PubliCola beat me to this point by a couple of days, but the internet sales tax bill making its way through Congress — it just passed the filibuster-happy Senate 69-27 , with your two Senators voting yes — has large implications for any local agency that largely funds itself with sales tax, which of course includes transit agencies across Washington.

For this bill, the Department of Revenue says that FY 2015, the first full year of implementation, the State would receive $113m in additional revenue. By 2017, projections expect compliance rates to stabilize so that revenues increase by $333m per year. Using my estimate that Metro revenues are 5.6%* of the state total, that amounts to $6.3m escalating to $18.6m annually for Metro.

Metro’s total 2015 budget gap is $60m, so this doesn’t come close to solving the problem. But it does mean they’d cut a little less core service, and if a tax package does pass it’d be a little more new service and a little less backfilling old service. And of course it’s the same story for Sound Transit, Pierce Transit, Community Transit, and so on.

The bill is S.743,  the Marketplace Fairness Act of 2013. In the House, where the bill awaits action, the equivalent is  H.R. 684. Letting your Representative know this is important to you always helps. In particular, Washington’s Suzan DelBene is on the subcommittee currently reviewing this legislation, and she is also a cosponsor of the bill.

*Goldy’s back-of-the-envelope estimate has slightly higher numbers. I based my 5.6% number on the 2012 state sales tax estimate of $7.241 billion and 2013-14 Metro budget’s 2012 sales tax estimate of $402.9m. His Sound Transit numbers don’t include the Snohomish and Pierce County contributions, and they count areas of King County not in the district.

18 Replies to “Federal Sales Tax Law Would Help Local Transit”

  1. I do most of my online shopping through Amazon, anyhow, which means I already pay the sales tax. However, one of the reasons I do this is because of the convenience and near-instant shipping.

    I think brick&mortar retailers who are in favor of this bill are going to be surprised when they lose out bigtime to e-commerce companies that had, thus far, stayed out of their state to take advantage of the sales tax loophole.

    1. That’s an iteresting point. The #2 pain of buying things online (#1 being not being able to see/touch products) is waiting for shipping. I wonder if we’ll see companies spread out so they can ship quickly anywhere.

    2. Amazon is also rumored to be thinking about setting up, gasp, brick-and-mortar stores.

      1. That seems highly unlikely. Amazon’s business model is based on operating at scale with incredibly low margins. I don’t see how that would work with a physical store. It would end up looking like Walmart, and that would just make Amazon look bad.

        The one possible exception I could see would be if they sold only Amazon-branded products, like the Kindle and Kindle-fire. But even then, they seem to be doing just fine, without the added expense of high rents for prime retail locations.

      2. Probably just gonna expand Amazon Fresh, and maybe put “mini-warehouses” in each city, to fulfill relatively-small, commonly ordered items.

        Perhaps also expand the Amazon Locker program (pick up your stuff 24/7 at your local 7/11)

      3. I envision it more like a like a small cellphone store, selling a few Amazon-specific things or best-selling items. Not a superstore like Walmart, no. It could be combined with a locker site. But something to pull in people like me who would rather see the product, pay a real person, and get a receipt and the product on the spot, rather than having to trust online ordering and wait for it to arrive or pay more for premium shipping. At the margin it can be the difference between a sale and a a non-sale, and at some point Amazon will determine that market niche is important to them.

    3. Completely agree. The 10% extra I pay on Amazon is easily outweighed by the ludicrously fast shipping. It blew my mind the first time that I ordered something and received it *the same day*.

    4. What? I buy things on Amazon all the time and have never paid sales tax. That is why I buy from Amazon…

      1. If you live in Washington State, and buy something that’s being sold directly by Amazon, you’re definitely paying sales tax.

        However, a substantial portion of Amazon’s inventory is provided by merchants other than Amazon. If you’re buying from a merchant without a presence in WA state, then you’ll pay no tax, even though Amazon is helping to fulfill the transaction.

      2. In New York, they have a special levy on our income taxes to cover sales tax which we supposedly might not have paid from online and other orders.

        Accordingly, this isn’t going to affect revenues in NY. If I’m actually paying sales tax on everything, I’ll make a point of marking the “No, I do not need to pay extra sales tax” entry on my income tax form; it’ll all cancel out.

