A Letter to Booksellers From ABA's CEO Oren Teicher

This week, ABA CEO Oren Teicher shares an update on association activities with members. Last month, ABA President Becky Anderson wrote the membership, and, moving ahead, she and Teicher will alternate each month with updates about the association's activities.

Dear ABA Member Bookseller:

In the weeks since BookExpo America, ABA staff has been working on a long list of initiatives -- including meetings with publishers to discuss new business models and programs; developing IndieCommerce enhancements, including an e-book reading app that you will be hearing more about very soon; preparing for the upcoming IndieCommerce Institute in Chicago next week; planning for ABA's participation in this year's round of Fall Regional Trade Shows; helping bring World Book Night to the U.S. next April (additional details about that will be forthcoming in September);  and working on the upcoming ABACUS-10. (I hope you have submitted your numbers! ABACUS-10 will be even more informative, including new data points and charts and graphs. Here's more information [1].)

And, while all the above has been going on, ABA has remained very active on the sales tax front. Because the fight for e-fairness is particularly important right now, I'm going to focus this update on that one issue, though, I expect these reports in the future will address multiple subjects.

Recently, both Amazon.com and Overstock.com responded to the passage of sales tax equity legislation in Arkansas, Connecticut, and California by firing their online affiliates in those states. The move was in line with what the online giants have done elsewhere. Rather than simply collecting the mandated sales tax, Amazon and Overstock have again left their in-state sales affiliate as collateral damage in a fight to maintain the key business strategy of sales tax avoidance. (The notable exception to this being New York, where Amazon.com has challenged the constitutionality of the law and where they have lost in court twice.)

Further, in California -- where Amazon still clearly has nexus despite having fired their affiliates because of the recently passed state legislation -- the company is taking the extraordinary step of collecting approximately 504,000 signatures in order to put a measure to overturn the sales tax equity law before the state's voters.

Following Amazon and Overstock's moves, it's not surprising that some may be asking whether the passage of sales tax equity legislation is a Pyrrhic victory if it doesn't result in the immediate collection of sales tax. This is understandable, especially as a growing number of state legislatures debate affiliate nexus legislation.

One compelling indication of the importance of these legislative wins is the extensive resources that opponents of e-fairness employ to fight the passage of affiliate nexus legislation. That alone underscores that every time a state enacts sales tax fairness legislation, we have accomplished a great deal. Despite the short-term delay in sales tax collection in some states, each victory moves us closer to the tipping point where these online retailers will no longer be able to afford to fire their affiliates and will collect sales tax.

In prepared media statements, Overstock.com says that it can simply hire more affiliates in states that don’t have affiliate nexus laws, and it contends that it is immaterial where an affiliate is located. But that assertion erroneously assumes a large enough number of affiliates in other, smaller states to make up for the lost markets in more populous states like Illinois and New York. However, it seems highly unlikely that there are a sufficient number of affiliates in other states to make up for the markets they will continue to lose. There are many more affiliates in California or Illinois than there are in any number of states with a smaller population.

Moreover, often overlooked given Amazon.com's high profile in this issue is that leveling the playing field involves many companies. In New York State, some 30 companies registered to collect and remit sales tax once the sales tax equity law was enacted. Given that, the effects of e-fairness are not moot simply because Amazon.com and Overstock.com don’t collect.

Importantly, Amazon has physical facilities throughout the country, and there have been media reports that Amazon.com is aiming for a same-day delivery model for some of their products. This will require many more distribution facilities nationwide, and in each state in which Amazon.com looks to build it has adopted a strategy of demanding a sales tax exemption -- on top of other tax credits -- for the assumed jobs its warehouse will provide.

When Amazon.com successfully convinces legislators to drop sales tax fairness laws -- through either lobbying efforts or threats of such economic reprisals as shutting distribution centers – and these legislators grant a sales tax exemption for opening distribution centers, pursuing sales tax fairness becomes much more difficult. We've already seen how this is the case in South Carolina and Tennessee. It’s one thing to ask a state to clarify existing sales tax laws; it’s an entirely different matter to ask a legislative body to repeal a just-passed sales tax exemption that was signed by the governor. 

In addition, we believe that the significant victories in states for sales tax fairness have helped clarify the issue and further the debate for a national sales tax solution. On July 29, Sen. Dick Durbin (D-IL) introduced the Main Street Fairness Act, federal sales tax fairness legislation that would require remote retailers to collect and remit sales tax in the states that have authorized the Streamlined Sales and Use Tax Agreement. For more than a decade ABA has supported a national solution, and we have never believed that advocating for a state solution was in conflict with the goal of e-fairness. 

Amazon.com has said that they support Sen. Durbin's legislation, and while we and our allies welcome these conciliatory comments, actions speak far louder than words. Recent coverage in the Wall Street Journal [2] makes clear just how hard Amazon has worked to avoid collecting sales tax to maintain its inequitable price advantage. It would be heartening to see this billion-dollar company dedicate as much effort and resources in helping quickly implement a national sales tax solution. Simpler still, Amazon could begin collecting on the state level the sales tax that current law mandates.

Looking at this from a national prospective, the number of safe harbors for sales tax avoidance is shrinking. What independent booksellers and our fellow retailers in the e-fairness coalition have already achieved is significant and important. While some states that have passed e-fairness legislation might not yet be collecting sales tax, with each victory we are one step closer to full sales tax equity.

Given the importance of this issue, ABA will work harder than ever with our allies in this fight for sales tax fairness around the country.

Thank you for everything you have done and I hope you will continue to work with us for national e-fairness. Working together, I could not be more confident that we will prevail.

Warm regards.

Sincerely,

Oren Teicher, CEO

American Booksellers Association