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One thing Wal-Mart could be good for

They could wreak havoc on payday lenders.

Raj Date says that with modern data analysis banks could offer payday loans on much less extortionate terms. Felix Salmon retorts that banks don’t actually want to do business with poor people unless they can scrape them for high fees. Otherwise the costs of dealing with the accounts exceeds the profits to be made by having them as customers.

The solution to this problem, I think, would be for banking services to be performed by a firm that already has low-income clients and would have an interest in increasing its level of engagement with them even if the payday lending operation wasn’t profitable per se. In a word, you need Wal-Mart. A few years back, Wal-Mart started offering check-cashing services that were much cheaper than the prices charged by stand-alone check-cashing places. And it’s no surprise that this worked. If your whole business is cashing checks, then your check-cashing fees have to be high. But if check cashing is basically just another way to get people in the door of your store, then it makes business sense to offer attractive terms. Wal-Mart once applied for a banking license and was turned down so it can’t lend money. But if low-end retail chains were allowed to get bank charters, you could imagine one or more of them wanting to offer discount payday lending services for similar reasons—it’s a great way to get customers in the door at a time when you know they have money to spend.

The embedded link about Wal-Mart in the check cashing business is worth reading. For that and for the payday lending industry, having WalMart come in and crush the existing players with the force of low prices would be a good thing. Frankly, letting Wal-Mart have a banking license, which would immediately give access to basic checking and savings account services for millions of adults that don’t currently have them. That could have a major effect right here in Houston.

The Houston area is now the sixth-most unbanked major metropolitan statistical area in the country, as 11.9 percent, or 264,000 households in the region, do not have access to a bank account, according to the Federal Deposit Insurance Corp. About 8.2 percent of U.S. households are unbanked.

It’s also the fifth-most underbanked major metro in the U.S., meaning the 28.4 percent, or 630,000 households, that fall into this category have bank accounts but rely heavily on alternative financial products, such as payday lending.

Even after the city of Houston in 2009 established Bank on Houston, a program to draw the unbanked to bank accounts, the numbers of the city’s unbanked and underbanked have increased. In 2009, when Houston was the seventh-most unbanked metro area in the U.S., 10.5 percent of the city’s households were unbanked and 21.4 percent were underbanked.

“Part of it is the population increase,” Alexander Obregon, special projects coordinator for the city controller’s office and chair of the financial education committee for Bank on Houston. “There aren’t enough service providers out there that can reach all the people who need a financial education. Houston’s population continues to grow, and demand for its safety-net services continues to grow,” outpacing the growth of those services, he said.

Roger Widmeyer, spokesman for the Houston controller’s office, added that the unbanked can be a challenging demographic group to draw to the financial services industry, as many have a generational or cultural distrust of banks.

“Houston is a mecca for skilled labor, and many of these folks get paid in cash, and they prefer it that way,” Widmeyer said. “We’re attracting a lot of new residents who are coming here without a bank.”

I’m willing to bet that if Bank On Houston could partner with Wal-Mart, that would make a major dent in those numbers. Hey, I dislike and distrust Wal-Mart as much as the next liberal do-gooder. No question, Wal-Mart is evil. Compared to the payday lending industry, though, they’re clearly the lesser evil. I’m not particularly sanguine about a legislative fix for payday lending, and while the city of Houston is likely to take action to restrict payday lending here, that can only cover the city. Bigger action than that is needed. I say let WalMart come in and squeeze all the profit out of payday lending. That’s one industry where there’s no downside to lower prices.

Amazon fulfills its end of the deal with Texas

Good to see.

Nine months after it struck a deal with the state to bring thousands of jobs and invest millions of dollars in Texas, online retail giant Amazon.com on Wednesday unveiled the first steps toward keeping its end of the bargain.

Amazon said Wednesday it will build three fulfillment centers in Texas, creating about 1,000 jobs. The new facilities will include a 1.2 million square-foot site in Schertz, east of San Antonio; and two sites in the Dallas-Fort Worth area — a 1 million-square-foot center in Coppell and a 1.1 million-square-foot facility in Haslet.

The fulfillment centers in Schertz and Coppell will handle the shipment of “larger items—anything from televisions to bbqs, for example,” Amazon said. The Haslet center will ship smaller items like books, small electronics or DVDs, the company said.

“We look forward to putting more than 1,000 Texans to work at our new fulfillment centers in Schertz, Coppell and Haslet,” Mike Roth, Amazon’s vice president of North American fulfillment, said in a news release. “We appreciate the state and local elected officials who have helped us make this exciting investment in the state of Texas.”

In April of last year, Amazon struck a deal with Texas Comptroller Susan Combs, calling for the online retailer to bring 2,500 jobs and $200 million in capital investment to the state, and to start collecting tax on sales made to people in Texas. Amazon began collecting the sales tax on July 1.

See here, here, and here for the background. Amazon had announced the Schertz location in November. Barring anything unusual this ought to be the end of the story in Texas, but it remains the case that Amazon and other online retailers should be paying sales taxes on Internet transactions regardless of what deals have been worked out in what states. It also remains the case that the current Congress is never going to fix that, so this is the workaround for now.

I’ll continue to demonize the payday lending industry, thanks

Lawrence Meyers, a shill for the payday lending industry, has a sad.

[Loren] Steffy claims in his blog post (“Will lawmakers finally rein in paydayl lenders,” chron.com) that PDLs are “inherently predatory,” yet a loan cannot be predatory if choices exist, and a person enters into a transaction via free will, with terms and pricing disclosed. Steffy’s inference that borrowers do not “understand the consequences of the terms to which they’re agreeing” indicates he has never taken out such a loan nor visited a store that offers such loans. It is too common for people like him to make unfair pronouncements without the experience to draw upon.

Here’s Steffy’s blog post. If you think it’s unfair because Steffy hasn’t taken out a payday loan himself, then go read Forrest Wilder’s account of taking out a payday loan. Be sure to read carefully the bits in which Wilder describes the obfuscatory language used to describe the loan’s terms, despite the laws that Meyers touts that are supposed to provide borrowers with accurate information. What do you have to say about that experience?

Regarding allegations of very high average percentage rates, borrowers don’t care about APR because loans are not taken out for a year. Customers care about the loan’s flat fee, just like any other product. When you get dinged for a $2 automatic teller machine fee for a $200 withdrawal, do you scream about the APR? No, you scream about the two bucks.

Meyers is counting on people’s innumeracy here in waving off concerns about APR. We use APR to provide a consistent basis for comparison, since payday loans by their nature are short term, as noted. You can say that the rate for a loan that’s due in a week and for which you owe $20 on top of $100 in principal is twenty percent, but the APR for a loan if 20% interest accrued weekly would be 1040%. It’s not a trivial difference, and it’s not at all a mystery why people like Meyers would like to gloss it over.

Consumers have choices, and in the first half of this year, the Office of Consumer Credit Commissioner reported that 800,000 consumers freely chose PDLs over the following loans (the cost for $100 for 2 weeks):

Borrow from a friend or an employer ($0)

Credit card advance ($1)

Installment loan ($3 to $8)

Pawnbroker ($9)

Title loan ($10 to $12)

PDL ($15 to $23)

Online PDL ($25 to $30)

Bank overdraft fees ($40)

Loan shark (no maximum)

While I question how freely some of these choices were made, I do agree with Meyers on one point: Bank fees are too high, and have been for a long time. I have great hope that the Consumer Financial Protection Bureau will take steps to deal with that. Of course, the CFPB is also taking a look at payday lenders, so perhaps that isn’t what Meyers was looking for here.

Simply put, it costs a lot more to get a payday loan in Texas than it does in other states, where there is regulation of the industry. Given that it’s highly unlikely that Texas payday lenders have significantly higher costs of doing business than their counterparts elsewhere, the obvious conclusion is that they’re charging too much. If all goes well, the Lege will deal with that next spring.

Amazon comes to Schertz

Hello, Schertz!

