The price of a S.C. tax break for Amazon
Friday, May 20, 2011
South Carolina lawmakers in April refused to grant Amazon a tax break when it comes to collecting the state's sales tax. The giant online retailer promptly pulled the plug on a plan to build a distribution center in Lexington County.
What a difference a few weeks -- and a few more jobs and a couple more million in capital investments -- make.
On Wednesday, the South Carolina House reconsidered the bill and this time easily passed it.
The amended measure would exempt Amazon from collecting sales taxes on purchases made by South Carolina residents even though the company will, as part of the deal, eventually have a distribution facility within the state.
That physical structure normally would be considered in determining nexus for sales and use tax collection. But not per the specific tax legislation's provisions.
So what's the price of a corporate tax break in the Palmetto State?
S.C. House Majority Leader Kenny Bingham, the Republican representative of Lexington where the center will be built and chief sponsor of the amendment to exempt Amazon from sales tax collection, said company officials told him they intend to increase their investment in the state "quite substantially."
Specifically, Amazon says it will spend $125 million instead of $90 million on the distribution center. And it will provide jobs for 2,000 South Carolinians instead of 1,249 workers under the original plan.
That explains some of the specific amendments that are required for a company to get the sales tax exemption:
- Put a distribution facility in service between Dec. 31, 2010, and Dec. 31, 2013;
- Make a capital investment of at least $125 million during the same time period;
- Create at least 2,000 full-time jobs with comprehensive health care plans; and
- Maintain at least 1,000 jobs after 2013.
The tax exemption is only temporary -- for now. It's set to expire on Jan. 1, 2016. But who's to say what economic (and political) conditions and corporate tax extortion might look like in five years.
Congress could force the state sales tax issue earlier by passing legislation allowing states to collect from online retailers. In that case, the federal law would pre-empt the state measure and Amazon would have to start collecting and remitting South Carolina's (and other states') sales taxes before the sunset date.
Depending, of course, on the timing of and ruling by the Supreme Court, which will no doubt have another say on this topic.
The Senate has until June 2 to give its approval to the measure. Bingham also said that South Carolina Gov. Nikki Haley, originally an opponent of the Amazon deal, told the Republican caucus before the vote that she wouldn't veto the new bill.
I hate to see South Carolina give in here.
Yes, as I said in my Bankrate blog discussing some of the states standing up to Amazon's tax demands and which, at that time included -- and applauded -- South Carolina, times are tough right now.
People need jobs.
Other states willing to cave in to Amazon's demands. A similar sales tax debate has been going on in Tennessee, which probably had some effect on South Carolina respresentatives' change of heart.
And I understand that the goal of any business is to make money.
But I'm also idealist enough to want companies to make their money fairly.
That's not the case with Amazon.
Amazon is being a tax bully and pitting states against each other to give itself a competitive advantage.
A $14 billion company finds it too darn difficult and costly to come up with a system to collect a state's sales tax and send it along to state tax officials? Really?
Maybe it could take the millions it added to get the South Carolina break and use that to devise a procedure that would work in all states where it's similarly affected.
But no. Amazon holds a state tax hostage because it can and because state lawmakers let it.
Meanwhile, as corporate tax incentives are being handed out like candy, those same legislators are dealing with reduced revenue and deciding how much to cut from education and public and social services.
Are 2,000 short-term jobs really worth the immediate well-being and future of a state's much larger population of young and disadvantaged citizens?
- Amazonian sized state tax battles
- More Amazon taxes advance in states
- Amazon, Google and taxes, oh my!
- California joins Amazon tax parade
- Are Amazon taxes costing states money?
- Sales tax collection on online purchases: legislation to ease it, lawsuit to stop it
- State and local tax breaks not necessarily the best business lure
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I enjoy reading your posts. I even purchased your book several years ago.
I disagree with your position on this issue. I formerly spent a lot of money each year purchasing items through Amazon.com. Then, about 3 years ago, Amazon opened a distribution facility in my home state of Kentucky. All of a sudden, because Amazon was now required to collect 6% sales tax, all of my purchases became 6% more expensive. Since there are numerous other web companies that do not charge sales tax because they do not have a physical presence in Kentucky, I purchase my products through these other companies and save 6%. I think Amazon understands that there are people who live in South Carolina and would do the same thing that I have done.
Posted by: Roy | Friday, May 20, 2011 at 01:53 PM