The other night, I went to a reception for new Commerce Secretary Bobby Hitt, my old shipmate at The State. Bobby was near the front door, and we exchanged pleasantries. Standing there with him and Mike Briggs from Central SC Alliance was the head guy from Amazon, whose name escapes me at the moment — and he didn’t have any cards with him, or I’d have it in front of me. (If this were a newspaper, I’d hold this report until I got the name, or rather, got a reporter or editorial writer to get the name for me. But it’s not a newspaper, it’s a blog; and you’re not paying for it, so get outta my face.)
Anyway, having said “Welcome” to Bobby (a bit ironically, since I’ve seen and chatted with him numerous times since he came back to town), I said an even more fervent “Welcome!” to Mr. Amazon, and we, too, exchanged pleasantries. I thought, “I really should ask this guy some questions,” but didn’t have any on me. At that point, I spotted the bar. I needed to be somewhere else in about 20 minutes, so if I were going to have a free beer, it was now or never. So goodbye, Mr. Amazon (Yes, interviewing a source when you have the chance is important, but there are other immemorial traditions of journalism that must be honored as well.)
On the way to the bar, though, I saw Lanier Jones, president of ADCO, and said, “Lanier, you should go over and meet the Amazon guy.” Which he did.
A couple of days later, this came out:
Amazon’s 1,200-job project in jeopardy
Online retailer Amazon.com pressed S.C. lawmakers Wednesday for a sales tax break for the distribution center that it is building near Cayce, amid concern that denying the incentive could jeopardize the $100 million project.
Amazon executives warned refusing the tax break is a deal-breaker for the project, projected to employ 1,249 full time by 2013 and provide up to 2,500 part-time jobs, some legislators and Lexington County officials said.
“The implication is if they don’t get it, they’ll pull out,” said House Majority Leader Kenny Bingham, R-Lexington. “That’s clearly an option they will look at if they do not get it.”
That day, Lanier said something about the fact that we knew about that. I didn’t know about it, I said. Lanier said that when he spoke to the guy, Mike said something about a tax problem, and the Amazon guy said, “It’s a dealbreaker.” Lanier figured I’d heard the same.
So maybe I should have hung around a tad longer. I just didn’t know that at the time… Oh, well.
Bottom line, what should SC do about this?
Nikki Haley has chosen, like Pontius Pilate, to call for a basin of water:
Gov. Nikki Haley on Thursday washed her hands of an effort to lure more than 1,000 jobs to Lexington County.
Haley said she does not support a tax incentive designed to entice online retailer Amazon.com to Lexington County, making clear her opposition a day after company officials said they will pull the plug on a planned distribution center unless they get the tax break.
But Haley said that if lawmakers — who are waiting to follow the governor’s lead — approve the tax break, she will not veto it….
So basically, whatever happens, it won’t have her delicate fingerprints on it.
Not that I mean to cast aspersions with the Pontius Pilate thing. Actually, Nikki’s right (I think; I’m still cogitating on this) not to support the tax break. And she’s right (although not what you’d call courageous, or a leader) to recognize that this is a hot potato.
But she opposes (kinda) it for the wrong reasons. She opposes it because of a Policy Council-style ideological objection to using incentives in economic development. Hey, I think a lot of incentives are a bad idea, but not all of them. That’s the problem with ideology; you don’t make distinctions between bad and good, you just always bet on black. Or red. Depending on your ideology.
The actual PROBLEM with the tax break is that businesses should not be allowed to skirt the sales tax. Not only do we have too many exemptions in the sales tax as things stand, but allowing Internet businesses to do that places other SC businesses, such as the proverbial Mom and Pops, at a terrible disadvantage.
Not only that, but it’s unfair to Walmart and others that have asked for such a break, and been turned down. So you have an equal protection problem.
But Nikki Haley isn’t going to put it in those terms. So I did.
All of that said, I don’t relish the idea of turning away those 1,200 jobs. Policy abstractions are one thing; actual jobs for South Carolinians is another.
So I’m a bit torn about it still. As the governor seems to be. So we have that in common.
This is an issue that I would have had a lengthy discussion with the editorial board about, to develop and sharpen my own thoughts before saying anything in the paper.
I don’t have an editorial board now. So what do y’all think?
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I shop a lot on Amazon because the selection is amazing and the prices are always competitive. Mom and Pop stores can actually sell on Amazon–even a regular person can. By and large, I am frustrated with Mom and Pop stores because they don’t have what I want. Sales tax is not the issue.