After about six months of negotiations, this city, the Schertz Economic Development Corp. and Guadalupe County have approved about $7.6 million in direct tax incentives to land a $166 million distribution warehouse for Amazon.com.

The 1.26 million-square-foot warehouse, called a fulfillment center, will become the largest facility in Schertz and Guadalupe County, Schertz EDC executive director David Gwin said. It’s expected that the project will create 350 new jobs that will generate about $11 million in annual payroll.

What jobs would pay was not disclosed, but Gwin said that the wage would exceed the minimum standards set by law.

[…]

According to the Amazon Fulfillment website, jobs at Amazon’s fulfillment centers pay about 30 percent more than traditional retail jobs.

As part of a deal with the state comptroller’s office to resolve the e-commerce giant’s past tax liabilities with the state, Amazon pledged to create 2,500 jobs and make $200 million in capital investment in the state. Amazon has been rapidly opening more fulfillment centers around the nation and Canada to increase its same-day delivery capabilities.

Schertz is just north of San Antonio, and used to pair with Selma as two of the biggest speed traps in the state. This is clearly a better way to generate revenue for the town. Hope it works out well for them.

No smokers need apply

Boy, is this a big can of worms.

Methodist Hospital System in Houston this month announcedit will implement a tobacco-free hiring policy on Jan. 1, joining the Texas Medical Center and Memorial Hermann Healthcare System, which have had similar policies since last year and 2010, respectively.

The policies are straightforward. Applicants who smoke or chew tobacco will not be hired. Existing employees are exempt.

A growing number of hospitals and health care institutions have adopted the policies to promote wellness, improve productivity and rein in rising health care costs, but critics say they discriminate and could lead to punitive actions against other personal habits and vices.

“We think this is an invasion of privacy and really overreaching,” said DottyGriffith, public education director for the American Civil Liberties Union in Texas. “At what point do you give up your rights and autonomy? Will they not employ those who ride motorcycles and drink alcohol?”

Dr. Marc Boom, president and CEO of Methodist Hospital System, said the policy is about company employees modeling healthy behaviors. More than 13,000 people work at the system’s five hospitals.

“This is part of a journey of wellness and making this a great place to work,” Boom said. “Employees work here to take of care patients. We can only do that if we’re leading by example.”

Methodist’s online application will warn job seekers that it is a tobacco-free employer and that urine tests will be used to detect nicotine. A job offer will be rescinded if an applicant’s results are positive. Free smoking cessation classes will be offered, giving applicants an opportunity to reapply if they have been smoke-free for 90 days.

On the one hand, it makes perfect sense for a hospital system to practice what it preaches. There’s a lot to be said for leading by example. And, though it isn’t specifically mentioned in the story, having an entirely non-smoking workforce would be great for Methodist’s bottom line, since it would reduce their own health care costs. Therein lies the rub, of course, because if having a non-smoking workforce is good for the company, then so is having a non-overweight workforce, and who knows what else. Employers have enough power over their employees already, thanks very much. Be that as it may, I have a strong feeling this will ultimately be settled in a courtroom, after someone files suit for discrimination. What do you think?

Amazon wine

You may soon be able to order wine from Amazon.com, depending on where you live.

Amazon.com Inc. AMZN -0.88% is planning an online marketplace for wine sales directly to consumers, said executives for several California wineries, marking the Seattle Web giant’s second foray into the business in three years.

Amazon hosted a workshop [last week] at a resort in Napa, Calif., and invited members of the Napa Valley Vintners association, said Terry Hall, a spokesman for the group. He said about 100 wineries attended the event.

At the event, Amazon said the marketplace would begin in the coming weeks and the online retailer will charge wineries a 15% commission of the sale price, as well as a monthly fee of about $40, according to people familiar with the workshop.

[…]

In 2009, Amazon pulled back from an effort to sell and ship wine after its partner, New Vine Logistics, suspended operations amid financial troubles. This latest effort would spare Amazon the cost and difficulty of shipping fragile and heavy wine bottles by passing that responsibility on to the vineyards themselves.

Wine sales online are challenging due to a patchwork of state-by-state rules that limit which companies can sell alcoholic beverages. And shippers must ensure that recipients signing for packages are at least 21-years-old, the legal limit.

The question you may be asking now is “Will I be able to order wine through Amazon to be shipped to Texas?” And the answer is…I’m not sure. Last year, the TABC cracked down on out of state resellers who were shipping to Texas without a state sales tax permit. The TABC addresses the question of direct shipping of wine to Texas consumers, and one of the things they say is “Under current state law, wholesalers / distributors are not authorized to ship wine directly to consumers in Texas”. However, out of state wineries may ship to Texas if they obtain a direct shipper’s permit, pay sales and excise taxes, and ship to a TABC permitted carrier. So I guess the question is whether Amazon would be considered a wholesaler/distributor in this scenario, or if the fact that the wineries themselves are doing the shipping opens a loophole for this to be permitted. I sense a legislative opportunity here, or failing that, future litigation. Anyone want to be a test case?

Janitors win new contract

I’m very glad for them.

Janitors who clean some of the largest office buildings in Houston have reached a tentative agreement with six of the city’s largest cleaning companies, a union representative said late Wednesday.

The deal is expected to bring an end to a heated labor dispute that began after the janitors’ last contract expired on May 31.

“We made progress here in Houston, and the janitors’ victory brings hope to security officers, airport workers and others trapped by poverty wages,” Tom Balanoff, president of Service Employees International Union, Local 1 in Chicago, which represents the 3,200 Houston janitors, said in a statement. “Our economy is broken, and unless we do something to turn low-wage jobs into good jobs, the middle class will be the great disappearing act of the 21st century.”

The Houston Area Contractors Association, meanwhile, distributed to cleaning companies and affected building owners and tenants a notice that the tentative agreement would give the janitors a 25-cent-per-hour raise each year for the next four years.

The janitors and the SEIU have been fighting for a raise for a long time now, and I’m happy they were finally able to get a breakthrough on that. But a dollar an hour raise phased in over four years, to $9.35 an hour? That works out to an annual salary of $19,448 – assuming a 40-hour work week, which may not be the case; the janitors were also seeking more hours but didn’t get them – which isn’t a total anyone can really live on. Houston janitors are still paid less than their counterparts in other cities, and they fell short of the $10 an hour goal they wanted. This is a step forward for them, and I’m sure the members will ratify the agreement when they vote today, but they still have a long way to go. They deserve a lot better than this. A statement from the janitors is beneath the fold, and The Observer has more.

(more…)

We better hope Amazon sticks to its deal with Texas

Remember that deal Amazon made with the state to start charging sales tax here and to commit to creating 2,500 jobs in return for having back taxes forgiven? Apparently, there’s not much in the deal to make them regret it if they don’t hold up their end of the bargain.

Amazon.com Inc. didn’t risk much when it agreed in April to create 2,500 jobs and invest $200 million in new distribution centers in Texas if the state forgave $269 million in back sales taxes.

If the online giant should fail to follow through on that promise, it has agreed to pay $1 million to the state — and Comptroller Susan Combs could not reopen her claims for back taxes before July 1, according to documents released Wednesday to the American-Statesman under the Texas Public Records Act.

Under the agreement, Amazon.com and its affiliates began collecting sales taxes from their Texas customers July 1.

[…]

Austin tax lawyer Buck Wood contends Combs is not legally authorized to make such a settlement and said she has created a double standard: a “too big to pay” class of taxpayers who get preferential treatment.

On Wednesday, after reading the agreement, Wood — a former deputy comptroller and also general counsel under the late Comptroller Bob Bullock — said Texas is not adequately protected if Amazon fails to keep up its end of the deal.

“I have a $269 million tax liability. I pay $1 million. That’s nothing,” Wood said. “If (Combs) can do this, she can do anything.”

Wood said Amazon got its tax bill forgiven just by agreeing to do what it wants to do anyway — build distribution centers in Texas. He dismissed the economic development aspects of the agreement as “window dressing.”

R.J. DeSilva, a spokesman for the comptroller’s office, defended the agreement.

