Comment by gojomo | Hacker News Reader

Comment by gojomo | Hacker News Reader

Parent Full thread

California is losing money. For example, NewEgg (based in California), faces a pricing disadvantage against Amazon in online sales to California residents, because NewEgg has to collect sales tax. At the margin people choose Amazon -- resulting in lost profits/jobs for NewEgg, and lost sales/income tax revenues for the state. In some cases, this also means shipments have to go an inefficiently long-distance, because of an arbitrary legal distinction. (Though, for the bay area, Amazon's Reno distribution center is closer than Southern California.)

And that's just comparing online retailers; there's no reason Amazon should have such a tax-based price advantage over the bookstore a block from me, driving the local supplier closer to bankruptcy and making it cheaper for me to have a book shipped hundreds of miles rather than walking a few minutes to pick it up myself.

I like low taxes. I like no taxes even better. But taxes that create arbitrary opportunities for gaming/avoidance aren't really in anyone's interest.

"I like low taxes. I like no taxes even better. But taxes that create arbitrary opportunities for gaming/avoidance aren't really in anyone's interest."

I don't believe you.

Evidence: "California /is/ losing money..."

I'm glad you pointed out that NewEgg "has to collect sales tax. At the margin people choose Amazon..." and everything else you said.

I'm just disappointed that you didn't see the obvious: California is the problem, not the businesses. They can tax and tax and tax - but they'll continue to be addressing symptoms instead of problems.

Seattle, home of Amazon, is not a low-sales-tax haven; its sales-tax rate of 9.5% is the same as San Francisco.

So this is not a matter of low-tax-jurisdictions winning over high-tax jurisdictions; it's a loophole that exempts a certain kind of transaction, no matter the direction.

Do we prefer people buy from distant merchants, so much that we want to punish local sales? Is there a case to be made that this approach optimizes welfare for people, or causes the most economic growth?

That case hasn't been made. This is a glitch in the law from when cross-border retail was too small to worry about. But since people have become wealthy from this glitch, it now has a constituency that makes change hard. That sort of entrenched-interest paralysis is not something to celebrate.

It's also not a California-specific issue. Even Texas finds Amazon's legal machinations to get out of sales tax fishy:

http://news.cnet.com/8301-10784_3-9942692-7.html

And even Texas requires residents to pay 'use tax' on out-of-state purchases:

http://www.window.state.tx.us/taxinfo/sales/faq_use.html#use...

Companies should compete on the merits of their offerings; jurisdictions should compete on what sort of pro-business environment they offer fairly to all businesses, not just loophole-favored segments (like cross-border shippers). Otherwise productive effort is wasted in gaming legislatureslaws/borders rather than innovating and serving customers.

Reply on news.ycombinator.com