Amazon is bringing top quality $15/hour jobs that our poorly educated works force can handle. They don’t want to put SC shoppers at a disadvantage when I can’t go into an Amazon store. The de facto rules seems to be that if you have a bricks and mortar store in state, you charge sales tax, even online. Otherwise you don’t. Walmart and Best Buy get my business when either I want it today, or it’s something not worth having shipped. That means I spend a whole lot more at Walmart than Amazon, just on different items.
Is there any way a law can be passed requiring citizen Mark Sanford to personally deliver the bad news to Jeff Bezos?
Until there’s a system in place where you’re required to pay the sales tax in the shipping address state (as if you were purchasing it in a B&M store) there will always be a problem.
You’d think that with all the programming experience we can lowball in India that they’d have this in place. If nothing else, have it collected at a central point and let them distribute it 51 ways. It can’t be that difficult to figure out. In theory I could write down the steps in about 5 minutes.
How many businesses closed their front door and went to E-Bay? I’ve purchased items before where the seller had over 100,000 items for sale at that given moment.
Then add in the Amazon stores where it’s not actually being sold by Amazon, but through Amazon.
Brad,
In one sentence, kindly tell us exactly what Vincent Sheheen would do? No press weasel words, please.
If the sales tax issue had really been a deal breaker, Amazon would have finalized a binding agreement before executing the transaction; as they did with the Sunday sales impediment. Since they didn’t deal with this as they did with the blue laws its just a want, not a must have. And its true; this is not something they should get anyway.
So I hope the state can find a way to tactfully let the issue wind down. Given the smackdown approach used on Darla Moore, I’m not too confident Nikki Haley should be the one to offer meaningless platitudes to the retailer.
But, Mark, they may have thought it was in the agreement. The steps are a bit convoluted on these incentives–far more so than in a simple real estate sale–you have things to be passed by the county and maybe the city, things to be approved by the executive branch of the state gov’t and then the big piece here which was the Sunday sales. You have limitations on what can be promised and by whom. Governments and agencies are the same as private businesses.
Amazon may also have thought that since they do not have a store here and since they do not currently collect sales tax on sales here, that would continue.
What is overlooked here is that everyone who buys on Amazon is still going to buy on Amazon if Amazon takes its business to another state. These are not sales that would otherwise go to a local business. The only thing truly at risk in this case is the jobs.
“Governments and agencies are the same as private businesses.” I meant to say NOT.
Brad–why can’t you fix it so we can edit our own comments like other blogs allow?
@Steven, the problem is not that we can’t do the collections. Sears, JCPenney, and many other companies that have nationwide presences and catalog sales have been doing it for years. The problem is that people aren’t paying the use tax as required by state law.
“Use Tax: Purchases of tangible goods for use in South Carolina on which no South Carolina sales or use tax has been paid are subject to the use tax. Examples include: catalog purchases, goods bought on-line over the internet, or furniture purchased out of state and delivered in South Carolina on which no or insufficient South Carolina tax was paid. (Contrary to popular misconception, the federal Internet Tax Freedom Act governs taxation of access to the internet through your internet-access provider. Goods purchased over the internet are not tax free.) When figuring your use tax liability, please review any credit card statements from the taxable year. In addition, please recall any large purchases made during the taxable year.”
The ironic thing about all of this is that it’s the presence of the Wal-Marts and the Best Buys in a community that ultimately does more to harm the so-called “Mom-n-Pop” stores than an online retailer setting-up shop with a sales tax exemption ever could.
After eight years of Bushisms, we are now treated to four years (hopefully) of Haleyisms.
“I oppose this legislation, but I will not veto it.”
Nikki has made some bold, but dumb moves; yet she hides under cowardice in refusing to veto the tax break legislation.
Nikki, if you’re opposed to the Amazon tax break, then don’t compromised your principles, just go ahead and veto it.
The Tea Baggers would be thrilled with your veto. However, I think that you would tick off your home county of Lexington.
I’m not sure this is actually a tax break. Amazon wants to not collect the sales tax, but the consumer is still supposed to pay it. You are supposed to keep up with the stuff you order but didn’t pay taxes on and report it on your SC income tax return. Of course, most people don’t – either out of ignorance or because they can get away with it. Amazon wants to not collect it because not having that 6% included in the price gives them a competitive advantage over B&M stores that have to include it, and the online retailers that have to include it (the ones that also have a B&M presence in your state).
So basically if Amazon did collect the tax it would generate a significant amount of much needed revenue, simply because of the volume of business that Amazon does. But likewise, if people would report and pay the tax on their own like they are supposed to, it would be a non-issue.