“The company is collecting the sales taxes quicker than any other state,” he said. “That’s a huge part of it.”

As for the $1 million fee, DeSilva said, “The penalty is what it is, but there is a commitment by the company to invest in the state.”

Wood raised the issue of legality in May, but until/unless someone files suit it’s an academic concern. I share Wood’s concerns, and I have to shake my head at the level of deference being shown Amazon, but at the same time I appreciate that we got this done, without the courts or the Lege or Rick Perry getting involved and mucking it up. The goal was to get Amazon to pay sales tax, which is good for the state and good for the traditional retailers and given Amazon’s same-day delivery innovation may be god for them as well. At some level, the rest is gravy.

Amazon starts collecting sales tax today

We are in a new era.

Beginning Sunday, Texans will see state and local sales taxes show up on their taxable Amazon purchases — the result of a deal with the state comptroller’s office that resolved the e-commerce giant’s past tax liabilities with the state in exchange for the sales tax collections, the creation of 2,500 jobs and a pledge of $200 million in capital investment in the state.

For customers, little will change other than prices. Amazon’s order summary already includes a line that reads “Estimated tax to be collected.” Come Sunday, that line often will be followed by something other than $0.00. The company’s systems will automatically calculate and add the proper state and local levies.

“Amazon customers in Texas will see the appropriate sales taxes applied to their order when they proceed to check out,” a company spokesman wrote in an email.

With the change, customers will actually have to pay the taxes they owe on their purchases through Amazon.com. Technically, these online buys were always subject to state and local sales and use taxes, although few people actually remitted those levies and the state rarely pursued them.

Now Amazon will collect them and, like other retailers around the state, turn them over to the comptroller’s office by the 20th of the following month.

[…]

The company will begin collecting sales tax for most of the other states in 2013 or 2014.

“Certainly of the states that managed to pressure Amazon into collecting their taxes, Texas is really the second big state, after New York,” said Michael Mazerov, senior fellow of the State Fiscal Project at the Center on Budget and Policy Priorities in Washington.

“But it’s just another step in the process,” Mazerov said. “A number of states have managed to pressure the company into collecting their sales tax. Eventually, Amazon will be collecting in a very large number of states.”

In fact, the company has thrown its support behind a federal bill — called the Marketplace Fairness Act — that would open the door for sales and use tax collections in every state. Brick-and-mortar retailers and a host of retail associations have pushed for such a law to help “level the playing field” with online retailers, most of which don’t yet collect sales taxes on purchases.

“Our hope is that eventually all online retailers will be collecting” sales taxes, said Stephanie Gibson, vice president for government affairs at the Texas Retailers Association. “We want to keep that money in our state because it supports our children and grandchildren.”

See here for some background. This is how it should be. There’s no reason to make a distinction between online sales and in-store sales. States and cities need the revenue, which supports things that online retailers need, too – streets, schools, utilities, and so on. There’s still the chance of a legal challenge to the deal Amazon struck with the state, but so far so good. This is and will be a good thing for Texas, and ultimately for the other states as well.

Wage theft

Any employer that would do this is scum.

[Wage theft] reflects a changing economy in which low-wage work has increased, more companies try to cut labor costs to stay afloat in a sour business climate, and fewer workers belong to unions that might protect them. At the same time, budget-cutting state and federal governments do not enforce wage laws as aggressively as they once did.

Wage theft can be as simple as stealing tips from restaurant servers, illegal deductions from a worker’s paycheck or failing to pay overtime or the legal minimum wage. It also can take other forms, such as classifying workers as “independent contractors” to avoid paying unemployment insurance.

Millions of workers are losing pay, with the majority in low-income service industries such as fast food, domestic work, agriculture, retail, hotel and tourism, and home health care. It’s also a big problem in the warehousing and construction industries, which employ large numbers of recent immigrants and undocumented workers, who are reluctant to complain, fearing scrutiny of their immigration status.

[…]

Nearly two out of three low-wage workers experienced some form of wage theft each week, according to a 2009 survey of 4,400 low-wage workers in Chicago, Los Angeles and New York. On average, these workers lost $51 a week in unpaid earnings, the survey found.

The lost wages add up. Workers in Houston lose more than $753 million a year, according to a recent study.

The U.S. Department of Labor, which monitors compliance with federal wage laws on behalf of more than 130 million workers, has only 1,000 enforcement agents. State wage-and-hour investigators are equally scarce in the wake of massive budget cuts.

Last year, Texas lawmakers closed a loophole that let employers escape prosecution if they pay workers only a portion of the wages they’re owed.

You can find that study here, and a writeup about it and related matters at The Nation. Imagine if your boss could get away with paying you less than you’re owed. Imagine if you had no good recourse to get the wages you’re supposed to get. That would suck, wouldn’t it? Meanwhile, in related news here in Houston, janitors who are fighting for a living wage have been illegally barred from their jobs after staging a one-day walkout to highlight the fact that the average janitor in this town gets paid about $9,000 a year. How much would you have to be paid to do that kind of hard, dirty work? I’ll bet you won’t find any management types stepping in to do those jobs in the event of a protracted dispute. See here and here for more. If we can’t do right by the people who clean up after us, how can we do right at all?

Is the Amazon deal with the state legal?

The Statesman raises a great question about the settlement deal between Amazon and the state of Texas that will get the online retailer to start collecting sales taxes in Texas while forgiving back taxes the state says it owes.

But is it legal?

Austin lawyer Buck Wood, a tax attorney and a former deputy comptroller and general counsel under the late Comptroller Bob Bullock, says no.

“While this may seem to be a reasonable resolution in people’s minds,” Wood said, “it’s not worth the paper it’s written on. She just can’t do it.”

Wood argued that the state’s constitution bars “forgiving” tax debts and that the settlement raised the specter of creating a “too big to pay” class of taxpayers who get preferential treatment.

He said it sets a bad precedent in a growing Internet economy when Combs has estimated that Texas loses $600 million a year on untaxed online sales.

[…]

[Wood] cited two articles in the constitution that, in essence, say the Legislature cannot forgive tax debts or delegate that authority.

Wood said the language, dating to the state’s early history, attempted to prevent officials from forgiving the debts of taxpayers with political influence.

There is one exception.

Wood and the comptroller’s office cited the same law that allows the comptroller to settle tax disputes, but they disagree on how broadly it can be applied.

The law says the comptroller may settle a claim for a tax, penalty or interest if the “total costs of collection” would exceed the amount due.

Wood said that if the $269 million tax bill is accurate, there is no way the cost of litigation and collection would approach that figure.

[…]

[Skip] Smith, a retired tax lawyer who has represented clients in disputes with the state, said the comptroller’s authority to settle cases is not as broad or explicit as, say, the Internal Revenue Service’s.

“They don’t really have a provision that gives them the right to settle based on the hazards of litigation,” he said.

Still, Smith said, “The comptroller, day to day, is settling these cases.”

He said the Legislature “hit Amazon between the eyes” when it changed the law last year. But he said it also gave Amazon another legal argument: Did the Legislature add the new language just to clarify the law or because Amazon wasn’t covered by the existing statute?

“It’s arguable,” Smith said.

Smith said the fact that the Irving site was owned by an Amazon subsidiary clouds the issue.

“If it’s a subsidiary’s warehouse, it becomes grayer,” he said. “I think this issue is not totally settled.”

Steve Bickerstaff, an Austin lawyer with a background in constitutional law, takes a different tack.

“It is never in the interest of the state to pursue a claim if the State of Texas is going to lose and there is a good alternative,” Bickerstaff said.

He said the constitutional prohibition against forgiving tax debts is not absolute.

I suspect that if we got a dozen lawyers together to discuss this, we’d get at least a baker’s dozen opinions. There are only two opinions that will matter. One is that of Attorney General Greg Abbott, who will undoubtedly be asked to provide it. The other is that of the State Supreme Court, once the seemingly inevitable litigation is filed. I wouldn’t even begin to guess what they might say. There is no such litigation yet, and who knows when there may be. I suppose if no one files a lawsuit then the matter will have been decided by forfeit. I don’t see that happening, however. Bottom line, we won’t know for sure for several years whether this is a precedent-setter, a one-off, or a false start.

