Borders Closing: Why We Need the Amazon Tax
Wednesday, July 20, 2011
This got me thinking.
Are we entering the age of the Net?
If the late 90s saw the influx of dot coms into the marketplace, will the 10s see the decline of brick and mortar stores? In addition to Borders, the story of Hollywood Video and Blockbuster, in my opinion, are forerunners of what’s to come. It won’t be like the old days where a corporate giant would come to a community and kill off the local mom and pop shops. No, the killer in the 10s will base its operations in the realm of the Internet with little overhead, increasing consumer trust, and low, low, low prices compared to their brick and mortar counterparts.
With more and more of our physical lives spent in front of a computer screen, are we headed towards the world characterized in the movie WALL-E? If we are, is it a bad thing?
In some ways, yes, as the lack of physical activity is leading to increased obesity. Increased obesity leads to more numerous health problems commencing at an earlier age. Contrarily, we’re living longer as medical advances continue to supplement our inability to manage our health effectively. In other words, had we lived like we do today even 100 years ago, I’m sure our life spans would be less than our contemporaries of that era. So I do believe we are entering into unchartered territory with daily life more connected to a computer screen than anything physical.
On the other hand, it’s not all doom and gloom and I am not intending to say that the Internet is evil. Places such as GoLocal, Wikipedia, local blogs, have allowed you and I to get information faster and from more sources than we could have ever imagined at any other time in history. Need to find out the score of an international soccer game? This was pretty impossible in the 80s unless you had a friend living in the country where the game was played. In the 90s you could go to ESPNNET.SPORTSZONE.COM (ESPN.COM today) and trudge through their site to find what you were looking for…hopefully. But today, there are a number of internet sources to get any kind of information you want. Anything.
All you have to do is type and click. This has made us into better shoppers, more informed patients, and I’d even guess a more tolerant society as we see “other” people are not boogiemen with black capes.
So how does this affect the Garden City Center and other local malls?
Getting back to the Garden City Center, after leaving Borders I looked at the various offices that were available for lease. Stores have come and gone recently with more going than coming. Remember when Circuit City proudly lit up your ride down Route 2? No more and from what I could see, nothing had replaced it.
On the other hand, if you visit some of the stores at the other end of the GCC you’ll experience something different. These stores have more of a boutique feel and from what I could tell seemed to be doing more than subsisting. It seems that the market for higher profile products is still being purchased by foot consumers in quantities large enough to sustain brick and mortar stores whereas many lower priced items such as books, DVDs, and music are being purchased online.
If this is the case, than GCC will continue to serve a specific population but beginning with the old Circuit City location to the OfficeMax those types of stores may experience significant issues. Perhaps the net will not destroy every company like Borders but it’s hard to see what companies the GCC and other local malls can attract that will be viable for the long term.
Taxing Internet purchases…federal legislation required
You may find it odd that this Republican is suggesting the following but we need to tax Internet providers on a national level. Back in 2009 Rhode Island joined New York in taxing Internet retailers who generated more than $5,000 in sales through sales affiliates (the Amazon tax). Immediately after passage, Amazon cut ties with affiliates in Rhode Island which to any observer should not come as a surprise. If Amazon could find a tax friendly state for its affiliates they have every right to do so, that’s how capitalism works.
However, the long term problem I see is that while these large Internet providers are providing goods and services at a lower price they are doing so at the cost of local businesses without the state benefiting by and large. While brick and mortar stores collect the local sales tax their competitors do not, giving their competitors the appearance of being ‘cheaper.’
This simply isn’t fair to all businesses and above all else, the market should be fair to individual players.
Unfortunately, Rhode Island found out the hard way that enacting a law such as the one in 2009 is not going to solve the problem. We need a clearly defined national sales tax system for Internet purchases that is standard across the 50 states. States can charge whatever sales tax they want, but if our economy’s base is headed towards cyberspace then we need a way to replace business sales tax revenues lost through closures of shops like Borders.
Will such measures help restore the competitive balance between Internet and brick and mortar businesses? Probably not and that isn’t something the states or federal government should be concerned about. Instead, politicians should look to address the lack of standardized collection of sales tax so that states are not losing millions of dollars in sales tax while passing along budget deficits to everyday America.
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Don Roach is a member of the Young Republicans. He can be reached at donroach34@yahoo.com
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Comments:
David Bibeault
8:17am on Wednesday, July 20, 2011
"large Internet providers are providing goods and services at a lower price they are doing so at the cost of local businesses without the state benefiting".... That's capitalism and since when is the purpose of a business to benefit the state? In most cases the cost of shipping equalizes the cost of products with sales tax. A State also has no authority to tax an out-of-state company. If we get a national sales tax, then other taxes should be lowered to be net revenue neutral. Government has a SPENDING problem, not a revenue problem.
David Bibeault
8:21am on Wednesday, July 20, 2011
Technology and eBooks are what killed Borders, not a sales tax. I can store every book at Borders in my iPad.... Libraries are fast becoming obsolete. Time to start cutting and closing Libraries.
