Several states around the country, in an effort to deal with huge budget shortfalls, have been attempting to close tax loopholes that let online retailer Amazon operate in their states without collecting sales tax. Even notoriously anti-tax Texas came after the company for $269 million in uncollected sales taxes.
By refusing to collect sales taxes, Amazon not only denies state’s desperately needed revenue, but it is also able to undercut local businesses. And the company responds to any attempt to do away with this tax preference by threatening to close plants and move elsewhere. Amazon actually closed a Dallas distribution center over its spat with Texas. Amazon CEO Jeff Bezos also claims that forcing his company to collect sales taxes would be unconstitutional, which, as my colleague Zaid Jilani noted yesterday, is bunk.
Last month, South Carolina’s state House, by a 71–47 vote, refused to grant Amazon a five year exemption from collecting sales taxes. The company then threw a temper tantrum and stopped building a distribution center in the state. Now, after Amazon promised to create more jobs than it had initially estimated, 49 members of the South Carolina House flipped their vote and approved the sales tax exemption:
After a dramatic turnaround Wednesday in the House, the battle to win a prized tax incentive to lure Amazon.com moves to the state Senate, where the online retailer’s support has not been tested. A 97–20 tally — aided by 49 legislators, mostly Republicans, who switched their vote — handed the Seattle-based company a real shot at receiving a five-year exemption from collecting state sales tax on each purchase by South Carolina shoppers.
“It obvious to me that dubious last-minute promises influenced some legislators to flip-flop on the vote,” says Brian Flynn with the South Carolina Alliance for Main Street Fairness. The tax exemption will be provided “on top of a free site to build the facility, property tax breaks on equipment, job tax credits from the state and repeal of Lexington County’s ban on Sunday morning retail sales.” Gov. Nikki Haley (R-SC) said that she is opposed to the exemption, but won’t veto the bill, which still needs to pass the state Senate, if it comes to her desk.
As Jilani pointed out, “it’s crucial that states are able to excise their powers of taxation to get revenue from transactions occuring within their territory, given that state governments are losing millions of dollars thanks to tax dodging by big online retailers. As just one example, in ‘2011 alone, Wisconsin will lose an estimated $127 million in uncollected sales tax on purchases made online.’” But instead, Amazon bullies weak-kneed legislators into giving away huge concessions, in return for jobs that may or may not materialize.