Sears Chairman Argues That Amazon Should Be Taxed A Lot More

Edward Lampert, the chairman of Sears Holding, wrote a letter to shareholders this month where he, among other things, argued that Amazon really should be paying an awful lot more taxes than it is now. If it doesn't, it will set off a chain reaction that will undermine and shut down brick-and-mortars throughout the U.S. (Pause. For you Seinfeld fans, "not that there's anything wrong with that.")

Before he offered the unsolicited advice for Amazon, Lampert penned an unusual claim: that Sears and its 20th Century catalogue business is essentially the father of E-Commerce. It's a bit of a stretch, but he makes a legitimate point.

"Sears has a long legacy in serving customers beyond physical stores. In many respects, The Sears Catalog was the 20th Century model for selling products through the mail," Lampert said, with the suggestion being that selling-through-the-mail is essentially what E-Commerce is. "To be successful, Sears had to earn the trust of its customers who purchased products sight unseen and who had to feel confident that they would receive what they purchased and, if they were not satisfied, they would be able to get their money back."

True, but the ability to return to Sears physical locations items purchased through the catalogue tended to work a lot better than trying to return a Sears Web purchase to one of its brick-and-mortars today.

"Amazon’s domestic business has grown to $12.8 billion in revenues for the year just ended. If you were to apply a 6 percent sales tax to this revenue (reflecting a rough average of sales taxes across multiple jurisdictions), that would amount to almost $800 million in sales and use taxes owed to state and local governments that is likely not being paid," Lampert said. "The good news is that it is $800 million that remains in the hands of the purchasers of products from Amazon, but at the cost of jobs and new fees and taxes required to make up for lost revenue. Having delayed a level playing field for as long as they have already, Amazon has been able to build relationships with many customers that give it an advantage, even playing under the same rules as those it competes against."

Lampert proposed a fix for this problem, one that coincidentally would help Sears.

"I would propose that there be a leveling of the playing field for E-Commerce merchants. Either we all collect taxes or nobody collects taxes. If state and local governments are going to require retailers like Sears and Kmart to collect sales taxes and not retailers like Amazon.com, they should recognize that over time their sales tax base will erode significantly and that they place companies who have chosen to locate stores locally at a competitive disadvantage," Lampert wrote. "This will lead to a loss of revenues, the closing of local businesses, the loss of tax revenue and, ultimately, to the increase in other types of taxes to compensate for the lost jobs and revenues. Alaska, Delaware, Montana, New Hampshire and Oregon are states that currently charge no sales tax at all. Let me be clear, we have no issue with continuing our current practice of collecting tax on behalf of state and local governments. We just don’t believe that the current set of rules is sustainable without severe competitive and community damage over time."

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