  2. Now if STB could get behind a movement to repeal the vehicle licensing tabs debacle (I paid more for my 72 Fairlane in 1994 than I pay for my much newer vehicle now) we might actually make some progress. Eyman is [ad hom], and it’s well accepted. Exploit that and lets get fuly back on track.

  3. In the House, where the bill awaits action

    This conversation is jumping the gun; passage in the house is highly unlikely. Boehner’s caucus is willing to let him pass legislation with (mostly) D votes if it’s absolutely necessary and urgent, but this isn’t. I suspect he wants to retain his leadership position more than he wants to pass this (if he even does).

  4. The irony is that while the internet tax will fund our transit to meet demand, we won’t need it anymore because all the Amazon and other tech workers won’t have jobs anymore.

    I exaggerate, but there is definitely a down side to the internet tax idea and it will be particularly felt in our woods of the neck.

    Maybe I should get a bunch of people to open etail startups in South King and we can use the resulting sales tax to prop up the South Link coffers so they can actually deliver what they said they would when they said they would (cough cough).

    1. Keith, Amazon is pushing for this. They recognized years ago that the tax break would go away and started preparing for it. Now they have the infrastructure in place to actually make money off this, as small businesses contract with Amazon to hand tax collection and remittance.

      They have actually moved beyond needing the tax as a competitive edge. By pioneering new distribution methods (same day delivery, package pickup kiosks, reoccurring deliveries, etc) convenience and selection is their edge, not the tax break.

      And blaming ST for South King County’s economy dropping out from underneath is a cheap shot.

      1. Yeah, if anything this would benefit the region, as amazon is prepared for this in a way that some of its competitors are not.

      2. Seattleite,

        eBay is supposedly against the bill, but I can’t believe they haven’t made exactly the same assessment that Amazon has: the users of their infrastructure don’t have the technical skill, time, or financial wherewithal to purchase and implement one of the “destination based selling” tax packages. So eBay, just like Amazon, is doubtless working on a web interface to provide their customers with the service — for a fee, of course — should the bill pass.

        However, the difference between Amazon and eBay is that most of the people on eBay are fly-by-night right-wing “entrepreneurs” selling worthless Tchotskys to gullible HSN TV watchers. So eBay has to act like it opposes the bill.

  5. I think the state, like Illinois before it, will be sorely disappointed with what the reality is. A simple example.

    “X” pays $90 for an Internet purchase, no sales tax, today. They spend another $9 (rounding the sales tax to 10%) on “Y.” Tomorrow, Internet purchases are taxed. The proponents of this legislation assume that X will pay $99 for the Internet purchase and that another $9 will come from…yep, thin air! Or, that they will drive to their nearest brick and mortar store to pay $99.

    Instead, here’s what I suspect will happen. “X” purchases online due to the convenience and an unfettered sales experience: they can (usually) easily compare products online, not having to drive anywhere @ $4/gallon, not having to deal with nonexistent store help (cutbacks), not getting the sales pitch for whatever management wants to push, including the generally-worthless extended warranty. It’s also entirely likely that the warehouse operation for the Internet merchant is located in a state that has lower labor costs than WA, so their prices will still beat the brick and mortar, the difference – plus convenience still outweighing possibly having to pay – and the hassle – to ship an item back. Perhaps “X” will think again about whether they want to pay $99 for the purchase. But, the $9 (in this example) comes from somewhere: from some other purchase that doesn’t get made, some savings that isn’t deposited, etc.

    Also, many out-of-state people buy from Washington-based businesses and aren’t charged their state’s sales taxes on their purchases. If the theory is that the “X” folks in our state shift to brick and mortar, won’t those from other states do the exact same thing? Then, it becomes a matter of who does it for more $.

    The cost of collecting the 9,600 or so different sales taxes seems to benefit folks like Amazon, who’s all ready to make money on the process for handling sales taxes for the smaller merchants, which will translate into higher prices for all buyers. It seems to me that the simpler legislation would be to just collect the state portion of each state’s sales tax, 6.5% in the case of Washington. That would reduce the # to just 45 different taxes.

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