I’m not sure that it isn’t a deal breaker though. Amazon is pretty serious about avoiding collecting sales tax based on their behavior in other states, from what I understand. They only collect it in 5 states, where they have thus far been unable to avoid it. They are challenging NY in court to not have to collect it. They have pulled out of and/or severed some kind of ties to affiliates in Texas and Illinois to avoid collecting it. I think there may be other cases – those are just ones I’ve heard about in the last few days. Here are some links with some of that info:
http://www.npr.org/2011/03/14/134543676/States-Try-To-Collect-Online-Retail-Sales-Tax
http://community.seattletimes.nwsource.com/mobile/?type=story&id=2014663286&
So basically, if we drive them away, we lose the jobs and we continue to not receive the tax we already are not receiving.
We could have the best of both worlds if they come with their jobs, and SC residents choose to pay their taxes on their own.
The problem with them having an advantage over retailers that have to include sales tax is going to continue whether or not they locate here, as long as they find enough other states that will make deals with them – so sacrificing the jobs to take that stand seems futile to me.
That’s how I see it.
(For some reason, my husband has become obsessed with this issue, which is why I now know so much about it. He has always kept track of his internet purchases and reported them – in fact, I’m supposed to be getting him my list of my internet purchases for the past year, right now, so he can do our taxes. So I better go get on that…)
If SC’s tax structure weren’t so f*&^#@d up, Amazon wouldn’t have considered SC over the sales tax issue. Amazon is likely to face this issue wherever they ultimately decide to land. $15 an hour jobs will still qualify folks for SC’s Medicaid program in 2014. The site is attractive, UPS is like next door. If not Amazon, then another distribution center will find it. We need to stop selling SC short for mediocre jobs.
States need the revenue from a fair sales tax. It’s time internet business joined the real world and collected sales taxes for the states their customers reside in.
Why don’t we just eliminate states altogether. What perpose do they serve? One nation without states. Call it the United State of America. Problem solved. No sales tax incentives to be offered. All drivers license tests would be the same. There would only be one gas tax, cigarette tax etc. It would be more efficient since there would be no need for state government. All laws would be federal. Since there would be no SC general assembly we could turn the capitol building into a giant amusement center. And since there is no state house there would no longer be a need to argue over the Confederate flag. Whoever buys it could do with it as they please.
Hey, that would be OK by Nikki. She ran a whole campaign last year (SUCCESSFUL campaign, which says as much about us as about her) yammering about Obama instead of talking about anything having to do with South Carolina.
In fact, that whole class of Tea Party Republicans would dig that — the only politics would be inside the Beltway, and they’re all about that.
Media would love it, too. They’d no longer have to employ the few, very few, reporters who still cover state and local affairs. Everything would be “rip and read” out of Washington, via AP…
Kathryn asks, “why can’t you fix it so we can edit our own comments like other blogs allow?”
Because I don’t know how.
It’s on the list for the redesign. When I get time, and probably money, for the redesign. Which, the way things are going, isn’t exactly going to be immediately.
Meanwhile — Burl, do you know how? (Burl not only uses WordPress, but employs the same theme on his blog — I liked his, which is why I went with it).
I think this would be a good compromise. Get Amazon to agree to send a statement at the end of the year to all their customers saying ‘This is all the stuff you bought this year. Go check if you need to pay use tax on it.’
Then Amazon still gets their advantage. People would not be able to claim ignorance for not paying the tax. Probably more would pay it. The state gets more revenue and the jobs. I can’t believe it would be that big a hardship on Amazon to generate such a statement and send it electronically.
@Brad
“Hey, that would be OK by Nikki. She ran a whole campaign last year (SUCCESSFUL campaign, which says as much about us as about her) yammering about Obama instead of talking about anything having to do with South Carolina.”
Replace Nikki with Vincent and Obama with Haley… same thing.
Except for the successful part…
I used to have a friend who worked at our college radio station whose nickname was “Rhonda Rip n Read”, which I thought was catchy. Thanks for reminding me of that.
Doug, did you miss this part of Brad’s comment (even though you quoted it) “…instead of talking about anything having to do with South Carolina.”
Yes Vincent talked Haley….but Haley had (has) everything to do with South Carolina.
Kathryn,
The business always knows the score in these kinds of deals. They don’t – can’t – know which political entity will give what or when it may actually be decided, but trust me when I say they keep score very carefully. The blindsides do happen, but it’s usually over the simple stuff like when politicians promise something a beaurocrat has no interest in delivering, and then doesn’t. Those things catch corporations unawares.
