Amazon’s successful business model is “destroying department stores and retailing all over the country,” President Donald Trump told radio host Hugh Hewitt last year. How should free market conservatives interpret the president’s continued critique of Amazon? That question becomes particularly important as congressional Republicans embark on a once in a generation effort to reform our nation’s tax code this fall.
First, it should go without saying that capturing market share by offering consumers the best possible product or service at the best possible price is the heart of capitalism. It is that competitive spirit that lifts people out of poverty and drives transformative innovation in medical treatment, engineering, nutrition and, of course, communication. The dynamic growth of innovative, successful businesses should be integral to our identity as Americans. What should be an anathema, though, is the erection of government-imposed barriers to competition and innovation. And here, Trump deserves credit because he understands Amazon is trying to rig the game to its advantage.
To be clear, there was a time in Amazon’s corporate history that the company sought to avoid collecting state and local sales taxes. In 2008, CEO Jeff Bezos told shareholders that the company is “not actually benefiting from any services that those states provide locally, so it’s not fair that we should be obligated to be their tax collection agent since we’re not getting any of the services.” Bezos was basically echoing the Supreme Court’s 1992 Quill decision, which made clear that states could not force remote retailers to collect sales tax if they did not have a physical presence in the state.
In 2008, Amazon’s physical presence was concentrated and sales tax collection would have been a massive burden. To borrow a Trumpian phrase, Amazon’s “no-tax monopoly” was viewed as a legitimate business advantage a decade ago, but the company’s business model changed dramatically over the past nine years as it went from selling books out of a warehouse in Seattle to becoming the go-to online shopping hub. To deliver products to consumers within days — or hours — it made a business decision to build warehouses and distribution centers in nearly every single state. As a result, the internet giant has physical presence in about 30 states and is the nation’s fifth largest company.
Tax avoidance is no longer Amazon’s corporate position. Not only is…