Amazon settles up with Texas

Good.

Amazon.com will start collecting sales taxes from Texas customers this summer and agreed to make capital investments of $200 million and create 2,500 jobs in the state over the next four years, Comptroller Susan Combs announced this morning. In return, the state will drop its efforts to collect back sales taxes from the company.

The online retailing giant hasn’t been collecting sales taxes from customers in Texas (and in many other states), citing a provision in the law that exempts companies without a physical presence in the state from taking part. The comptroller filed a $269 million tax lien against the company, pointing to a warehouse operation in Irving and saying it should have been collecting and remitting taxes from December 2005 to December 2009.

That’s been in dispute for more than a year.

And just like that it no longer is. Seems like a fair settlement, as long as Amazon holds true to its hiring promise. I agree with Comptroller Combs and Amazon that this issue needs to be dealt with by Congress, and have been saying so all along. We’ll need a better Congress first, of course, but be that as it may, this is theirs to fix. For now, kudos to both parties for getting this done. A statement from Combs’ office can be found here.

Our long Amazonian nightmare may finally be over

Negotiations are in progress to get Amazon to pay something like its fair share.

Amazon.com is negotiating with the state to start paying Texas sales taxes on online sales and to create some jobs in the state, reviving talks that fell apart at the end of last year’s legislative session, sources involved in the conversations said today.

A deal would apparently end the state’s attempts to force the company to collect sales taxes. Comptroller Susan Combs accused the company of ducking $269 million in sales taxes it should have paid from December 2005 to December 2009. The company threatened to close a warehouse operation in Irving that it said employed about 120 people.

The comptroller’s office had no immediate comment about the talks.

“There are meetings going on, but I can’t tell you much else about it,” said state Rep. John Otto, R-Dayton. He’s been involved in the online sales tax issue at the legislative level, but said he isn’t directly involved in current negotiations.

This week, the company reached agreement in a similar dispute in Nevada and is reportedly negotiating sales tax agreements with other states. No hard estimates are available on what such an agreement would bring into the Texas treasury. In its lawsuit, the state put the annual number at about $70 million. In Nevada, where the sales tax ranges up to 8.1 percent, officials expect the Amazon deal to bring $16 million annually into state coffers.

[…]

“As long as they’ll start collecting sales taxes this fiscal year or within the next four or five months, that’s really what’s important,” Otto said. “We’ve got to level this playing field.”

I presume this would also settle the ongoing litigation between Amazon and the state. This has been a long time coming, and I don’t really have anything to add other than I agree with what Rep. Otto says. See here for prior blogging on the subject.

Making a profit coming and going

I don’t comment very often on the business world, but I thought this Loren Steffy column from Friday about the El Paso/Kinder Morgan deal was noteworthy.

Protesting the El Paso shareholders meeting

Chancellor Leo Strine questioned the role of Goldman Sachs, which advised both El Paso and Kinder Morgan in various aspects of the $21.1 billion deal. Goldman handled Kinder Morgan’s public offering last year, owns a 19 percent stake in the company and has two representatives on its board.

Last week, Strine ruled that the vote should go forward so shareholders can decide for themselves whether the price is fair. But he also decried the conduct of companies involved.

During the negotiations, Kinder Morgan, for example, lowered its offering price for El Paso in September, to $26.87 a share from $27.55, Strine wrote. That should have given El Paso’s board the chance to force Kinder Morgan into a public fight by putting El Paso in play and soliciting bids from other potential suitors. The deal was announced in October.

After all, if Kinder Morgan initially had been willing to pay more, it was a good bet that other companies might also.

Instead, El Paso’s chief executive, Douglas Foshee, and the company’s board accepted the lower price.

“Instead of telling Kinder where to put his drilling equipment, Foshee backed down,” Strine wrote in his ruling.

Yes, that’s the same Goldman Sachs that wrecked the economy in 2008, working and profiting from both sides of the deal. Why El Paso’s shareholders would tolerate this screw job, I couldn’t say. Why this kind of blatant conflict of interest isn’t illegal, I also couldn’t say. Nice work if you can get it, that much I can say.

Not that anyone should feel sorry for El Paso, of course. As a press release from Good Jobs Great Houston noted, “Over the last three years, El Paso Corp and General Electric made $14 billion and got a refund of $4.8 billion in federal subsidies and rebates (2008-2010)”. Even Mitt Romney paid more in taxes than that. They’re far from the only such examples. For plenty more, read this US PIRG/Citizens for Tax Justice report on the highly profitable investment Fortune 500 companies have made in lobbying, which has resulted in a very handsome return for the bottom lines. If you’re not talking about corporate tax reform – and I am perfectly happy to trade a lower base rate for closing the many egregious loopholes – you’re not serious about the country’s long term fiscal health.

Put that wine bottle down and slowly back away

Don’t buy wine over the Internet, kids. The State of Texas says so.

State officials have teamed up with FedEx, UPS and other shippers to ferret out wines being sent to Texas by websites that don’t have proper permits.

That has prompted Wine.com and several other resellers to restrict sales to consumers in the Lone Star State.

Wine.com has 30,000 active customers statewide, CEO Rich Bergsund told the American-Statesman on Thursday. Those customers were notified via email this month that the company had halted shipments of wine to Texas.

Other sites not currently shipping wine to Texas include TheWineBuyer.com, WineBid.com, WineExpress.com and WineLibrary.com.

A law blocking the deliveries isn’t new, but the Texas Alcoholic Beverage Commission has ratcheted up enforcement efforts this year.

“Anybody who is going to sell to Texans has to have a permit,” TABC spokeswoman Carolyn Beck said.

And, right now, Beck said, there’s no law enabling out-of-state resellers to obtain permits allowing them to sell wine here. “They haven’t been authorized by the Legislature,” she said.

Nasty little conundrum there, isn’t it? You need to get a permit to sell wine in Texas, but there’s no law that allows an out-of-state retailer to get such a permit. Thus are crackdowns like this born. There is one potential workaround for businesses like Wine.com, but it’s at best a partial solution:

In its message to customers, Wine.com indicated it was working to set up a warehouse in Houston in hopes of securing a state permit. A lease could be signed soon, Bergsund said.

“We are hoping the state government will see this as a win-win,” the company wrote in its email, “because we will bring valuable jobs into Texas, but there are no guarantees.”

A question-and-answer section on Wine.com indicates the company has used a similar approach in other states with similar restrictions.

“We’ve opened a network of Wine.com warehouses in a number of states, giving us a local presence in those states. This enables us to legally ship wine to our customers in those states while also reducing the shipping time to get you your wine. Unfortunately, in some states not even that will suffice, so keep those letters and emails flowing to your state legislators!”

Beck said Wine.com would only be able to ship to residents of Houston, Harris County and areas within a two-mile radius of Houston’s city limits if its proposed warehouse materializes.

Given that Texas wineries can sell and ship to any customers within Texas, one presumes that Wine.com would either have to open a storefront or start growing grapes here to qualify.

Unlike many industries, online wine sales are a minimal share of the total – about one percent, according to the story, though the potential for growth is there. It’s never going to be a dominant force, but that’s not stopping state regulators here and elsewhere from intervening. It’s hard to see this as anything but an anti-competitive move, one that like the byzantine restrictions we have on selling beer in this state will do nothing for the consumers. From my perspective, as long as the Internet retailers pay the same taxes as the brick and mortar folks, it’s all good. And speaking of such things, let me give the last word to the Austin Contrarian, from whom I saw this story:

Thankfully, Texas booksellers didn’t have the political clout wielded by wine merchants and wholesalers when Amazon was getting off the ground back in the 1990s, else the State would have banned buying books off the internet, too.

Good thing there isn’t a state agency equivalent to the TABC for books.