Donn Roach
9:51am on Wednesday, July 20, 2011
To clarify:
My point is not that the sales tax killed Borders. On the contrary as you suggest, technology killed Borders as people could purchase books cheaper than at Borders and utilize new technology such as eBooks instead of paper copies.
That’s not a problem. The problem is the sales tax revenue decreases because there isn’t a federal system governing sales tax for items purchased on the internet. States are therefore losing revenue that they’d otherwise receive from brick-and-mortar store. It creates a market inequality and unless we roll back all sales taxes, then my argument is that we need to make it fair for all.
Don Botts
9:57am on Wednesday, July 20, 2011
I would tend to agree with what David said. It was their execution of their business plan that did them in. Plus, guess who Borders outsourced their online presence too? Amazon. Nothing like using your competitor for your sales.
They read the market wrong, didn't go to an e-Reader in time like B&N did with the Nook, and was slow to adapt. Circuit City was also in this boat.
Matt Oczkowski
11:35am on Wednesday, July 20, 2011
I am usually in agreement with Mr. Roach, but I think he is way off base on this one. A tax on internet services is a very slippery slope. Opening the door to greater regulation of online services will only create greater bureaucracy and end up hurting the taxpayer. Times are changing and companies need to alter their business models. That is the essence of capitalism.
Robin Bugbee
2:37pm on Wednesday, July 20, 2011
Such a selfish comment by David Bibeault: "Time to start cutting and closing Libraries". You are undoubtedly the priviledged owner of a great education and the opportunities that provides. What about the vast number of people in our cities who use our libraries as the doorway to basic literacy that can get them to the first rung on the ladder of success in this country. I am so tired of the flippant "I've got mine, the hell with yours" attitude that seems to permeate our discussion on almost any issue these days. How about cutting ridiculous wars and nation building in other countries and using our funds to make our library facilities available to all.
David Bibeault
3:06pm on Wednesday, July 20, 2011
@Robin - It is time to start cutting and closing libraries - for half of what we spend on libraries, we could give every household a new computer and free internet access. Technology is making Libraries obsolete just like it did to Borders and you can't stop it.
And you're "so tired of the flippant “I’ve got mine, the hell with yours” attitude".... well I'm tired of the "you've worked for yours, so I'm going to use government's power to steal it from you and give it to me."
Robin Bugbee
3:59pm on Wednesday, July 20, 2011
David: Sad. Why are you so angry? Stop using selfishness and technology as a shield to hide behind. You're welcome to spout any foolishness you wish, I'm just surprised you want your name attached to it. As most educated people understand, our free library system has given us back far more than it has ever cost us. However I have no interest in trying to change your mind. You are clearly not interested in such a dialogue.
Sanjuana Gabriela Enriquez Galvan
4:13pm on Wednesday, July 20, 2011
Bibeault: 1. Actually libraries ARE being used as computing centers. Municipalities find it cheaper to have a set number of computers in a library than to hand them out willy nilly.
2. And on top of that they become community centers too, with classes like computing, Chinese and French, and after school activity centers.
So unlike Borders, libraries are evolving. Wild, huh?
3. “you’ve worked for yours, so I’m going to use government’s power to steal it from you and give it to me.”
No, they've worked for "theirs" too. The rich must accept the fact that they must provide some degree of social services. The rich in Mexico don't provide social services to the people of Sinaloa, so the drug cartels do it instead. Guess who gets the loyalty of the people?
Robin Bugbee
4:30pm on Wednesday, July 20, 2011
David. I agree with you. As an independent retailer in Providence, I have no interest in asking the government to help me make my business successful. I am confident I can survive against big box on on line retail by giving my customers the great service and unique product and experience they can’t. That is my job. But local retail is being used as a “showroom” by many online customers who source, price and demo products in local stores and then return home to purchase them on line because it is cheaper to do. One of the reasons it is cheaper is that they do not have to pay local sales taxes. This is a free gift given by government primarily to giant on line companies like Amazon and it creates and even more unfair playing field. For many reasons, we all should be paying sales taxes and we may need national legislation to achieve this. Particuularly in Providence and surrounding RI towns and cities, state sales taxes support critical services that could not be supplied without grossly them and would result in grossly increased income taxes. Additionally, if bricks and mortar retail begins to fail, imagine what local shopping areas would look like with abandoned shops and boarded up windows. Not only would this cause a serious decline in the quality of our lives but could very negatively effect commercial real estate taxes that currently are one of the only ways local cities and towns can support their schools and critical services. There are many self inflicted reasons Borders in shuttering, but no one should be dancing on their grave and we we all need to support our local retail businesses.
Stephen DeNuccio
6:40pm on Wednesday, July 20, 2011
What killed Borders was poor business decisions in their Corporate office. Electronic books are cutting into sales at physical stores, however Barnes & Nobel have been ahead of this curve by allowing visitors to their stores to download E-Books at a discount on location with their E-Readers. In addition.... RI stores were doing a good business, as I researched.
Taxing Internet sales I am dead set against, I am not willing to open that Liberal Tax Box, as it never ends well.
