Amazon.com Might Be the USA’s Biggest Tax Evader

Yesterday, California governor Jerry Brown signed a new sales tax law that served as a loud shot across the bow of Amazon.com, the world’s largest internet retailer. Amazon founder Jeff Bezos is no dummy. He has built a massive retail empire that sells just about anything (including a huge amount of fake autographs — but that’s a topic for another day) to just about anyone, shipped to just about anywhere in the world. Part of Amazon’s success story is its reliance on a 1992 Supreme Court ruling that retailers are only required to collect sales tax in states in which they have a physical presence.

Amazon, however, has been playing fast and loose with this interpretation almost since it was a mere twinkle in the eye of Mr. Bezos. For example, Amazon has massive, multi football field sized warehouses in states that its legal department claims are not physical presences — because they are owned by Amazon “subsidiaries.” Yes, these are the same warehouses that ship the books and DVDs you buy from Amazon, but thanks to their legal shell game, Amazon claims it doesn’t have to collect billions of dollars in sales tax across the country.  State after state has declared through legislation and litigation that enough is enough — California being the latest.

Amazon has offices and thousands of affiliates in California, not to mention the developer of its best selling Kindle is based in Silicon Valley. As it did in other states, Amazon is cutting ties with California affiliates. But according to the new California law, that isn’t enough — Amazon is still responsible for collecting sales tax, but you can count on Amazon to sue.  If California was its own country, it would be the world’s 8th largest economy, so the sales tax issue is a much bigger deal than in other states.

Everyone loves bargains and no one wants to pay sales tax if they don’t have to. As a small California internet retailer myself, I would rather not collect sales tax if I didn’t have to, but I do and always have. If I were to adopt Amazon’s questionable ethics, I would incorporate in Nevada, get a PO Box in Las Vegas and claim I was now only responsible for collecting Nevada sales tax.

The bottom line is that Amazon has been “legally” evading sales tax across the country for more than a decade now, and it’s time the playing field was leveled. Yes, I know that the money pushing these “anti-Amazon” sales tax laws is coming from big box retailers like Walmart, who have their own ethical issues. However, in this case they are on the right side of the law. ALL internet retailers that have physical presences in California, regardless of size, should be required to collect California sales tax, whether it’s Amazon.com, Walmart.com or AutographsForSale.com.

What’s a Tiger Woods Autograph Worth NOW?

Almost exactly three years ago, Tiger Woods had just won his 14th major tournament at the 2008 U.S. Open at Torrey Pines, just outside San Diego. I was there that Monday when he beat Rocco Mediate. As we found out later, Tiger won that event with one good leg. At the time only 32 years old, Tiger was still in his prime and it seemed certain that eclipsing the Jack Nicklaus record of 18 major championships — Tiger’s lifelong goal — was only a matter of time.

Flash forward to 2011. Tiger hasn’t won a major since, missed the 2011 U.S. Open entirely due to injury, and no one knows exactly when he’ll return to the PGA Tour. When he does, it’s questionable whether he will ever regain his #1 ranking or more important to him, how many major titles are left in his golf bag.  Meanwhile, 22 year old Rory McIlroy just completed a Tiger-esque dominant victory lap at the 2011 U.S. Open after coming awfully close at the Masters.

Is the Tiger Woods era of golf now over? I believe it could be, for five primary reasons:

1. Health. Violent golf swings are not unlike a baseball pitcher’s throwing motion. It’s an unnatural human activity that wears and tears on the body. Remarkable athlete that Tiger is, he still is mortal and it’s obvious that his body is gradually breaking down under the pressure.

2. Age. At 35, Tiger is by no means washed up, but he’s running out of time to catch Nicklaus. At best, Tiger has about 40 majors left to play while he could still be competitive, and he needs to win 1 out of every 10 to tie Jack, 1 out of every 8 to surpass him. Can he do it? Yes, but it certainly looks much less likely than it did in 2008. Remember, Tiger needs to win 5 more majors, or 1 more major than Phil Mickelson has won in his entire career.

3. Rory McIlroy. If McIlroy is close to as good as he’s looked at the last two majors, beating the field 7 out of 8 days by a wide margin, then it’s reasonable to project that Rory could average 1 major victory a year for the next 10 years. That would mean 10 less opportunities for Tiger to win, obviously.

