My understanding is that it is one of the most unfair. Poorer people will lose a greater percentage of their income to sales tax than richer people because certain consumptions aren't elastic to increasing income. Now some states won't collect sales tax on items deemed "necessities" but the classifications can get tricky and imo just leads to inefficiency.
Like you said, sales tax can be considered a form of regressive tax: http://en.wikipedia.org/wiki/Regressive_tax. How is that then fair?
Is flat fair? There's nothing inherently "fair" about a zero second derivative. I'm actually ok with some sort of government rebate for the first N dollars of taxation to reduce the burden on America's (relatively) poor people.
But we probably agree on more than we disagree. I actually agree that flat isn't fair and that the current situation isn't fair to b&m stores either. I just don't think the solution is to interfere with interstate commerce. States need to enforce use taxes, or if that turns out to be unenforceable, which I suspect it might, rethink their taxation strategy.
By the way, not sure why you were downvoted. I upvoted to correct that. Thanks for the discussion -- it got me thinking about this situation quite a bit.
One rationale is that the Company in Nevada isn't using any services in California, so they shouldn't pay taxes for services they aren't receiving. I think that's ingenuine - it's a good reason not to pay _property taxes_ in California - but Sales Taxes are supposed to paid, they are called "Use Taxes" - and most larger business pay them, but individuals either don't bother or don't know.
The debate is over anyways - Amazon will be collecting sales taxes in all states within two years. In the meantime, their behavior has been both ethical and legal - and they enjoyed a competitive advantage - for a while.
Sales taxes are a tax on the merchant. If the merchant is not located in a state, the state has no jurisdiction over the merchant.
Do you really want the nuts in charge of {Texas, California} (depending on your political views) to have the power to pass laws binding on your state? Besides, if a state really wants the money they can simply tax their citizens (which many states do).
A bricks and mortars biz in CA gets benefits from taxes paid to CA. Amazon doesn't.
The tax you are legally required to pay does not vary. You simply choose not to pay whats required at the end of the year.
Certainly, Amazon must resist collecting sales taxes until all online/catalog retailers are required to collect them -- anything less would lead to a shareholder revolt.