On Dec. 20 the Salt Lake Tribune ran an opinion piece penned by William Shughart, who decried the recent agreement between the state of Utah and Amazon in which Amazon agreed to begin collecting Utah sales taxes. As a representative of many of Utah’s brick-and-mortar businesses and as a Utah taxpayer, I disagree with several of Shughart’s assertions and thank Gov. Gary Herbert for working to make this deal happen.
Shughart asserts that this deal “shamefully” and “unilaterally” unwinds the Supreme Court precedent in Quill v. North Dakota — a strange assertion because the court held in Quill that a retailer must have a physical presence in a state before it could be required to collect sales taxes. Not even a tortured reading of Quill could cause one to believe that Quill prevents a company, that may not have a physical presence in a state, from voluntarily agreeing to collect sales taxes.
Next, Shughart claims that the additional money collected, because of this agreement, would be “more wisely” utilized by Utah consumers than by state and local governments. To this point I would simply say “you may be right.” If one believes that taxes are too high and that citizens will spend money more wisely than government, let’s have that policy debate. Shughart agrees that sales taxes on online purchases are due under current state law, but are going uncollected on personal income tax returns. To argue that citizens should not pay their taxes, which are legally due, because we feel we will make better financial decisions than government, borders on insanity. Where is the logical end of this line of argument? Income taxes? Property taxes? If we want lower taxes let’s have the debate and change our taxes laws through our constitutional democratic process, not just turn a blind eye to the enforcement of existing tax laws.
Finally, Shughart argues that brick-and-mortar retailers have competitive advantages over online retailers citing “touch and feel” and “immediate delivery.” He is correct that brick and mortar retailers do have some competitive advantages. However, he conveniently fails to detail the competitive advantages of online retailing. For example, the convenience of being able to shop at 2 a.m. in my PJs while sipping my favorite beverage. The financial advantages of not being required to have expensive buildings or to employ individuals to staff those physical locations. Let’s agree that there are inherent advantages to both business models. So why provide online retailers with a 7 percent government price subsidy over brick-and-mortar retailers?
In addition to detailing all the reasons Shughart’s opinion piece is flawed, I think it is important to state why the Amazon deal is good for Utah consumers and businesses.
First, this deal levels the playing field between brick-and-mortar retailers and the 600-pound gorilla of the online retailing world. This will enable businesses that are here in Utah, paying property taxes, employing Utahns and contributing to the fabric of our communities to compete without government placing its finger on the competitive scale. I believe in the ability of Utah businesses to compete and win if the rules are well defined and the fight is fair.
Second, this deal helps Utah consumers to easily comply with existing tax laws. Consumers who purchase directly from Amazon will no longer be required to track and report their purchases on their income tax returns. I believe most taxpayers do not comply with existing use tax reporting laws because they have been placed in a situation that makes compliance with the law nearly impossible. This deal helps address this compliance complexity.
Finally, the Amazon deal is good tax policy. One of the primary principles of good tax policy is to broaden the base and lower the rate. In other words, we want as many people as possible paying as low a rate as possible. With one stroke of the pen, Gov. Herbert broadened the sales tax base and headed off any discussions of raising Utah’s sales tax rates in the future.
This Amazon deal is good for Utah consumers and businesses and next time you see the governor, thank him for standing up for Utahns.
Dave Davis is president and chief legal officer for the Utah Retail Merchants Association and the Utah Food Industry Association.