However, there is no way that a company like Amazon and its advisors didn’t understand what the state was promising vs what they were offering as a possibility. The possibility puts the responsibility on the company to fire up the PR machine and play for all the chips. Which is what Amazon is doing now. There’s no need for us, as voters or as political office holders, to fall for this ploy. Its just a game of “will we shoot our own foot”? Sadly, the answer is usually.
Don’t forget the head of Amazon was once a Wall Street quant jock. Its just a game. One with huge financial stakes for us. For Amazon its important, too, but they’ve been playing this game for years, just waiting for a sucker table to offer up the chips. Let’s not be those fools. The issue is far larger than one distribution center.
If Amazon claims they have no brick and morter store here; simply parade the site resellers who do. Amazon’s mission remains the vision of being THE sales channel for all a buyer’s needs. They want to aggregate other retailers through their site. Having a sales tax advantage is a huge plus in that campaign.
Okay, fair enough, but as a consumer, I love Amazon and hope they get even more resellers.
For example, I went out on Saturday afternoon to look for some art. I went to City Art, which was having somebody’s wedding reception, over to Carol Saunders, which had sold most of its show and had about 2/3 of the gallery empty. Havens was closed after 1:30 per a paper sign posted in its window. If… and HoFP were open but didn’t have anything that caught my fancy. I spent a few hours doing this. I can go online and view thousands of works of art in that time, but I prefer to see them in person. Same thing with clothing–I can spend a whole day trying to find something that fits or order something that, since I know the actual measurements of clothing that does fit, will likely fit.
I have tried to find books locally, and find that unless I’m just looking for something to read—which is rare since I have about a year’s backlog, I’m so much better off online. I would gladly pay a few dollars more to support a local seller, but my needs are fairly specific and to drive all over and still not find what I was looking for….eventually I just start looking online.
Only GB Shoe Warehouse is likely to have any selection of shoes in my large but not all that unusual size 11, so I buy online for shoes, too. My best source locally for shoes and clothes is Revente, frankly. New apparel merchants don’t seem to want to stock anything but the most mainstream sizes.
If I need a $28 candle, to use your wonderful example from the Walk, I know where to go, and when I need a gift in a hurry, that’s what I do, but is that any way to build an economy?
You need to have a long talk with the Shop Tart. She’ll set you straight…
We’ve spoken often about this very issue. The Tart is a nice small size like the boutiquiers like. It’s also why she can eat all those fries and quaff all those fancy high calorie cocktails she writes about. Those of us in double digits find it much harder in local shops. For the record I am currently the average size of a woman in America, although I am six inches taller than she is. It is considered to be a truism that really large women will buy clothing, perhaps because they have “given up” on getting smaller, but that merely moderately larger women are always expecting to lose that last twenty pounds and won’t spend. How would retailers know? It’s been so long since many of them have stocked double digit sizes….
Those who do stock larger sizes, and by that I mean 10, 12, 14, often stock mother-of-the-bride looking stuff….so I can find stuff in specialty stores like Coldwater Creek and Chico’s, or department stores, but none of them are truly local. I have to order my tall pants online anyway, so why not just order it all?
So, as I said, as far as I am concerned, Amazon is not stealing sales from local merchants. Either you are shopping online or you are shopping bricks-and-mortar–for different reasons. All we stand to lose are the jobs…
Who buys $28 candles?
Hmmm, I confess I didn’t follow most of that.
My question is why should the state actually promote online sales by making bricks and mortar stores even less competitive?
The jobs that Amazon needs must be physically located somewhere. How many other areas are centrally located between Miami and New York at a UPS and FedEx hub and provide ultra cheap labor rates? Yeah, we are competing against ourselves.
What’s the benefit of that?
Since we are talking tangents now, will Boeing pay sales taxes on aircraft delivered from Charleston? Boeing isn’t just a manufacturer as it sells its own products to end users…
1,200 new jobs… but nobody talks about the possible job loss because of Amazon. Will these be 40 hour per week jobs with benefits or 32 hour per week jobs with no benefits?
Amazon has done just as much to shut down Main Street as the big box stores. How many Ace Hardware (or similar) stores are left in the Midlands? I can think of 1, when I moved here 20 years ago there were probably 15-20 neighborhood hardware stores, now you have to look hard to find one.
Anyone else tired of this country becoming nothing but Walmarts; Best Buys; Lowes; Home Depots and Sears stores? I’ve personally witnessed the small Mom & Pop stores opening E-Bay stores to survive. One of my favorite things to do while traveling cross-country is to take the back roads and drive through small towns, it’s a shame to see the same chain stores and restaurants popping up in towns with less than 1000 citizens. I want to stop at Hardware Hanks and Smalltown Cafe, not Lowes and not Pizza Hut or Hardees.
