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I'm afraid I'm not overly familiar with the bill or the minutiae of it, particularly as a foreigner to US politics. From what I understand, though, US businesses trading online and with annual sales over $1m will have to collect sales taxes on behalf of customers' states.

If that is the case, what is there to stop businesses working around that qualifier? For example, say International Global Mega Corp (IGMC) makes $10m in sales each year and most of its customers are outside of its home state. It looks like it would have to start charging and collecting sales taxes under the act, if passed. What is there to stop IGMC from splitting up its business in to eleven smaller businesses and declaring that they each sold less than $1m annually? Surely the $1m qualifier is set at such an amount that would perhaps be 'too bureaucratic' to manipulate for a small business, but large enough for a larger business to manipulate, so is it likely that the bill was drafted with the assistance of some business interests?

closed as off-topic by Drunk Cynic, Carson, chirlu, Rupert Morrish, Texas Red Jun 13 '18 at 21:58

This question appears to be off-topic. The users who voted to close gave this specific reason:

  • "This question does not appear to be about governments, policies and political processes within the scope defined in the help center." – Drunk Cynic, Carson, chirlu, Rupert Morrish, Texas Red
If this question can be reworded to fit the rules in the help center, please edit the question.

  • "Surely the $1m qualifier is set at such an amount that would perhaps be 'too bureaucratic' to manipulate for a small business, but large enough for a larger business to manipulate, so is it likely that the bill was drafted with the assistance of some business interests?" - you need to show why that is a valid assumption to make. Looks like you don't seem to understand even remotely how business works, or just how much are the sales figures for those "IGMCs" are. – user4012 May 13 '13 at 5:05
  • That last sentence was, admittedly, lazily added so there was an explicit enough 'political' quality to the question (lest the SE police close it). But you've pretty much qualified that point in the first paragraph of your answer below. And you're right, I don't pretend to know how business works - I make no claims otherwise, though. – James May 13 '13 at 10:52
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    "What is there to stop IGMC from splitting up its business in to eleven smaller businesses" = logistics. – user1530 May 13 '13 at 18:08
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Leaving aside other issues with your question (splitting mega-corps into "under 1M sales" units is about as feasible as disassembling a ballistic missile into pieces small enough to be OK to carry onto a passenger airliner), you did actually stumble on a correct approach to an answer of why a mega-corp would nearly ALWAYS welcome more regulations, as long as they aren't terribly crippling, in a business field with low barriers to entry and much small competition.

Compliance with regulatory regimes is a cost whose function has a floor, but grows very slowly.

I'll make up a some numbers to illustrate the idea, but it's pretty trivial - it costs at least $X dollars (say, $300k) to implement a software system to comply with regulations. It costs $Y dollars to extend that system as the company grows, but that marginal increase is significantly smaller, say $1k per $1mm in sales (that's just how those things work - it's a lot cheaper to scale up a system that already exists than to create one. I'll commit a logical fallacy and reference myself as a cite - I build such systems for a living :).

So, for a business with $300k income or less, complying with such regulations would mean they go out of business.

For a business with $600k income, complying means their income is slashed by 50%.

For a business with $3mm income, it slashes the income 10.1%. For a business with $30mm income, it slashes the income 1.1%. For a business with $300mm income, it slashes the income by 0.2%. For Amazon.com (Net Income in 2010 $1,152,000,000) it would be 0.01%.

| Income | Compliance cost | Income drop | Comment         |
| <$300k | $300k           | 100%.       | EPIC FAIL!      |
| $600k  | $300k           | 50%.        | Hard to recover |
| $3m    | $303k           | 10.1%.      | Impactful       |
| $30m   | $330k           | 1.1%        | Survivable      |
| $300m  | $600k           | 0.2%        | Pocket change   |
| $1B    |                 | 0.13%       | Amazon rules!   |

So, look at it from Mega-Corp's point of view. Enacting costly regulation is a major competitive benefit for them, despite the cost - because the cost, comparatively speaking, to their smaller competitors is much much larger; and for the smallest of such competitors, creates a barrier to entry which they didn't have before.

This is why Amazon welcomes Internet tax (but not eBay whose livelihood depends on small sellers); why GE loves environmental regulation, etc...

  • I understood why some businesses use statist market interference as a way to 'kick away the ladder', but the compliance numbers seem to illustrate a new perspective for me. It's almost as if there's a calculation that, for a large business, it's still cheaper and less risky to support legislation that knocks out small and new competition than it is to compete with them in the marketplace. That said, I'm still unsure why they wouldn't parcel up sales in to $1M batches, if the accounting procedures are in place? Hence the politicla curiosity about such a low sales threshold. – James May 13 '13 at 11:03
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    @James - the threshold is just a "cover your ass" approach to prevent people from being able to yell "THIS IS BAD FOR SMALL BUSINESS" on an obvious basis (it's STILL bad for small business, but not many people realize that $1mm in sales is not all that much for a retailer; and a retailer with $1mm in sales is a very small fry). – user4012 May 13 '13 at 14:08
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    Good answer. Small note, in addition to the above reason, Amazon also supports it due to the fact that Amazon is now moving towards same-day delivery in many states requiring physical locations which would require that they charge local sales tax anyways. – user1530 May 13 '13 at 16:39
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    @James: Amazons yearly sales are around $65 billion a year. They would have to split the company into around 65,000 different companies just to meet the $1 million requirement. What if some of those company sell $1 more and hit the million mark? Might as well create 130,000 companies to make sure that doesn't happen. As you can see, it just isn't practical. Plus, I'm sure there might be some "tax fraud/evasion" issues to get around with that scheme. – Dunk May 14 '13 at 22:08
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    As a side note, amazon has about 45,000 employees. In order to implement the above scheme, then each employee would have to run 3 companies on their own or amazon would have to hire another 85,000 workers and just have 1 employee for each company. But, at the same time, amazon couldn't do the hiring because these companies are not supposed to be amazon any longer. All just to avoid having to charge the customer a tax. Once again, just not practical. – Dunk May 14 '13 at 22:16

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