Sunday, 21 November 2010

Amazon and sales tax

One of the (many) reasons people buy from is that they don't charge sales tax.

It's a feature of the US tax systems (and interstate commerce in general) that a state can only collect sales tax from companies that have a significant presence in their state.

Amazon mostly studiously avoids having a presence in states with a sales tax. The upshot is that for residents of California (ie. me) if you buy from amazon, you save 10% over buying in a shop. Obviously other considerations will often apply: convenience; whether amazon actually *is* cheaper; etc. But isn't it neat?

In the EU, on the other hand, companies that sell above a certain threshold (about a hundred thousand euro, possibly only to consumers) into any EU countries have to register with the VAT authorities in that country and collect VAT in that country for stuff sold into that country. BUT, if you sell to a vat-registered _company_ in a country you're not vat registered in, and they tell you their VAT number, you don't have to charge them [your country's] VAT. If you're registered in their country, of course, you charge them their country's rate. (They'll "claim it back" (or, rather, deduct it from the payment they make of all the vat they in turn charged) anyway, but they get cashflow advantages this way.)

This inter-country VAT system, incidentally, is seriously abused ("carousel fraud", I think it's called) for some items like computer memory and mobile phones. So, of course, the system is constantly being tweaked to make life harder for everybody. (Because that's what governments *do*. Sigh.)

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