Archive for July, 2018

Online Tax Collection

Tuesday, July 24th, 2018

In delivering a long-awaited decision on Thursday, the U.S. Supreme Court closed a decades long tax loophole that gave online-only retailers an unfair advantage over local brick-and-mortar businesses. The decision in South Dakota v. Wayfair means that online retailers will likely be required to collect state sales tax very soon, just like their brick-and-mortar counterparts. It’s a win for small businesses that often struggle to compete with online retailers’ low prices and a victory for states that could soon see a boost in their economies.


South Dakota sued Wayfair and other online retailers after they failed to collect sales tax on online purchases made by South Dakota residents. Previously, states did not have the power to require retailers that did not have a physical presence in their borders to collect and pay sales tax to the state. South Dakota attempted to circumvent the “physical presence” requirement by enacting a law in 2016 that required online retailers to collect sales tax. The law applied only to large online retailers – those with at least $100,000 in sales or 200 transactions in the state.


On Thursday, the Supreme Court overruled two outdated decisions and upheld the South Dakota law. As a result, South Dakota – and other states – can require large online retailers to collect and pay state sales tax. In the Court’s opinion, Justice Kennedy called the loophole created by the old policy “flawed” and “arbitrary.” He went on to explain that the old policy was based on the administrative challenges that large retailers would face in collecting sales tax in many different states. With modern technology, however, the loophole is no longer justified.


“Modern e-commerce does not align analytically with a test that relies on [physical presence],” Justice Kennedy wrote. “This Court should not maintain a rule that ignores … substantial virtual connections to the state.”


Supporters of small and independent businesses celebrated Thursday’s ruling. For the Institute for Local Self-Reliance, senior researcher Olivia LaVecchia wrote, “It’s an important day for independent businesses: After years of being forced to compete at a significant price disadvantage, locally owned businesses finally have a shot at a more level playing field when it comes to sales tax.”


After the South Dakota v. Wayfair decision, states can adopt laws that require online retailers to collect sales tax. As a result, local economies will benefit from greater tax revenues. They may also benefit from more local purchases, as small and independent businesses get a more level playing field in the competitive retail market.


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Tuesday, July 10th, 2018

Amazon Under Fire Over US Communities Contract

as reported on

An in-depth report released today by the Institute for Local Self Reliance (ILSR) has painted a scathing picture of Amazon Business’s US Communities cooperative contract for local government purchasing.

The award of a marketplace US Communities contract to Amazon Business was first covered on in a February 2017 article titled Amazon Business’s $5.5 billion public-sector land-grab (which is actually referenced in the ILSR report). At the time, it appeared that the contract RFP (request for proposals) had been tailored towards Amazon and there were also question marks over the pricing structure of the contract.

Now, Olivia LaVecchia and Stacy Mitchell of the ILSR have written a report called Amazon’s Next Frontier: Your City’s Purchasing that takes a closer look at how Amazon Business was awarded the US Communities contract and at the e-commerce giant’s push into public sector purchasing.

Below are some of the key points and findings in the report about the US Communities contract:
• The terms of the RFP made it unlikely that anyone but Amazon would be awarded the contract.
• The contract adopts some of Amazon’s owns terms and conditions that override normal local government purchasing provisions and restrict contract transparency.
• The contract does not offer pricing guarantees nor volume discounts.
• Amazon has a trained national sales force selling to local governments.
• A pricing comparison study commissioned by the ILSR and carried out by Rick Marlette of OPSoftware shows that Amazon Business is more expensive for a basket of items than an independent dealer.
• The contract provides slower and more expensive fulfilment terms than the office products industry standard of free next-day delivery.
• There is evidence to suggest that local government spending on Amazon jumped dramatically between 2016 and 2017, although some cities are holding back due to concerns over price transparency.
In addition to Rick Marlette, another well-known office products figure who is prominently featured in the ILSR report is David Guernsey, whose dealership lost some business when Prince William County Public Schools in Virginia – the lead agency on the US Communities marketplace contract – started purchasing from Amazon. In fact, Guernsey – who believes that Amazon is the biggest threat to the existence of independent dealers – is the subject of a two-page epilogue near the end of the ILSR report.

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