Heartland Institute Reacts to Amazon Tax Deal in Massachusetts

Massachusetts Gov. Deval Patrick and Amazon announced Tuesday an agreement in which the online retail giant will begin collecting sales taxes from purchases made in the Bay State starting in the fall of 2013. The state claimed Amazon established “nexus” in Massachusetts when it acquired Kiva Systems and was thus required to collect sales taxes. After years of opposition, Amazon now supports a federal law allowing for the collection of online sales taxes.

The following statements from tax and technology experts at The Heartland Institute – a free-market think tank – may be used for attribution. For more comments, refer to the contact information below. To book a Heartland guest on your program, please contact Tammy Nash at [email protected] and 312/377-4000. After regular business hours, contact Jim Lakely at [email protected] and 312/731-9364.

“Gov. Patrick asserts that Amazon’s about-face on Internet taxes is a winner for both the state and the company, when, in reality, Amazon has thrown every other Internet retailer in the state under the bus. Amazon is huge and has forfeited the debate, likely assuming the tax named after its successful business model is an eventual fait accompli.

“Rest assured that smaller businesses with a Massachusetts’ nexus that rely on the Internet as a sales channel will feel the pinch and pull up stakes to relocate to another state to avoid the additional hassle and expense of collecting the state’s sales tax. It may be a win-win for Amazon and Massachusetts, but it’s a lose-lose-lose for small businesses in the state, the individuals they employ, and Bay State consumers.”

Bruce Edward Walker
Policy Advisor, Telecom
The Heartland Institute
[email protected]

“Amazon’s agreement to collect Massachusetts sales taxes from purchasers in that state isn’t really a surprise – it agreed to collect California sales taxes in September. But it’s unfortunate, creates a windfall for the state, and sets a bad precedent for other mail order/Internet sellers.

“Legally, Amazon has no obligation to collect sales taxes, in my opinion. In the Quill case, the U.S. Supreme Court set out a test for when an out-of-state mail order retailer must pay state sales taxes in a particular state. Two parts of that test are applicable here: the activity taxed must have a ‘substantial’ nexus to the taxing state and the tax must fairly relate to the services provided. Delivery by common carrier isn’t enough. Delivery of e-books over the Internet unquestionably isn’t enough. Under any fair reading of Quill, Amazon is not obliged to pay sales tax in Massachusetts.

“Here, there is one current Amazon activity in Massachusetts: its ownership of Kiva Systems, which makes robots for use in automated order fulfillment warehouses. At the time of the acquisition (March 2012), Amazon didn’t use the Kiva robots in its warehouses, all located in other states. Vague plans to create jobs in Massachusetts aren’t nearly enough to oblige Amazon to pay the taxes.

“According to the Tax Foundation, there are more than 6,200 sales taxing bodies in the United States. Maybe Amazon can keep up with this mind-boggling task of acting as the tax collector, but many small Internet retailers are going to find this an extremely difficult – and costly – endeavor.”

Maureen Martin
Senior Fellow for Legal Affairs
The Heartland Institute
[email protected]

“The Massachusetts Main Street Fairness Coalition says the state has lost out on $387 million of tax revenue from online purchases. Another way to put that is to say Massachusetts shoppers have saved $387 million. Those savings will now disappear down the gullet of state government. Amazon recently started collecting sales tax in California and announced it would continue to sell items at lower prices than traditional retail stores. We can bet Amazon will do the same in Massachusetts.”

Steve Stanek
Research Fellow, Budget and Tax Policy
The Heartland Institute
Managing Editor
Budget & Tax News
[email protected]

“Taxes harm business. The more you tax something, the less of that something you will have. The absurd assertion that Massachusetts ‘lost out on an estimated $387 million in 2011’ misses a vital point. The tax-free nature of all of these online purchases was a key reason there were all of these online purchases. Removing this attractive feature will move many shoppers elsewhere.

“Here’s a phenomenally easy prediction: Massachusetts will not next year raise anywhere near the $387 million on which they ‘lost out’ without a sales tax in place. That Gov. Patrick has concocted such a tenuous, alleged ‘justification’ to do said violence to the free market and a thriving business sector is all the more disturbing.”

Seton Motley
President, Less Government
Policy Advisor, Telecom
The Heartland Institute
[email protected]

The Heartland Institute is a 28-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.