With the highest public debt per capita in the nation, Connecticut’s bleak fiscal outlook is causing the legislature to grasp for tax policies that require out-of-state online retailers to collect sales tax on transactions with Connecticut residents. The tax scheme, which potentially affects dozens of online retailers, is better known as the “Amazon tax” after its largest target, Amazon.com. The Amazon tax is blatantly unconstitutional and is bad news for Connecticut’s online shoppers, especially students, causing Amazon to decrease its ties with Connecticut contractors.

The Amazon tax is pushed under the premise that it will “close a loophole” in Connecticut’s tax collection, making it easier for the state to collect sales taxes on online transactions it claims to be entitled to. This argument isn’t new to the internet age; it has been argued for decades against mail-order companies who operate out-of-state, but advertise and distribute catalogues to in-state residents. The reason why mail-order companies don’t collect sales tax is because forcing them to do so has been decided by the Supreme Court to be unconstitutional in Quill Corp. v. North Dakota. The ruling is intelligible: interstate commerce is a federal matter, not a state matter.

Amazon and other internet retailers like it are the quintessential mail-order companies of our age, and the Constitution equally protects Amazon as it protects traditional mail-order companies. If Connecticut wants to collect taxes from Amazon, it should focus on making its business climate one that attracts Amazon to move in-state.

Proponents of the tax will argue that Amazon’s in-state affiliate advertisers, who put Amazon links on their websites in exchange for a fee, create an adequate in-state presence to justify a tax. But these advertisers aren’t Amazon employees and aren’t participants in Amazon’s sales transactions. These advertisers are the equivalent of a newspaper putting an advertisement for a mail-order company in their publication.

Furthermore, if Connecticut enacts this tax, Amazon has threatened to remove these advertisers to prevent having to collect a tax, while detracting from many Connecticut incomes. Therefore, Connecticut won’t be able to collect any sales tax from Amazon, while also losing out on income taxes. So, regardless of the Constitutional arguments, it is still clear that this would lead to negative results for the state.

Suzanne Staubach, manager of the UConn Co-op argues in her testimony to the Finance, Revenue and Bonding Committee that because Amazon doesn’t collect taxes on transactions, the Co-op suffers. Thus, requiring Amazon to collect taxes equalizes the competition. This argument is flawed for several reasons.

First off, many items purchased on Amazon are not a transaction with Amazon, but rather transactions with individuals who are selling their new or used merchandise on Amazon’s platform. These individuals likely have no authority to collect taxes anywhere, much less in Connecticut. As of 2010, these third-party transactions account for 31 percent of Amazon’s sales.

Secondly, as of January, Amazon’s ebook sales have outpaced their hardcovers sales by three to one. Amazon’s ebooks have even surpassed their paperback sales with 115 ebooks sold for everyone paperback sold. If the Co-op wants to complain about not being able to compete, it isn’t because of a 6 percent sales tax, but rather because customers are discovering an alternative to paper books.

Lastly, the greatest reason why the Co-op’s criticism is misguided is because the Co-op doesn’t collect any sales tax on books purchased by students for classes, which presumably make up the majority of its sales. This is because Connecticut has a tax provision that excludes all books purchased for college classes from sales tax. Under an Amazon tax students would still be eligible for tax-exempt books from Amazon, but the state’s tax policy makes it easier and more convenient to receive this tax exemption from college bookstores than from online retailers and smaller in-state book retailers. So, ironically, it is actually the Co-op that has “loopholes” working in its favor.

The justifications for the so-called “Amazon tax” are wrong on both constitutional and policy grounds. While blatantly unconstitutional, the tax is also bad for consumers, especially students, who have less disposable income and are more likely than older generations to shop online. Imposing the tax will cause Amazon to remove ties with in-state services, hurting in-state contractor’s incomes and the income taxes the state earns.