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False Arguments for Taxing Zappos, Other e-Commerce Sales

A lot of hullabaloo followed the recent announcement that Internet retail giant Zappos.com was moving its Henderson, Nevada, headquarters to downtown Las Vegas. And by almost all accounts, this was a win-win deal for both Zappos and Las Vegas. However, one “knowledgeable insider” did share these contrary words with political pundit Jon Ralston:

“Besides a payroll tax (which they are already paying) and collecting sales tax on ONLY the Nevada sales, why is Zappos a good deal? They have kids in school. They have parents in need of services. Yet they pay NOTHING (a miniscule payroll tax that is capped) toward those costs.”

Hold on there, Bubba-looey.

“Knowledgeable insider” is, indeed, correct in pointing out that businesses do not actually “pay” sales taxes. They merely collect sales taxes paid by consumers and remit them to the government.

But to complain that Zappos pays “NOTHING” toward the cost of government services its employees receive is like complaining that illegal aliens pay nothing toward the cost of the government services they receive. As American citizens are constantly reminded by amnesty advocates whenever we complain about the financial drain of illegal aliens using government services, illegal aliens pay taxes in the form of sales taxes, property taxes, fuel taxes, insurance premium taxes, etc.

So how are Zappos’ employees in Nevada any different from illegal Honduran aliens in Nevada? They pay sales taxes, property taxes, fuel taxes, insurance premium taxes, etc., to fund various government services. Why should Zappos have to pay if Honduras doesn’t have to pay?

Which brings us to the complaint about Zappos customers who do not live in Nevada not paying, under current law, Nevada sales taxes on their online purchases: Why should they?

They don’t live here. Their kids don’t go to government schools here. They’re not using Nevada’s public streets and sidewalks. They’re not getting police, fire and social services here. Indeed, they’re not using any of our government services, so why should they pay for them? To force out-of-state Internet consumers to pay Nevada sales taxes would be – dare I say it – taxation without representation, which, I believe, is about as un-American as you can get.

On the other hand, let’s say Zappos, instead of moving from Henderson to Las Vegas, decided to move to Texas. And let’s say you, a Nevada resident, purchased something via the Internet from them. Should you be charged the Texas sales tax to help Texans pay for their schools, roads, indigent medicals care and other Texas government services? Of course not.

On the other hand, if Zappos is located in Texas and not using any of Nevada’s government services, why should a Nevadan be charged Nevada sales tax on Internet purchases from an out-of-state company – other than the fact that the government just wants more money from anywhere it can get it to do “stuff”?

In November, Nevadans rejected a ballot proposition put forward by the 2009 Legislature which would ultimately result in such universal taxation of Internet sales.

“We have a situation where Main Street businesses must collect the 7 percent to 8 percent in sales taxes, while e-commerce businesses do not,” maintained Nevada State Sen. James Settelmeyer who, as an assemblyman in 2009, put forward the bill to put Question 3 on the ballot. “Give mom and pop businesses a fair chance to compete.”

This is wrong on two levels.

First, Main Street businesses have the advantage of allowing a consumer to immediately walk into a store and make a purchase without waiting or paying the extra cost to have the purchase shipped. That’s a pretty significant advantage for brick-and-mortar stores.

And secondly, if the overall objective is to level the playing field, then the answer isn’t to impose the burden of sales tax collection on e-commerce businesses; it should be to eliminate that burden from Main Street businesses.

So let it be written; so let it be done.