There is now a controversy about a deal between the state of South Carolina and online mega-retailer Amazon. Amazon wants to build a $100 million warehouse/distribution center in Cayce, South Carolina, a suburb of the state capital Columbia, and employ over 1200 people. In times of economic hardship, such an opportunity would be welcomed, but not by some in the Palmetto State.
The problem stems from an exemption promised Amazon by the Mark Sanford administration that does not require the company to collect South Carolina sales tax on items shipped from the Cayce facility. Some question this allowance, claiming it’s unfair to local retailers and gives on-line retailers an unfair advantage.
Current Governor Nikki Haley campaigned to protect and promote small businesses in South Carolina. This has created a dilemma for the chief executive of a state in particularly dire economic straits. A statement from the governor’s office said:
The state has been put in a terrible spot, forced to choose between not wanting to be known as a state that doesn’t keep our promises, and a governor who strongly believes South Carolina’s first responsibility is to take care of the businesses we already have and not give preferential treatment.
I don’t believe these concerns are applicable here.
The Amazon facility is not a sales office, but a distribution hub. Think of it this way; if a South Carolinian went to a local store to purchase an item that had to be ordered from a regional distribution center, which state sales tax should the buyer be required to pay?
If it’s in Georgia (4%), the state of South Carolina loses tax revenue on the sale, though the buyer gets a 2% break. If it’s in California (8.25), again, South Carolina loses, but so does the buyer. How about buying some nice Italian tile for the bathroom or kitchen, but it has to be ordered from the old country? What’s the sales tax?
Suppose a South Carolina resident drives to Augusta, Ga and buys clothes or a television … whatever. For what state should sales tax be paid? Clothes and televisions can be bought in South Carolina, so is that buyer harming local businesses by purchasing out-of-state? Yep. Is there a law against it? Nope. Are there customs stations at state lines so one can declare items for the payment of tariffs? Nah.
Automobile sales taxes are based on the state in which the vehicle is registered, not bought (or from which it may have been sitting on a distribution lot). If the proponents for sales tax collection for Amazon were to have their way, an automobile shipped into Charleston and sent to a dealer in Delaware (no sales tax) to fulfill an order, then the buyer would have to pay South Carolina sales tax. Or this… the car is shipped to San Francisco from an overseas manufacturer and a Lexington, SC dealer orders a car that comes from that California facility. Should the South Carolina buyer pay 8.25% or 6%?
Who would the exemption really hurt? Every bookseller in the state has to order books from somewhere. Every electronics seller, home improvement store, sporting goods outlet and big box retailer gets their inventory from some warehouse/distribution center, mostly not in South Carolina. How do you handle those taxes?
To say that people will buy from Amazon online and not from a local Books-A-Million because of no sales tax is nonsense. Here’s a hint from a serial Amazon shopper – shipping costs are usually higher than sales tax.
The point is that sales tax should be administered at the point of sale, not distribution. The issue of sales tax collection for online retailers is a nation-wide debate. Denying Amazon an incentive (already promised) is not going to solve that issue.
There is also a complaint that the Amazon people have not promised that those 1200+ jobs will go to South Carolinians. Considering that most of the positions are not likely to be in the upper pay scale, it’s equally unlikely that people will move to central South Carolina to take them. If they own homes somewhere other than South Carolina, they’ve got to sell them to move to and buy a house in-state. Not these days they aren’t!
And suppose, for a minute and for argument, they none of the jobs go to current state residents. So what? If you’ve got 1,200 jobs coming into the area, you’ve got at least 1,200 taxpayers. They also buy stuff. And they’ll buy stuff locally.
The building of an Amazon warehouse/distribution center in South Carolina is a good thing. If relieving the company of collecting sales taxes on items shipped from (but not sold at) the facility is the only issue, it’s not a valid reason to hold up the benefit to the area and the state.
Remember that the next time you order something.