4. No fear. Several years ago, the Tiger Woods aura intimidated the rest of the PGA Tour whether they chose to admit it or not. That factor was probably good for a stroke or two per tournament. Whatever aura there was left diminished once Y.E. Yang took him down at the 2009 PGA Championship, and then evaporated entirely in the wake of Tiger’s adultery scandal.

5. International competition. In addition to McIlroy and Yang, several younger golfers from around the globe have emerged as being potential threats to Tiger at every major: Jason Day, Graeme McDowell, Martin Kaymer, Charl Schwartzel, Bubba Watson, Dustin Johnson, Luke Donald, etc. Old threats like Mickelson aren’t going away any time soon, either. The days of Tiger running away with majors, or even regular PGA Tour events, are apparently over. Just look at Tiger’s diminishing margins of victory from his early major wins to his most recent ones.

If the Tiger era is over — keeping in mind that we won’t really know the answer for at least 2-3 more years — will this harm the value of his autographs, cards and other memorabilia? It certainly would. Tiger’s memorabilia demand and prices are based on him not only being the best player in the world (which doesn’t seem to be the case any longer), but also becoming the undisputed best player of all time. If Tiger fails to at least tie Jack’s record, then he can’t call himself the best golfer of all time, especially considering Sam Snead has both Nicklaus and Woods beat for career PGA Tournament wins.

If you’re unhappy about facing this possibility, neither am I, considering how many Tiger autographs I still have in inventory. No, I’m not going to give them away, but I reduced the prices recently and might have to continue doing so if Tiger doesn’t stage a comeback.

FBI Investigation Looms Over the 2011 National Convention

A month and a half from today, sports memorabilia collectors and dealers from all over the country will convene at the 2011 National Sports Collectors Convention in Rosemont, just outside Chicago. The location may be appropriate, because the Chicago office of the FBI has been investigating the sports memorabilia business for the last four years and may be ready to announce its findings any month now. FBI agents have questioned numerous individuals at the last few National Conventions and it would surprise no one if they showed up in Rosemont as well.

The FBI’s investigation began with 2007 allegations that Mastro Auctions (based in suburban Chicago) was involved in shill bidding, card doctoring and other fraudulent activity. Mastro Auctions, which was the industry’s largest auction house, shut down in 2009 as its reputation went down the toilet. The FBI investigation has been thoroughly reported by Michael O’Keeffe at the New York Daily News.

If the investigation results in indictments, which seems likely, the sports memorabilia business will suffer a major black eye. But how big? It seems unlikely the FBI would spend four years looking into the actions of just one auction house. In fact, a, August 2008 article by O’Keefe regarding Mastro Auctions notes that “federal agents investigating fraud in sports collectibles questioned employees of Professional Sports Authenticator, the hobby’s top card grading service” and regarding the famous T-206 Honus Wagner card graded 8 by PSA sold for a record $2.8 million in 2007, “a former PSA authenticator has said the company knew the card had been doctored.”

It has been frequently alleged within the hobby that PSA has given preferential grades to its best customers, such as Mastro Auctions, and by the same token, PSA/DNA is much less likely to decline to authenticate autographs submitted by its best customers. To see just how tight PSA was with Mastro Auctions, note that four years after the fact, on PSA’s website there is STILL an article boasting about Mastro’s big sales in 2007.

I don’t have any first hand knowledge of what will come of the FBI investigation, but I do know this. It’s been more than a decade since the last big FBI bust, Operation Bullpen. This business unfortunately has more fraud going on right now than back then, thanks to the internet and a general feeling by fraudsters that the FBI doesn’t care about this business in a post 9/11 world. Just look at all the obviously bogus autographs that Amazon.com is flooded with, for instance. Regarding third party autograph authentication companies such as GAI, JSA and PSA/DNA, it’s long been my suspicion that individuals within those companies have knowingly cooperated with forgers.

I believe the length of this investigation means that the more the FBI has dug, the more fraud they’ve found. A major FBI bust in this business will temporarily hurt sales of all dealers selling sports memorabilia, including me. However, I will be the first to tell you that I can’t wait for it to happen. I hope all the scumbag competitors I’ve run across on Amazon.com and elsewhere on the internet get busted. Then they can practice forging signatures from behind bars.