When I first woke up last year, you couldn’t keep me off Amazon and Ebay. It seemed like I could buy literally anything I wanted, and a smiling man or woman would show up at my door and give it to me. And it was all tax free!!!! Then I started noticing all the small businesses in town with shuttered doors and windows. And I saw the connection.
See, while I was sleeping, you all passed Proposition 13. Whatever else it did, Prop 13 made local governments almost completely dependent on sales tax, and made it real easy for the state to take money out of city coffers whenever Sacramento ran short. For a while, that was no problem, because we had auto dealers, and Costco, and CompUSA, and Circuit City, and lots of small thriving businesses, and Sacramento wasn’t running short because the tech boom was creating a cash cascade.
Along with that tech boom came Amazon and Ebay. If you take the time to look back at news reports from the time, you’ll see that nobody could figure out how these two companies were going to make money. I mean, they have to pay to ship individual items to consumers, while the local stores already have them in stock. Sure money loser, right?
Except that they don’t pay sales tax. And that, all by itself, can explain the success of online retail. Raise your hand if you’ve ever gone to a local store to browse, then bought the item online to save sales tax. That’s one pothole not fixed, part of one teacher’s salary not paid. All by myself I probably cost the school district a new computer.
When the tech bubble collapsed, and then the real estate bubble collapsed, and Sacramento came looking for funds, and we’d all become accustomed to spending our money online…
In fact, the law in California says that you are liable for tax for anything you buy online. Not coincidentally, the tax you owe is exactly equal to the sales tax you would have paid if you’d bought the item locally.
Personally, I actually paid that tax last year. This year, whenever possible, I’ve been buying all my stuff from real people, at real stores. People who may very well turn around and buy my services from me. On the things I buy online, I’ll declare and pay the tax.
I don’t want to sound self-righteous at all. It’s enlightened self-interest. Meg Whitman (of eBay) and Jeff Bezos (of Amazon) have enough of my money. The small business people in my community, and my schools, and the state Universities and my city government are starving. I’d be a fool to do any different.