Self service checkout at supermarkets

This AP story about supermarkets scaling back on self service checkout aisles, which was recently in the Chron business section, has been making the rounds in the progressive blogs.

Market studies cited by the Arlington, Va.-based Food Marketing Institute found only 16 percent of supermarket transactions in 2010 were done at self-checkout lanes in stores that provided the option. That’s down from a high of 22 percent three years ago.

Overall, people reported being much more satisfied with their supermarket experience when they used traditional cashier-staffed lanes.

Supermarket chains started introducing self-serve lanes about 10 years ago, touting them as an easy way for shoppers to scan their own items’ bar codes, pay, bag their bounty and head out on their way. Retailers also anticipated a labor savings, potentially reducing the number of cashier shifts as they encouraged shoppers to do it themselves.

The reality, though, was mixed. Some shoppers loved them and were quick converts, while other reactions ranged from disinterest to outright hatred , much of it shared on blogs or in Facebook groups.

An internal study by Big Y found delays in its self-service lines caused by customer confusion over coupons, payments and other problems; intentional and accidental theft, including misidentifying produce and baked goods as less-expensive varieties; and other problems that helped guide its decision to bag the self-serve lanes.

It’s interesting that this story comes out at a time when Kroger is running billboards that feature its checkers saying things like “We’ll open an extra checkout lane for you”. Nice to know that providing good customer service is still seen as a competitive advantage at least some of the time.

I’ve used the self-serve lanes at supermarkets, but only when I have a small number of items – basically, I find it to be a quicker option than the Express lane, mostly because there’s almost always a self-serve kiosk available. At Kroger, there are four of them in a given lane. But for someone with a week’s worth of groceries in their cart, there’s no way this will be a time saver, because you have to bag your own items in addition to checking them. I don’t see how the chains could have viewed these as anything but a supplement to their existing setup, not a replacement for it. If they did make that mistake, they seem to have learned from it.

Phil Lempert, a Santa Monica, Calif.-based food industry analyst, noted that supermarkets have a few other motivations to get rid of the self-serve lanes beyond customer service.

They will eventually need to replace their checkout computers to read newly emerging types of bar codes, so there’s little business sense in keeping and replacing those self-serve machines if they’re not well-used anyway, he said.

Perhaps more important, he said, the growing trend toward using bar code-reading programs on smartphones is likely to change everything in supermarket shopping over time.

Maybe someday you’ll be able to scan while you shop and have the total automatically billed to your credit card, or debited from your bank/PayPal/Google/whatever account. Bring your own bags with you to put stuff in as you pick it up and you can leave directly as soon as you’re done. I can get behind that.

Credit card security

Here’s another thing the rest of the world does better than we do.

The United States is the only developed country still hanging on to credit and debit cards with those black magnetic stripes, the kind you swipe through retail terminals.

The rest of the industrialized world has switched -or is in the process of switching- to “smart” chip-based cards.

The problem with that black magnetic stripe on the back of your credit card is that it’s about as secure as writing your account information on a postcard: everything is in the clear and can be copied. Card fraud, and the measures taken to prevent it, costs U.S. merchants, banks and consumers billions.

The smart cards can’t be copied, which reduces fraud. Smart cards with built-in chips are the equivalent of a safe: they can hide information so it can only be unlocked with the right key. Because the key information is hidden, the cards can’t be replicated.

But the stripes have been so entrenched in the vast U.S. payment system that banks, payment processors and retailers have failed to reach consensus on how to revamp it, leaving the U.S. behind the rest of the world.

“The card system in this country has been dysfunctional for a long time,” says Mallory Duncan, general counsel of the National Retail Federation. “We have far, far too much fraud because we have a very antiquated payment system relative to the rest of the world. This is something they should have fixed a long time ago.”

Changes are coming, and the smart cards will be much more prevalent in the next few years. In the meantime, if you’re traveling overseas, you may want to check and see what your options are, because your dumb card may not be accepted everywhere over there. I don’t have a point to make about this, I just had no idea this was the case and figured many other Americans don’t either. Did you?

Amazon cuts a deal with California

Interesting.

Amazon.com cut a tentative deal with legislative leaders Wednesday night that would allow it to postpone collecting sales taxes from Californians for another year.

The company in turn would drop its battle to overturn the state’s new law that required it and many other out-of-state online retailers to collect the taxes.

Under the deal, Amazon would delay collecting taxes until September 2012, Assemblyman Charles Calderon (D-Whittier) said. The new law had mandated that Internet retailers start collecting state taxes in July if they had offices, workers or other connections in California.

Amazon had refused to collect the taxes and poured $5 million into collecting signatures for a ballot referendum challenging the law.

If Congress acts by next summer to settle the contentious issue of how online retailers should be taxed, that decision would override Amazon’s deal with California.

“It’s a safe harbor for up to a year,” Calderon said of the agreement he helped strike. “If they can’t get Congress to act by next July, then they will start to collect the tax in September 2012. If by chance they get Congress to act, then that would trump the state law.”

See here and here for some background. I think the odds of this Congress taking any action are pretty small, but you never know. You know that I believe this will ultimately require a federal fix, I just want it to be a non-radicalized Congress that does it. Be that as it may, I consider this a step in the right direction. I wonder if it will have any effect on the battle between Amazon and Texas over sales tax collections. (Side note: Comptroller Susan Combs says Rick Perry was “uninformed” about the Amazon issue in Texas. Awesome!) Kevin Drum has more.

Trash into treasure

Waste Management Inc. is looking at ways to turn trash into energy, which is the next best thing to actual treasure.

“In my mind, it’s pretty simple why we’re doing it: If we don’t figure it out, somebody is, and they’ll take the waste away from us. If we lose the waste, we’ve certainly lost the business,” said Carl Rush, vice president of the company’s organic growth group, the chief vehicle for its energy investments.

The shift in thinking comes at a time when U.S. landfill collections are hitting a plateau as Americans recycle more, consumer products makers reduce packaging and many large corporations adopt “zero waste” goals.

Demand for renewable energy and fuels also is increasing, in response both to regulations requiring them and to public concerns about the nation’s reliance on fossil fuels and their environmental impact.

The confluence of trends has pushed Waste Management’s leaders to take a hard look at where the company is headed, and has brought a slow and sometimes reluctant culture change to a business that had been set in its ways.

“Five years ago it would have been, ‘just put it in a hole and don’t worry about it,’ ” Rush said. Today, company officials try to avoid even using the term trash. Instead, it’s “materials” or “resources,” he said.

“It’s remarkable to me to see the change that’s taken place just in the mind-set of the people in this company.”

It’s amazing what a change in market conditions can do. Part of the issue is that there are fewer and fewer places to add landfill space that don’t run into stiff opposition from the locals, part of it is as mentioned the push everywhere to cut down on the amount of solid waste that gets generated. When faced with a declining revenue stream from an existing product line, what else is there to do but look for new ways to monetize assets? I commend Waste Management for seeking innovative solutions rather than trying to change the politics of it.

Amazon to push for ballot initiative in California

I believe we are entering “last refuge of the scoundrel” territory here.

Amazon said [last] Monday that it would back a California ballot initiative that would roll back a new state law that forces more online retailers to collect sales tax.

Amazon’s decision to support the proposed referendum pits the world’s biggest online retailer against the state government, which is looking for ways to raise additional revenue to cover budget shortfalls.

The California legislature last month passed a law, now in effect, requiring online retailers to collect sales tax just like merchants physically located in the state. The law was intended to close a loophole that let online retailers sell their wares but not collect and pay sales tax to the state.

Two weeks ago, Amazon, hoping it could comply with the new law and still avoid collecting taxes, severed ties with thousands of California businesses whose Web sites linked to products on its site. California officials say that move does not free it of this year’s tax obligation, estimated at $83 million.

“At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away,” said Paul Misener, Amazon’s vice president of public policy. He also called Amazon’s antisales tax position “a referendum on jobs and investment in California.”

