Taxing Online Sales

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A bill (SB 1338) is moving through the Arizona State Legislature that would require Internet-based companies like to collect state taxes on the products it sells. Michelle Ahlmer, Executive Director of the Arizona Retailers Association, explains why her organization is supporting the bill.

Ted Simons: Next on "Arizona Horizon," we'll take a look at a couple of bills moving through the legislative process. One requires Amazon to collect state taxes on products it sells. The other establishes an armed militia to patrol the Arizona-New Mexico border. Next on "Arizona Horizon." Good evening, and welcome to "Horizon," I'm Ted Simons. Health care at Arizona's state prisons the target of a lawsuit filed today by the ACLU. The suit describes Arizona's prisons as "one of the most broken systems" the ACLU has seen in 20 years of litigation. The suit alleges a variety of complaints, including one involving an inmate allowed to die of liver cancer after being denied treatment for two years. The Department of Corrections has yet to respond to the suit. The State Senate is considering a bill that would have Amazon companies pay state taxes on products it sells. Senate Bill 1338 expands the definition of retailer to include internet companies that maintain distribution centers, warehouses or fulfillment centers in Arizona. Amazon operates several distribution centers in the state. Joining me now is Michelle Ahlmer, executive director of the Arizona Retailers Association, which is supporting the bill. We also invited Amazon's lobbyist to appear but he was unable to join us. Good to have you here, thanks for joining us.

Michelle Ahlmer: Thank you for the invitation.

Ted Simons: Why is Senate Bill 1338 good for Arizona?

Michelle Ahlmer: It's a clarification of the current statute. If you're in Arizona right now, and you sell to an Arizona resident, there is a tax that is collected on that transaction. This would kind of close a loophole and clarify that, if you're here and you're kind of hiding behind a subsidiary or some kind of complicated corporate structure that makes you say, we're here but not really here when it comes to the collection of taxes, it would close that loophole and require they collect the tax, just as Changing Hands Bookstore does in Chandler, Arizona.

Ted Simons: So the idea, when critics say shipping goods in and out shouldn't be enough to force collection of taxes, you say --

Michelle Ahlmer: This is definitely about what is being sold. So it's not about shipping, it's about being sold from an Arizona business to an Arizona resident, very clean and simple that way.

Ted Simons: Does it coincide with the use tax? That's got a lot of people confused and concerned.

Michelle Ahlmer: Right now if you buy something online you are required to remit the use tax yourself, the individual. 1338 shifts that responsibility to the retailer where we believe it belongs.

Ted Simons: Another concern or question I've heard is this targets Amazon specifically and is thus discriminatory. How do you respond to that?

Michelle Ahlmer: That's completely untrue. Any time you change a definition, anyone who falls under that definition would be subject to it. As far as we know, there are other companies that don't have their name on the building that are operating that same way.

Ted Simons: So when Amazon testifies before the legislature there really isn't another E-firm or E-commerce company in Arizona this law would apply to, you would disagree?

Michelle Ahlmer: We don't know, and I don't know if Amazon knows that, either.

Ted Simons: I know Amazon has worked out compromises in other states. Maybe start collecting taxes in 2014, 2013, to kind of ease into position as opposed to something that's quick. How would that work?

Michelle Ahlmer: We don't think 2014 is a benefit to Arizona. In Arizona, everything -- and Nationwide -- for retail it's all about the holiday season. We live and die on that holiday season. Every time it comes around, everybody's like, how much are we going to do this year? That's why we don't want to go into 2014. That would not be a win. We think that it's appropriate for them to start collecting as soon as possible. There is, you know, for Amazon specifically, they were the backbone for for many years. They could flip a switch and do it today.

Ted Simons: Interesting. The idea that the -- excuse me -- Congress is looking at this, that there could be a federal answer to this. I know Amazon again is hoping for a comprehensive long-term solution to this problem, both in Arizona and elsewhere around the country. I'll get to that question in a second. As far as waiting for Congress to do something, is that an option?

