So You Want To Buy Something?

So far, second thoughts might keep the additional burdens of doing business in Michigan at bay.

I have lost some big sales in other states because of ‘Amazon Laws’ in the past few years.

Its an amazing thing that happens when your cost of doing business in a state goes up by 10%. (Michigan will be 6%) You lose customers, they pay more, or you eat the costs.  The first option is of course the worst of the three, but when profit margins range between 15-20%, 10 points represents at least HALF the profits, and can be discouraging to even attempting to sell.

California has some of the most used shipping ports, so its natural that many warehouses are located there. It also has quite a large population.  Our business has historically sold more to California customers, than those in Michigan. But a few years ago, I was notified by one of my suppliers who drop ships for me in that state, that unless they had an exemption form on file for the customers, they would have to charge an additional 10% for the product to cover THEIR tax liability; CA Sales tax being 8% and an additional 25% tax for assumed mark-up.

I had a choice.  I could in some cases ship product all the way here, then ship all the way back, and salvage a few pennies, OR I could simply find a supplier for similar product in other state warehouses willing to ship to California.  The unnatural commerce that had to evolve (and quickly), wound up raising the cost of doing business.  It raised the cost and in some cases slowed service for the customers in California who were STILL expected to report their ‘USE tax.’

This effect began to spread as the State, in its desperation for tax revenue began a widespread audit of each warehouse and the drop shipping that was being done; specifically looking for in-state deliveries.  The jackboots were at full throttle.  They began assessing fines and in most cases applied retroactive tax bills for product that was shipped prior to the audits. Additional compliance time and energy was needed, and yes there were closures.

In the end, for my purposes, its best to be able to ship the least expensive way.  This means if the CA sales tax exceeds the shipping cost difference, it comes from another vendor elsewhere.

A state pays in multiple ways for this type of law.  It encourages warehousing and shipping from other states, which costs jobs.  It makes the cost of buying more expensive for citizens within the state, which limits other economic growth.  It forces a government driven burden on mom and pop small businesses which already have large lobbying competitive forces like wolves at the door.

And it provides ZERO net benefit for the state.

Even the fiscal analysts agree. From HB4202’s analysis:

“As written, it is unlikely the bills would generate much revenue (relative to the amount that is currently uncollected) unless federal legislation is enacted. While the bills could potentially generate some sales and/or use tax collections, major online retailers (Amazon, Overstock, eBay, etc.) can avoid nexus in Michigan by eliminating affiliate partners and/or relocating warehouses located in Michigan to other states, a practice that has been adopted in the past when online vendors have faced similar laws elsewhere.”

Indeed.

Bad policy, and apparently making some other lobbyists a little nervous:

Now the question of whether Michigan advances more of this type of policy remains to be seen.

we are as usual, taking names.

You Betcha! (23)Nuh Uh.(2)

  5 comments for “So You Want To Buy Something?

  1. Corinthian Scales
    December 11, 2014 at 6:27 pm

    Yes, let's really examine the sponsor of HB 4202, shall we?

    December 5, 2014 (vote here), flushing $50,000,000 a year down the drain on zero return is not a problem for her.

    Quote: "Michigan passed its program in 2008 and has appropriated almost $500 million. The state has fewer jobs today than it did prior to the subsidies."

    Eileen Kowall, September 25, 2009 - "Representative Kowall feels state government should live within its means."

    Despicable, yes?

    You Betcha! (6)Nuh Uh.(0)
    • Jason
      December 11, 2014 at 7:43 pm

      Yes.

      You Betcha! (3)Nuh Uh.(0)
  2. Corinthian Scales
    December 11, 2014 at 10:10 pm
    • Corinthian Scales
      December 12, 2014 at 8:02 pm

      I stand corrected.

      Make it 22...

      You Betcha! (2)Nuh Uh.(0)
  3. December 19, 2014 at 1:55 pm

    SB 658 DID pass.

    THESE Guys voted no.
    HOUSE REPUBLICANS
    Bumstead (R) Franz (R) Genetski (R) Goike (R) Graves (R)
    Hooker (R) Howrylak (R) Johnson (R) Kesto (R) LaFontaine (R)
    Leonard (R) Lund (R) MacGregor (R) MacMaster (R) McBroom (R)
    McMillin (R) Muxlow (R) Nesbitt (R) Pettalia (R) Somerville (R)

    HOUSE DEMOCRATS
    Abed (D) Brinks (D) Brunner (D) Dianda (D) Greimel (D)
    Robinson (D) Yanez (D)

    Thank them.

    You Betcha! (0)Nuh Uh.(0)

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