Actually, it’s a straightforward statement of naked self-interest. Not that there’s anything wrong with that, but let’s not try to cloak it in anything noble. Amazon wants to maintain a competitive advantage it was given many years ago. I see no reason why anyone should feel inclined to abet them with that, especially at the cost of the public’s interest, but stranger things have happened.

Supporters of the proposed initiative must now gather around 505,000 signatures to qualify it for the ballot, according to the secretary of state. A vote could occur during the next statewide election in February 2012.

“Where does Amazon plan to collect these signatures — in front of bricks and mortar retailers that collect sales tax everyday?” asked [spokesman for Gov. Jerry Brown Evan] Westrup.

Kind of amusing to imagine, isn’t it?

Amazon versus California

It’s getting real in the Golden State.

Saying it won’t force California customers to pay sales tax on their Internet purchases, Amazon.com is severing ties with 10,000 small businesses and individuals here who funnel shoppers to the online bazaar through their websites.

The defiant action came hours after Gov. Jerry Brown signed legislation that would have required Amazon to start collecting a 7.25% base tax on online purchases Friday because it has affiliates here that are paid commissions for steering shoppers to its website. Previously, only Internet companies with stores or operations in California had to collect the tax.

“This legislation is counterproductive and will not cause our retail business to collect sales tax for the state,” said Paul Misener, Amazon’s vice president of global public policy.

He wouldn’t say whether the company would sue to overturn the law, as it has in New York, where its case is pending. But California officials said they expect Amazon to file suit.

“It’s a huge fight,” said Betty Yee, a member of the state Board of Equalization, the agency that collects sales tax. “We are the biggest customer marketplace for Amazon and other online retailers.”

You know where I stand on this, so I’ll spare you another rehashing of it. See here, here, and here for more on this.

News flash: The Amazon sales tax problem requires a federal solution

How many times do we have to say it?

State governments across the country are laying off teachers, closing public libraries and parks, and reducing health care services, but there is one place they could get $23 billion if they could only agree how to do it: Internet retailers such as Amazon.com.

That’s enough to pay for the salaries of more than 46,000 teachers, according to the U.S. Bureau of Labor Statistics. In California, the amount of uncollected taxes from Amazon sales alone is roughly the same amount cut from child welfare services in the current state budget.

But collecting those taxes from major online retailers is difficult.

Internet retailers are required to collect sales tax only when they sell to customers living in a state where they have a physical presence, such as a store or office. When consumers order from out-of-state retailers, they are required under state law to pay the tax. But it’s difficult to enforce and rarely happens.

That means under the current system the seller is absolved of responsibility, buyers save 3 percent to 9 percent because they rarely volunteer to pay the sales tax, and the state loses revenue.

You know why we don’t have this kind of problem with brick-and-mortar retailers? Because they automatically add the sales tax into the amount you owe them, and then it’s their responsibility to remit those taxes to the state. This should be ridiculously easy to accomplish with online retailers: Just apply the applicable sales tax to whatever state the ship-to address is in, and remit to the states as you would if you were an offline retailer. Your e-commerce backend should have no trouble keeping track of how much you owe each state. All that’s missing from this equation is the requirement to do it. As long as it’s up to each individual state, we’ll have these problems. The day that Congress passes a law addressing the 1992 U.S. Supreme Court decision involving catalog sales, Quill Corp. v. North Dakota, those problems vanish and the states and cities that depend on sales taxes will get a boost. This isn’t rocket science.

Amazon offering a bribe to keep its sales tax exemption

Well, what would you call this?

Amazon.com is negotiating a deal with Texas officials that would see the online retail giant promise to bring more than 5,000 jobs and $300 million in capital investments to the state over the next three years – if in exchange lawmakers will grant Amazon a 4 1/2-year exemption from collecting tax on online sales, according to documents obtained by the American-Statesman.

The proposed deal would be implemented by attaching it to Senate Bill 1, the wide-ranging fiscal matters bill being debated in the Legislature’s special session. SB 1 is a must-pass measure essential to balancing the state’s 2012-13 budget.

A draft copy of the conference committee report that would add the language to SB 1 was obtained by the American-Statesman. Mark Miner, spokesman for Gov. Rick Perry, confirmed Monday that the governor’s office has seen the draft copy of the proposed legislative language.

[…]

The proposal is similar to one Amazon recently struck with South Carolina, where that state’s legislators approved a 4 1/2-year exemption on collecting sales tax in exchange for Amazon creating at least 2,000 jobs and investing at least $125 million through the end of 2013.

One wonders who will be responsible for verifying that the job-creation and capital spending metrics have been met, and how we’ll know that these were genuinely things Amazon would not have done otherwise. Will there be any penalties for them if they fail to reach those goals, or if they just decide not to bother trying? I mean, a subsequent Lege could pass another online taxation bill as this one did, but unless there’s a provision to charge back taxes, what does Amazon have to lose by reneging?

By the way, would this deal mean that other online retailers will be required to pay sales taxes, just not Amazon? Anyone think some of them may try to do their own deal, or maybe sue to be exempted as well? Which makes me wonder what the cost of this may wind up being.

The proposal is the latest twist in Texas’ standoff with the world’s largest online retailer over the collection of online sales tax. The state stepped into the national debate over that issue last September, when Comptroller Susan Combs sent Amazon a notice that it owed $269 million in sales taxes it failed to collect on Texas transactions from 2005 to 2009.

[…]

Combs has estimated the state loses $600 million a year from untaxed online sales.

I guess Amazon’s share of that is between $50 and $70 million per year, depending on if we’re talking four or five fiscal years for that $269 million to accrue. Seems like it should be a bigger percentage than that. I think the state would be better off with the $600 million than with perpetuating that race to the bottom, but maybe that’s just me.

Amazon versus the states

The Street takes a look at the national picture of Amazon’s battles with states over collecting sales taxes.

In the past, Amazon has been protected by a 1992 Supreme Court ruling (Quill Corporation v. North Dakota) that prohibits a state from forcing a business to collect sales tax unless it has physical stores in the state.

While tax payers in most states are required to pay the tax directly to the government, few actually do.

But now several states are seeking to get around these restrictions by passing laws that expand the definition of physical presence.

The target has been on those e-commerce sites that work with affiliates. Affiliates are partner sites that earn commissions by advertising or linking to an online retailer’s merchandise.

In response, Amazon has threatened, and in some cases, ended partnerships with affiliates in states looking to revise these rules.

Amazon already collects sales taxes in a few states. A couple of others have codified exemptions for it. Many are working on or have passed legislation like Texas that would require Amazon to pay up. I’ll say again, I don’t know how long it will take, but I firmly believe that federal action to require online retailers to pay local sales taxes is the endgame. I just wonder how much Amazon will spend in the meantime fighting against it.

Bill in US Senate to make Amazon pay sales taxes

As someone who believes that online retailers like Amazon should collect sales taxes and who believes that federal action will be needed to make that happen, I’m glad to see this.

Senate Majority Whip Dick Durbin (D-Ill.) says he plans to introduce a bill, called the Main Street Fairness Act, mandating that all businesses collect the sales tax in the state where the consumer resides.

Such measures have been proposed and disregarded by Congress for years, but Durbin believes the winds are shifting. “This idea is overdue,” he says. “Online retail sales are now very fulsome and are growing at the expense of local units of government.” Many state budgets are bleeding red, despite some recent revenue upswings around the country, and Internet sales-tax revenue has the gleam of found money. In many states, customers are supposed to declare their online purchases on their income tax forms but rarely do. A University of Tennessee study recently estimated that states will collectively lose $10.1 billion in uncollected online sales-tax revenue this year and $11.3 billion next year.

Amazon executives have long argued that state laws requiring it to collect sales tax violate Supreme Court rulings from 1967 and 1992, which stipulate that only retailers with a physical presence, or “nexus,” in a state need do so. Surprisingly, Jeffrey P. Bezos, Amazon’s founder and chief executive officer, recently told Consumer Reports that he supports federal legislation that rationalizes the patchwork of 30,000 state and local sales-tax jurisdictions around the country, each with its own rules and administrative quirks. Amazon declined to comment on Durbin’s proposed bill.