Robin Bugbee
6:59pm on Wednesday, July 20, 2011
So Stephen: so if you are willing to give online retail a free ride and not require them to collect local sales taxes, why should those of us with brick and mortar stores be required to collect and submit it either. And please don't respond that all sales taxes should be eliminated because if that actually did happen, states would have no alternative but to increase income and real estate taxes to supply the funds needed to pay for fire, police, schools transportation and emergency services. Or are you an adherent of no government at all?
Douglas Jones
11:02pm on Wednesday, July 20, 2011
Rather than R.I. tax internet sales to even the playing field, we should elimanate the state sales tax completely. You were trying to even the playing field in the wrong direction. Last time I checked, New Hampshire has no sales or income tax, and they have very nice, well lit roads, schools, parks, and everything else we have. To say that we need the revenue from the state sales tax is quite wrong, because other states do not need it.
Donn Roach
5:56am on Thursday, July 21, 2011
Robin makes a good point. Really, if we're not going to require internet retailers to collect sales tax, let's do away with sales tax entirely. I've got no problem with that, but we're going to need to reduce a significant amount of government services...otherwise the state is just going to pass the cost onto taxpayers. And ultimately, I don't want that to happen.
Douglas, your option is certainly viable and I'm glad you brought this point up. I guess I'm trying to be pragmatic here in that I don't believe RI will get rid of the sales tax. We're 'addicted' to taxes because of our bloated government. The cynic in me says if we can't get rid of taxes then we need all businesses to collect sales tax on purchases equally. Do you see a way for RI to eliminate the sales tax? Rather, will this governor and this General Assembly ever consider doing away with sales taxes? I just don't see it, so in lieu of that this is what I propose.
Stephen Hutchins
6:44am on Thursday, July 21, 2011
so, if sales taxes caused the demise of Borders, why would you want to do the same to amazon. we don't have a revenue problem, we have a spending problem. leave amazon and net commerce alone.
Robin Bugbee
8:42am on Thursday, July 21, 2011
Stephen: I never said "sales taxes caused the demise of Borders". Borders caused their own demise by bad business decisions which included getting into ridiculously large retail spaces they no longer needed or could support after the end of their cd business. Please read what I wrote: my comment was that government was giving on line business a free ride and a huge leg up over those of us with brick and mortar shops by not requiring sales tax collection on line.
Robin Bugbee
8:49am on Thursday, July 21, 2011
"Rather than R.I. tax internet sales to even the playing field, we should elimanate the state sales tax completely. You were trying to even the playing field in the wrong direction. Last time I checked, New Hampshire has no sales or income tax, and they have very nice, well lit roads, schools, parks, and everything else we have. To say that we need the revenue from the state sales tax is quite wrong, because other states do not need it."
-This comment by Douglas Jones is typical of the tea party foolishness that makes no logical sense but that people without the facts continue to repeat in an effort to eliminate all government. It should not be taken seriously: no one disagrees that government is bloated and waste and duplication should be cut. But it is a long way from reasonable budget concerns to the support of efforts that would gut services and protections that we all need. Why not just eliminate all unemployment payments in this the worst economic decline since the great depression? How about getting rid of the air flight controllers or the National Institute of Health? Taxes are a fact of life. They should be reasonable and fair but to say they should be eliminated is pure ignorance and foolishness.
Ronald Correia
5:43pm on Thursday, July 21, 2011
Article 1 Section 9 of the US Constitution states, "No Tax or Duty shall be laid on Articles exported from any State." A tax on purchases from Amazon - or any other online seller - would be unconstitutional.
Borders is not being closed because of any tax benefit afforded Amazon. Rather, Borders simply did not have the foresight to compete in the e-reader market. Their latecomer on the scene does not compare to either the Kindle or the Nook. With e-reader and e-book sales skyrocketing, their inability to compete in that market doomed them.
For normal book sales, it's not taxes that hurt the brick and mortar stores, it's convenience. The ability to order any book in print - not just the ones a store opts to stock - as well as the ability to access used sellers with hard-to-find out-of-stock books is something Borders could not offer to the same capacity as either Barnes and Noble or Amazon.
The bottom line is that Borders was a victim of strategy and corporate vision. They were not a victim of taxation.
Robin Bugbee
7:36pm on Thursday, July 21, 2011
Ronald: before you waste so much tome refuting something I didn't say...it might be a good idea if you read and understood what I did say. I never said that Borders was a victim of taxation but I did say on line retail is being given a free ride by not being required to collect state sales tax. You can argue with that all you want and you are simply wrong. Government needs revenue to pay for crucial services. They have one way to get it: taxes. If the sales tax goes down local property taxes and income taxes will go up. That's just the way it is. Cuts costs but revenue is still needed. President Obama was right: "eat your peas". I'd add one more suggestion: relax. This is all cyclical. We came out of the great depression and we will survive this.
erin connole
7:01pm on Monday, July 25, 2011
Ironic that a guy writng for a cyber "newspaper" is lementing the death of a bookstore. Goverment is losing ways to pick our pockets. E-mail is killing the post office, electric cars are killing the gas tax. Thank heavens for booze and cigarettes or there would soon be nothing left to tax. Humans were meant to evolve, we will survive.