Amazon.com is upping the stakes in its quest to avoid sales tax on online sales. The online sales giant has promised to build a distribution center in Cayce, South Carolina (just west of Columbia) that will reportedly create 1,200 jobs in the first year alone. But. And it’s a big but. The company wants assurances that the Palmetto State will exempt the company from collecting sales taxes inside its borders.
If you’ve been following along, you know that Amazon.com has been making noise in several states, including South Carolina’s immediate neighbor to the north, my home state of North Carolina, about sales tax on internet sales. Usually, the company makes some creative argument as to why they should not have to remit sales tax. And in most cases, they lose that argument.
So, this time, they’ve decided to cut off the whole issue at the pass by directly asking for an exemption. If the state votes no, Amazon.com says they won’t build the plant (that’ll show those legislators who’s boss).
The state is desperate for new jobs. How much so? Lexington County, where the facility is to be built, has already coughed up offered the company tax breaks and 90 acres of land near Interstates 77 and 26 according to the Cayce web site. That’s right. They gave them the land to build on. For free.
But Amazon wants more.
They want the state legislature to exempt sales from sales tax inside the state. Without a specific exemption, the company would clearly lose any challenge to the imposition of sales tax on internet sales inside the state. The “physical presence test” where sales tax is imposed only on sales where a company has nexus (or presence) would clearly be met with the new distribution center. That would make sales taxable. And that would make Amazon unhappy.
It would, however, make companies like Wal-Mart and Target – not to mention Mom-and-Pop stores – across the state happy. They have to compete with Amazon.com and since they have real brick and mortar stores, they have to charge sales tax. The claim is that this gives Amazon.com an advantage. So, of course, those stores have hired folks to push this point of view through lobbying and ad campaigns. It’s kind of an odd alliance, if you think about it: the big box stores and the traditionally small stores they have crushed chased out of town run out of business increasingly replaced. But politics make for strange bedfellows.
And speaking of strange bedfellows, there’s another challenge to Amazon.com’s sales tax exemption from a most unlikely source: Southern Baptists.
Amazon.com is slowly irritating Southern Baptists in the state. First, existing “blue laws” had to be repealed so that the warehouse could process orders 24 hours a day, 7 days a week. That’s kind of a key component of Amazon.com’s sales model. However, the existing blue laws would have prohibited commercial sales on Sunday morning. So, the law had to be repealed, creating what appeared to be a victory for the heathens corporate giant.
There’s more. It’s not bad enough that Amazon.com wants to make sales on a Sunday. They want to sell – wait for it – porn.
No, Amazon.com isn’t going Girls Gone Wild on us. But their rules do allow the sale of “unrated” movies and affiliates have been known to push the envelope quite far. And that can (and does) mean sex and nekkid people. And that makes the Southern Baptists see red.
That doesn’t appear to bother the Greater Lexington Chamber of Commerce. They’re still hopeful that the law gets passed and that the company builds in Cayce. To them, it’s all about jobs.
But ticking off conservatives in a year before an election probably isn’t the best strategy in a starkly conservative state. It’s clear that Governor Mark Sanford (yes, that Mark Sanford) won’t be running for Governor (or likely any public office) next term. That leaves the door open for a challenger. And with a few exceptions, all serving SC State Senators were elected in November 2008; their terms expire in November 2012.
(Editor’s note: see comments re Governor Sanford and the 2010 election)
Chances are, the Southern Baptists won’t actually get organized enough to mount a significant challenge to the Amazon.com exemption. But they will be successful in being a thorn in the company’s side for a little bit. And they will likely make enough noise about porn and family values to be on the national media radar – that can’t be something that Amazon.com will be thrilled to see happen. It will be interesting to see what, if anything, comes of the threats on both sides.
Hey, head’s up – South Carolina just elected a new governor – Nikki Haley. The state legislature is bicameral, and the House of Representatives have a two year term, so they’re pretty much always worried about the next election. The Senate has a four year term, and the election is always concurrent to the US Presidential election – so those 50 or so representatives are the ones really concerned about the Amazon deal.
The (conservative) radio media in town seems to be very anti-Amazon, while Lexington County itself is pushing for the deal to go through. The governor’s position is hard to read right now – she was elected as a Tea Party Candidate, but her main theme was job creation, so far she’s not come down strongly on one side or the other.
Hey, thanks to both of you for the clarification. For some reason, I assumed he was voted in for a second term in 2008, not 2006. My brother lives in SC and I usually depend on him for this sort of thing. Clearly, he’s off his game right now. 😉
The Governor of SC is Nikki Haley. She was just elected this past November. She is extremely conservative, but doesn’t face an election in 2012 since she was just elected in 2010. She may be able to force a change in the laws for sake of jobs simply because she doesn’t have to fear an angry electorate.
I can’t tell you anything about tax policy debates in any other state than my own, so I can’t really blame you for a mistake in a side issue.
Not necessarily apropos to this subject, but you have brought up the old Southern definition of the difference between naked and nekkid.
Naked means you have no clothes on. Nekkid means you have no clothes on, and you’re up to something.
Have a nice day.
Bob, Oh, being brought up Southern, I totally know about nekkid… Thanks for the levity!
Has anyone noticed that taxes are getting harder to collect from those who have the earnings to tax? We are down to a 9.6% average rate from federal income tax payers this year. Of course, it has always been true in some respect. If the government cannot be as nimble with technology as the corporate world, then the industry of tax avoidance (the legal kind) may perfect the ability to minimize federal and state tax revenues. That could cripple Uncle Sam, much to the joy of many overtaxed payers (I mean that in the bureaucratic sense). The federal government recently has been borrowing more than it collects in income taxes while companies and people have been complaining about high taxes. Amazon is not the exception; it is now the rule. Can this continue?
The Governor of SC is Nikki Haley. She was just elected this past November. She is extremely conservative, but doesn’t face an election in 2012 since she was just elected in 2010. She may be able to force a change in the laws for sake of jobs simply because she doesn’t have to fear an angry electorate.
Thanks bestmishu, you’re right. I was corrected previously but I don’t like to change my pieces – even when I’m wrong – after they’ve been published so I made an editor’s note to check the comments.
This is a topic I find very interesting since my fiance recently started his own on-the-side photography business. Currently he only does business in the state we live in because then he only needs to keep track of the sales tax for one state. Because he wants to make some online sales (people buying wedding photography, for example) it makes it very difficult to figure out how to charge sales tax, how to keep track of how much was charged per state, and at what time(s) during the year to remit that sales tax to the states. Not all 50 states collect sales tax, but a good majority of them do. For a giant like Amazon.com I would imagine they could conjure up the resources to figure all that sales tax stuff out. But for a sole proprietor, it’s daunting to the extent that it puts a damper on trying to grow the business.