Amazon’s actions on the state level have spoken much louder than its words in support of a national solution. The company has fought state-by-state collection efforts, deploying both carrot and stick to hit politicians where they feel it most—jobs. In Texas, when the legislature passed a bill that would force online retailers with distribution facilities in the state to collect sales tax, Amazon announced it would close its shipping center outside Dallas, fire hundreds of local workers, and scrap plans to build other facilities in the state. On May 30, Texas Governor Rick Perry vetoed the bill.

As it happens, that provision could be included in one of the fiscal bills that will get passed during the special session. If the statewide smoking ban can get a second chance, anything is possible. Having said that, I think there’s a greater chance that I’ll be named Amazon CEO tomorrow than either Congressional chamber passes Sen. Durbin’s bill. I’m glad to see him introduce it, but we’re a thousand miles minus one step from it happening. Thanks to Dwight for the link.

Amazon complains to the SEC about Texas trying to collect taxes on it

Poor dears.

Amazon said in a regulatory filing this week that the SEC is looking into its dispute with Texas, which began last year when the Texas comptroller’s office sent Amazon a $269 million assessment for four years of uncollected sales taxes.

“In March 2011, the SEC staff notified us of an inquiry concerning this assessment, and we are cooperating with the staff’s inquiry,” Amazon said in its SEC filing.

The company gave no additional information. An SEC spokeswoman declined to comment on the investigation Friday.

[…]

In an earnings conference call this week, Amazon Chief Financial Officer Tom Szkutak sought to downplay the potential impact if more states put an end to tax-free online sales. He said Amazon generates more than half of its revenue in places where it already collects sales or consumption taxes, including markets outside the U.S.

However, in Amazon’s SEC filing, the company wrote that additional tax obligations “could create administrative burdens for us, put us at a competitive disadvantage if they do not impose similar obligations on all of our online competitors, and decrease our future sales.”

Whatever. If the only reason Amazon is viable is because they have this tax advantage over brick and mortar stores, then they’re not really viable at all. Does anyone believe they’ll go down the drain if they have to pay sales taxes? I don’t either. Quit whining, Amazon.

On a related note, Amazon is pulling out of another state over a sales tax dispute.

On the heels of a legislative vote in South Carolina that rejected Amazon’s plea for a sales tax collection exemption, Amazon said it won’t open a distribution center in the state, a project that included a one-million-square-foot building already under construction and 1,249 jobs.

“As a result of today’s unfortunate House vote, we’ve canceled $52 million in procurement contracts and removed all South Carolina fulfillment center job postings from our (Web) site,” said Paul Misener, Amazon vice president for global public policy, according to a report on The State newspaper website.

[…]

Amazon’s “our way or the highway” strategy suggests Amazon thinks it will easily find other alternatives to fulfil the company’s needs to open more distribution centers to keep those boxes of goods flowing. Maybe so. But it remains to be seen if this is a sustainable strategy, given the fact that Amazon currently doesn’t collect sales taxes in half the U.S. states.

Amazon this week said it plans to open 11 distribution centers, maybe more, as the company tries to keep up with demand from consumers who have flocked to its website looking for deals on books, music and other merchandise.

But Amazon also has played hardball in states where Amazon does not collect sales taxes from those sales. In March Amazon announced it was closing its affiliate program in Illinois, a day after the governor signed a law requiring Amazon and other online retailers to collect sales taxes on goods sold in the state.

Via Dwight. I’ll say it again, this really needs to be resolved at the federal level, and the sooner the better.

Amazon not gone yet

In case you were wondering.

Amid its fight with the state over collecting tax on online sales, Amazon.com had said it would close its distribution center in Irving this week, resulting in the loss of 119 jobs.

As of Wednesday, however, Amazon was still operating the Irving facility. Also, a hiring firm is interviewing to fill temporary jobs at the center, the Dallas Morning News reported.

Amazon confirmed Wednesday only that operations were winding down at the Irving center, and declined to give additional details. In a letter to the Texas Workforce Commission, the company had listed Wednesday as the center’s projected closure date.

Well, these things do take time, and if you’ve ever worked for a large corporation, you know how the best laid project plans often see their deadlines get pushed back. I wouldn’t read too much into this. Also in case you were wondering, one of the bills that would clarify the state law that says Amazon must pay sales taxes has passed out of committee and should get a full vote in the House. I doubt that will do anything to change their minds, not that this bothers me.

Amazon abandons Texas

More job losses, and we haven’t even started firing teachers yet.

Online retail giant Amazon.com will close its suburban Dallas distribution center amid a dispute with the state over millions in uncollected state sales taxes, The Associated Press reported Thursday.

The AP obtained an e-mail Thursday sent to Amazon employees by Dave Clark, the company’s vice president of operations.

Clark wrote that the center in Irving will close April 12 because of the state’s “unfavorable regulatory climate.”

Amazon spokeswoman Mary Osako would not say how many employees work at the Irving distribution center.

Texas employees who are willing to relocate will be offered positions in other states, Clark said.

[…]

Allen Spelce, spokesman for the Texas comptroller’s office, said Thursday that though “we regret losing any business in the state of Texas,” that doesn’t change the state’s position.

“We feel like if you have a business presence in the state of Texas, you’re no different than any other business in the state of Texas, and you still owe sales tax,” Spelce said.

He declined to comment further on the state’s demand that Amazon pay back sales tax, saying the case remains in the hearings process.

I’ve said before that I side with the state in trying to collect these taxes from Amazon, and I’m not going to change my tune as a result of this. We really need action on this at the federal level, but we won’t get any from this Congress, that’s for sure.

In his e-mail to staffers, Clark said Amazon also is scrapping plans “to build additional facilities and expand in Texas, bringing more than 1,000 new jobs and tens of millions of investment dollars to the state.”

Katherine Cesinger, spokeswoman for Gov. Rick Perry, said the governor’s office has had “ongoing communications” encouraging Amazon to expand its business in Texas, “and we recently encouraged them to stay in the state.”

That’s in addition to the 119 jobs that will be lost immediately. With all the time Perry is spending gallivanting around the country rubbing elbows with the conservative elite, when did he ever have the chance to fit them into his schedule? And what would he have done about it anyway? Said “There, there, I’ll call of my Comptroller and we’ll find a way to give you a tax break, too”? Now that I think about it, the more gallivanting he does, the better. PDiddie, McBlogger, Grits, and Kevin Drum have more.

UPDATE: When I made up that quote about Perry telling Amazon he’d “call off” his Comptroller, I was only kidding. I should have known better.

Gov. Rick Perry, in Washington to speak to the conservative C-PAC gathering, today second-guessed Comptroller Susan Combs’ handling of a tax dispute with Amazon.

Amazon said this week it will close an Irving distribution center because of an unfavorable regulatory climate in Texas. The company cited Combs’ attempt to collect Texas sales tax on Amazon’s Internet sales to Texans, because the warehouse constituted a “nexus” under tax law.

In an interview with the Washington Examiner, Perry said the distribution center “obviously didn’t have a storefront.”

Perry said he would work with the Republican-controlled Legislature to try to make sure Amazon can stay. And he was bluntly criticial of his fellow Republican Combs:

“That is a problem and I would suggest to you that we need to look at that decision that our comptroller made,” he told the Examiner. “The comptroller made that decision independently. I would tell you from my perspective that’s not the decision I would have made.”

I will now type “I will never assume any position is too ridiculous for Rick Perry to adopt” one hundred times as my penance. Combs’ office released a statement saying they were just following the law. As if that sort of thing matters to Rick Perry.

When the Love Boat goes condo

That was my reaction when I read this.

Minnesota-based River Cities is proposing a floating condo community that would be based in Houston.

The developer, which is targeting retirees, is showing a model condo at the Marina Del Sol in Kemah through Feb. 6.

The boat, which will be 600 feet long and called the Marquette, would spend more days in Texas than in any other state, according to the developer, which hopes it will eventually dock at the Bayport cruise terminal or someplace that has “a less commercial feel.”

