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Amazon's jobs power play
Partial view shows hundreds of books in shelves at the logistic center of U.S. online retail giant Amazon.com in Bad Hersfeld, eastern Germany, 23 Oct. 2007.
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Kai Ryssdal: One hates to begin with a report from an organization with the somewhat opaque name of the Institute for Supply Management, but the ISM is kind of where it's at today, economically speaking. They put out a survey every month of the supply chain: factory orders, production capacity, that kind of thing.
Today's number was weak. Weaker than many would have liked. And not a promising sign for those hoping to see signs of economic life tomorrow when the August unemployment report comes out.
On the topic of jobs, by the way, we turn our attention now to Amazon. The online retailer of just about everything is promising to bring thousands of jobs to California -- if only the state will give it a tax break.
Marketplace's Jennifer Collins has the details.
Jennifer Collins: Analyst Roger Kay says this carrot-and-stick approach to jobs is a reflection of hard times.
Roger Kay: The strong during the recessionary period have gotten stronger and they're using that advantage in basically every domain.
Amazon has been fighting over sales tax in several states. Traditionally, Internet retailers haven't paid it. But California this year passed a law requiring all Internet retailers to collect and pay. Amazon shot back with -- what else -- a ballot measure: Let the voters decide if they want sales tax. California lawmakers are now trying to pass a bill that would basically make the original law exempt from a challenge by referendum. And then along comes Amazon's promise.
Bill Dombrowski: Any time you can go into a legislature and say we're going to create jobs, it makes you look popular.
Bill Dombrowski is the president of the California Retailers Association. Amazon has offered to build two distribution centers and bring 7,000 jobs to the state. Roger Kay says, don't blink, California.
Kay: California needs the money, but my sense is that California shouldn't respond to that sort of blackmail.
The state estimates sales tax would bring in around $83 million from Amazon alone -- $317 million from all Internet retailers. Income tax from Amazon's promised 7,000 jobs might add up to 2.5 percent of that.
Amazon declined to comment for this story. But Lenny Goldberg of the California Tax Reform Association is not impressed.
Lenny Goldberg: I think it's pretty cynical. It basically says: Let's improve our market position in California -- oh and meanwhile, let's avoid sales tax.
He says the only possible upside from those new distribution centers: maybe cheaper shipping?
I'm Jennifer Collins for Marketplace.
This clearly isn't blackmail. (Blackmail is threatening to *tell* or *reveal* something, after all.) But it doesn't look like extortion either. Let's face facts: If Amazon has to charge sales tax if it does business in California, it probably can't afford to do business there, since its competitors elsewhere don't.
And California's sales tax looks unconstitutional on its face. States cannot regulate---which is to say, tax---interstate commerce. (Except alcohol, so states could remain dry when Prohibition ended, but that's not relevant here.) And anytime anyone buys something online from an out-of-state company, that's interstate commerce. If Amazon built whatever it says it wants to build in California, that gives sales tax agents a starting point if they want to argue a sale wasn't interstate at all, and Amazon is understandably leery of this power grab.
