Wow–I’m glad I haven’t sold anything on AMZ for years. Recently I’ve taken advantage of selling stuff directly to AMZ (when the listing for an item says “trade this item for a gift card”). I got $80 for an older iPad. I struck out on a 70-210mm Canon lens. I was hoping for $40 but my lens was rejected because of “fungus”. Google “fungus on camera lens”. I never heard of that problem before. It must be a disaster for people who own lots of old Nikon lenses.

  26. Kraig says:

    The other subsidy to Amazon is because it is around 160 times more expensive to maintain highways for hgv/lorrys than cars/pickups/SUVs but the funding comes from income tax equally. So if you had a private Interstate with tolls youd be paying around 160 times per pound in delivery fees for anything that was not produced locally. I suspect this is why toll road countries tend to have more of a high Street sector.

  27. Bob says:

    Fix sales tax by having tax remitted to the state where the retailer is, not the consumer. Way easier for the retailers, they only need to comply with one tax code. If the states want mail order tax money, they should encourage mail order businesses to open in their state.

  28. scott says:

    I enjoy all the comments and perspectives and knowledge eveyone has on this site even if its a political opinion.

  29. Shawn says:

    The Amazon tax subsidy is so typical of tech company today. If you can get something for free, the go for it. Amazon, AirBnB, Tesla, Uber, I’m sure there are more. Time and time again one tech company after another have used, what amounts to advances in automation, to circumvent rule, regulations and taxes in order to gain an unfair advantage over it’s competitors. It’s the we are ‘Changing the world’, so we can do anything we want mentality.

  30. Markar says:

    I ordered a $10 pair of shorts on Amazon w/free shipping. Came directly from China via DHL, then delivered the last mile to my door by the post office. Talk about a subsidy!

  31. Philip Arlington says:

    The UK has the highest percentage of retail sales online of any country in the world (15.6% in 2016 vs. 7.7% in the U.S.) even though internet retailers have to charge the same percentage of VAT as bricks and mortar retailers. And the rate is 20%.

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