“While we are in town, we will be looking at the possibilities,” developer David Nelson said. “Especially in the river towns north of the Gulf, the docking location usually puts us right in the middle of town, which is very convenient and usually a fun place to be. Ideally, if we could find a similar place in Houston, we would be very happy, especially since it will be our longest stop of the year — 10 days.”

The boat would cruise the inland waterways along the Gulf coast in the winter and northern rivers within the U.S. in the summer, getting as far north as Minnesota.

I figure the main attraction of something like this – besides shuffleboard on the Lido Deck, of course – would be the fact that since it has no locality, there are no property taxes to pay. I’m just guessing, but it seems logical to me. I for one never underestimate the desire of those with too much money on their hands to maximize their take.

All of that was just an excuse to post this, of course:

I dare you to find something more awesome than that.

More on Amazon and the sales tax

From Slate:

Amazon has aggressively fought state efforts to impose sales tax on its operations. In 2008, New York passed a law that required online companies to collect taxes if they had deals with marketing affiliates based in the state. The law was designed specifically to target Amazon and other large online retailers—many called it the “Amazon tax.” In response, Amazon sued New York over the law’s constitutionality—marketing affiliates, Amazon argued, did not constitute a significant presence in the state. (Overstock.com, another company that has carefully avoided collecting taxes, took a harder line. In response to the New York law, Overstock canceled its relationships with all New York affiliates, freeing it from collecting any taxes in the state.)

While Amazon is still fighting the New York tax law, the company has been collecting taxes in the state as per the legislation. But Amazon has pushed back against collecting taxes in three other states that passed similar laws—it told its marketing affiliates inColoradoNorth Carolina, and Rhode Island to take a hike, allowing the company to skirt tax collection there. And it has threatened to do the same in other states—including California—where legislators have proposed affiliate-related taxes.

So, is Amazon’s tax-free status unfair? Of course it is. As [Michael Mazerov of the Center on Budget and Policy Priorities] points out, Amazon has physical operations in 17 states in which the company and its employees enjoy the fruits of local taxes—police and fire protection, roads, hospitals, and other infrastructure that make its operations possible. Yet Amazon skirts tax collection in most of these places through clever legal tricks. For instance, it has incorporated its warehouses and Web site as separate legal entities in order to argue that it doesn’t really have a presence in Nevada, Texas, and other states. The Kindle offers another example of that strategy—the e-book reader was developed at Lab126, an Amazon office based in Cupertino, Calif. But that office is actually a legal subsidiary, freeing Amazon of collecting any taxes in California.

Anything that drives a company to resort to such trickery cannot be good public policy. The solution will ultimately need to come from Congress, which means it won’t happen any time soon. Out of fairness to brick and mortar retailers, as well as to state and local governments, it needs to happen eventually.

Today’s TABC

Interesting story about the Texas Alcoholic Beverages Commission and its struggles to find an identity. To me, the key bit of the whole thing is right here:

Moreover, the agency, formed in 1935, still has many rules and regulations on the books — wholesalers selling beer to retailers by law can’t accept credit as payment — more appropriate to the 1930s rather than 2010. As a result, the beverage commission can find itself in the peculiar position of a 21st century regulatory body enforcing moonshiner-era laws.

A wake-up call was sounded in 2005, when the Sunset Advisory Commission issued a sharply worded report on the beverage commission’s failure to keep up with the times. “TABC and the (Alcoholic Beverage) Code are in clear need of modernization,” it concluded.

We see that to some extent with the recent successful attempts by various municipalities to allow or expand alcohol sales, in effect finally ending Prohibition for themselves. A much bigger issue is all the state laws that still exist from that era, especially those that restrict the way alcohol can be wholesaled and transported. The virtual monopoly that the beer distributors have in this state as a result of that is a disgrace, which mostly benefits the behemoths at the expense of microbreweries. You’d think in a state that’s filled to the brim with self-styled defenders of the free market system that this travesty would have been fixed ages ago, but campaign contributions speak louder than words. It won’t surprise me if we hit the 100th anniversary of Prohibition’s repeal without any change to that status quo.

About that BP safety record, Governor…

In addition to his silly statement that the BP oil leak in the Gulf was an act of God, Governor Perry also made the curious claim that BP has “historically had a very good safety record from my perspective.” From most anybody else’s perspective, not so much. Texas Watch sent him a letter laying out BP’s long history of accidents, fatalities, and government sanctions. Check it out.

Amending the CPSIA

I’ve written before about the Handmade Toy Alliance, of which my cousin Jill Chuckas is the secretary. The HTA was formed after the passage of the Consumer Product Safety Improvement Act (CPSIA) of 2008 because it was interpreted by the Consumer Products Safety Commission (CPSC) to require small toy, clothing, and craft businesses to perform product testing that was intended for large manufacturers. As that would be too great a financial burden for the vast majority of them, they have been working to get the CPSIA amended to address their concerns.

There’s a draft bill called the Consumer Product Safety Enhancement Act (CPSEA) now working its way through Congress, which the HTA has endorsed and has testified about before the House Commerce sub-committee. Unfortunately, as these things can go, negotiations have hit a snag. The HTA has sent out a call to action to its members and supporters to call their member of Congress and ask for the draft bill to go to markup so it can be debated and ultimately voted on. Jill forwarded their email on this to me, which I’ve reproduced beneath the fold. If you or someone you know is involved in this kind of business, this is of interest to you.

(more…)

Collecting sales tax on Internet purchases

Tax revenues are down in nearly every state. Most states rely on sales taxes for a significant portion of their revenues. Purchases made over the Internet are generally exempt from sales taxes. You do the math.

In recent weeks, legislators in Maryland and Connecticut held hearings on whether to force Internet stores to collect local sales taxes. Last month, Colorado’s $1.3 billion deficit led legislators to pass a law requiring e-commerce sites to tax. New York, North Carolina, Rhode Island and others states took or tried to take action last year.

Texas is looking at a two-year budget shortfall of as much as $15 billion. Speaking recently in Austin, Texas Comptroller Susan Combs said the state is losing almost $600 million a year in state and local sales taxes from online purchases.

Over the next decade, online shopping is forecast to grow five times as fast as brick-and-mortar retail, according to a Goldman Sachs research report. It predicts online shopping will go from 4.4 percent of all U.S. retail sales today to 14.6 percent by 2020.

These trends “should create a more favorable climate for leveling the playing field and, in fact, efforts to move forward with legislation have intensified over the past year,” said Wayne Zakrzewski, associate general counsel at J.C. Penney Co.

As I recall, the justification at the time for not imposing sales taxes on Internet purchases was that e-commerce was a new and fragile thing and it needed a little help to ensure that it would survive and hopefully thrive. Mission accomplished, I daresay. I have to say, I can’t see why buying a CD at Cactus Music is subject to sales tax but buying the same CD on Amazon.com is not. In the 1990s it sort of made sense, but not now.

Amazon.com says it shouldn’t have to collect sales taxes from customers in states where it doesn’t have a physical presence, the long-standing criterion for catalog and Internet sellers from a 1992 U.S. Supreme Court decision. It’s been collecting local sales taxes in New York since 2008 while it uses that defense in its court battle.

In Texas, Amazon.com has operated a distribution center in Irving since 2006 without collecting sales taxes from its Texas customers. Amazon.com says a subsidiary owns the distribution center, which exempts it from the Texas law.

This is just silly. The fact that such a ridiculous loophole exists is by itself sufficient reason to put aside the pretense that there’s something special about buying stuff over the Internet and start treating it like any other act of commerce. We’ve known for a long time that Texas’ sales tax system is largely outdated because it is mostly focused on sales of goods and not services, which as a share of the economy is now larger and growing faster than goods. That’s one reason why there is now some lip service about reviewing the tax code so that obsolete deductions and exemptions might be reviewed and removed. (There was similar talk a few years back about doing the same for property taxes, but that ultimately went nowhere.) Segregating the economy like this makes no sense.