Michelle Ahlmer: No. Especially because we see these as two separate issues. What happens in Congress could take care of interstate customers. This happens in our own backyard. We need to take care of Arizona. If you are an Arizona business selling to an Arizona consumer, that is a clarification of the current law and appropriate to help us get over that competitive disadvantage of a 10% price differential. That's completely unfair.

Ted Simons: When Amazon says it's concerned though because there are so many different tax structures and codes to deal with, if you went ahead and had them to be applied in the same fashion as other businesses, how would you respond to that?

Michelle Ahlmer: In two ways. First of all Senate Bill 1338 only assesses a use tax. So it's one rate. 6.6%.,,, do that nationwide every single day. It certainly is doable.

Ted Simons: Do you think Arizonans want to pay this extra amount?

Michelle Ahlmer: I think it comes down to what is fair for the whole community. If you are shopping in a store, a transaction is a transaction, a sale is a sale. As long as it is state policy that we tax on tangible goods it definitely is fair.

Ted Simons: It's fair, but the question remains: Do you think a -- a lot of folks flock to Amazon for this particular reason, because they don't get hit with something extra? Do you think they want that?

Michelle Ahlmer: I think most people shop online because of convenience. We've seen that over and over again. Many people that we've done polling on, on a national basis, said they didn't realize it wasn't collected, they were kind of uninformed on the whole issue.

Ted Simons: Is it worth it to Arizona? I don't know if it's a threat, I don't know if it's a veiled threat or even a possibility. Some are suggesting that Amazon may not be so happy in Arizona. They are four distribution centers right now?

Michelle Ahlmer: I believe that's correct.

They may pull out if something like this passes. You got up to 5,000-some-odd jobs at stake here is that worth it to Arizona?

Michelle Ahlmer: That threat was leveled in other states but hasn't happened in other states. The same legislation was adopted in California. They began collecting in September 2012 and they haven't left that state. As you mentioned before, there are agreements throughout the country, all based upon warehouses, distribution or fulfillment centers and they are not leaving those states.

Ted Simons: So the idea -- again, the idea of what Amazon has been saying as far as their testimony is concerned and their public statements regarding this -- that this bill essentially ignores the changing nature of a changing economy, that people weren't used to this sort of thing in the past but it's time to get used to this sort of thing now regarding E-commerce and how they trade as opposed to bricks and mortar. They are different beasts. Valid?

Michelle Ahlmer: Invalid. The very argument they use could be turned right around and that's the vision we believe. The laws have not kept up with commerce, that's absolutely true. This bill addresses how it needs to change to address the fact that retail is very different than it was 15, 20 years ago.

Ted Simons: The idea that this bill is making its way through the legislature, I know there's action on it today. What's the latest?

Michelle Ahlmer: The bill passed the Senate committee as a whole and now it moves on to the Senate third reading tomorrow.

Ted Simons: And that would, explain exactly what that means.

Michelle Ahlmer: The committee as a whole is where the bill can be debated and any amendments could be made on the floor. None of that happened today, nothing was changed from the time it was introduced. Tomorrow it goes to third reading when the full Senate votes on it. If it passes there, and we anticipate that it will, it'll go on to the house.

Ted Simons: Was there much debate today?

Michelle Ahlmer: Zero.

Ted Simons: Surprised by that?

Michelle Ahlmer: A little bit. Usually there's always something to be said on every bill.

Ted Simons: Expecting more debate tomorrow?

Michelle Ahlmer: Certainly.

Ted Simons: Ya, that's when the rubber hits the road I take it. It's good to have you here. Again, we did invite someone from Amazon to appear, but they were unable to attend. I'm glad we got you here. Thanks for joining us.

Michelle Ahlmer: Thank you very much.

Michelle Ahlmer:Executive Director, Arizona Retailers Association;

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