Enough ranting, I buy from Amazon… but wish I didn’t.
Steven — the bottom line is this, IMohsohumbleO:
These minimum wage jobs will be strategically filled with seedy criminal types who are hungry for the almighty $ and will do anything to get it.
Not a good scenario, muchacho 😉
The Amazon jobs are going to pay $15 an hour. Sounds good to a lot of people.
$15 per hour… how about benefits? Nobody has said word one about these jobs having benefits.
Are these good jobs if they pay $15 per hour, for 32 hours per week with no benefits?
You know, the same Main Street Merchants who want all kinds of protection for their businesses are often the ones happy to starve the University that pays my husband.
One man’s cost is another man’s income.
You’re losing me again… what are the Main Street merchants trying to do to your husband?
Sounds like you’re taking this personally. This is just business, Tom, and this woman is taking it very personal…
The sort of libertarian tax-hating small business people who want my business don’t realize that taxes pay a lot of their customers, such as, but not exclusively including, my husband, government employees ( not a trivial market segment in the state capital)….
If they had what I wanted to buy, I’d buy from them. It isn’t sales tax, as Cindi pointed out today, that’s hurting them.
The State (and other newspapers) get a break from collecting sales tax. Why can’t Amazon? Or, as an alternative, remove all the loopholes for products that are sold to consumers.
And while we’re at it, can some brave legislator file a bill to remove the 1% sales tax exemption for people over age 85? Whoever came up with that one was surely just trying to buy votes.
I’d be for the tax break for Amazon because of the residual effects we would see with all the jobs: more income tax, more sales tax collection from the workers… hopefully lower spending on unemployment.
The collection of state sales taxes by Amazon and others should be handled at the federal level. I’d be fine with implementing a national internet sales tax that is collected at time of purchase and then redistributed to the states based on the location of the purchaser.
See – I’m not against taxes, just stupid, unfair, hard-to-collect taxes.
I use Amazon because I can search hundreds of products, from various retailers (Amazon doesn’t sell everything on Amazon.com- many of their products are from small retailers) and price compare all from the comfort of my home.
I read this in The State this morning and thought this odd to hear:
“Some lawmakers say they see as a commitment the promise by state Commerce Department officials to make a “good-faith effort” to win legislative approval of the exemption.
“That language is legalese for ‘you can count on it being done,’” said state Rep. James Smith, D-Richland. “I don’t want our state to get a reputation for not keeping its word.”…”
Hmmm, I’m not an attorney, but every time this phrase has been used it is because a PROMISE cannot be made on an issue, whether because of a point of law, or engineering issues or financial market conditions. So a pledge to pursue diligently is offered up as the next best thing – but specifically stated with NO guarantees. I used to represent large deals like this and every time we knew that the executive branch would need to obtain legislative or council approval, we never expected better than a 70/30 result. If we needed something absolutely, we waited until we had it. Never did anyone on the corporate side ever take “good faith effort” to mean anything other than to advocate compellingly. That’s why I think Nikki’s in such a pickle; as Governor she should carry the banner seeking approval of the break – and yet it does seem believable that she was not informed such an odious obligation had been thrust upon her by Sanford.
I’m surprised that Rep. Smith would mischaracterize the phrase. In the same way I’m not surprised Amazon would choose to follow the announcement that some legislative plan was in the works to publicize that they have “halted” filling a handful of executive positions (which are largely internal transfers anyways): It’s all just a game.
Each side has valid arguments on this. So let’s talk about the bigger issue of which this is just a tiny speck; are we going to continue to specially except certain classes of tax payers, thereby shifting the burden to all the others, or are we going to move toward a more rationalized tax code that has everyone carrying a more equitable burden? The amazing part is how people just can’t seem to understand that this would end up feeling economically better for all as everyone manages to get caught in one of this state’s tax sinkholes in some way.
Amazon wants to locate here so it doesn’t have to collect taxes in NC, GA and FL (among others), let them pay the meager taxes due on our 4 million citizens who have far less disposable income than our neighbors do. That’s the trade off. Amazon understands that. So let’s stop shooting ourselves in the foot and stand our ground. We have the compelling business case already.
Speaking of that hiring freeze ploy… could Amazon have gotten a better result, in its wildest dreams, than that lede headline in The State today?
Their PR people must be hugging themselves with joy…
That’s the problem when the PR is the story; balance, where’s that?