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|Amazon Fires Colorado Affiliates|
New Law Enacted, Old Affiliates Redacted
Colorado joined New York and North Carolina with an ill conceived plan to collect taxes on Internet sales and has just put a bunch of their constituents out of business or seriously dented their income.
|In response to recent legislation in Colorado (HB 10-1193), Amazon.com has sent a letter to its affiliates in Colorado informing them that the on-line sales giant will no longer be advertising through businesses in the state that that make money by referring buyers. |
You would think in a downturn economy that Colorado would be sensitive to the needs of the people earning off Amazon, who in turn do pay income taxes on that money.
Nope, instead of trimming government excesses and bloat they go after internet sales tax and punish the people trying to earn a living.
A similar bill almost passed in California but we all rallied in full force and let our representatives know we did not want such a thing to foul up the internet economy.
However, with 3 states down, taxing online sales could be the norm unless people express their outrage early and often as new states start eyeballing internet sales taxes as an option.
Amazon did state they would reinstate Colorado-based Associates if the state of Colorado brought the law into compliance with what the US Supreme Court said was constitutional.
I wouldn't hold my breath, but Senator Greg Brophy said he would try to fix the problem.
Engaging in a fight by pushing the little guy out front to take the beating?
[edited by: martinibuster at 8:42 pm (utc) on Mar 8, 2010]
We'll see more of this in the future. Guberment is hurting for revenue. I'll shut up now.
Several more states have a so called "Amazon tax" in the works including Virginia, Mississippi, Vermont and New Mexico. If I were located in these states, I'd seriously curtail further expansion of any Amazon agenda.
A bill has been re-introduced in California after the Governator vetoed an earlier bill. Although I haven't studied it, the new one seem to have some exemptions that might apply to smaller affiliates. Since I no longer live in California, I'm still a go with Amazon. In fact, the eBay program is such a PITA, that I'm switching a lot of my eBay stuff over to Amazon.
Diversification is my mantra in the affiliate game.
|go after internet sales tax and punish the people trying to earn a living |
There's nothing intrinsically wrong with governments wanting to tax an online purchase the same as a brick-and-mortar transaction would be taxed for selling the same item in person.
I'm not against the idea of ecommerce taxation, but wow, the state-by-state mishmash that is evolving is just nuts. Nuts!
Why can't the states get together and make some common-sense decisions about consistent ways to apply sales taxes to out-of-state sales (could be online sales, phone sales, mail order, etc.).
The problem for online retailers would not be the fact of taxation per se, it's the dumb way some taxes are being applied and the crazy-making patchwork quilt of regulations and rates they have to deal with.
Re "punish the people trying to earn a living": Many local brick-and-mortar retailers would argue that the present situation is what's punishing them. The fact that online transactions so often escape sales taxes creates a disadvantage of several percentage points for local retailers who must charge sales taxes on every transaction. That disadvantage is entirely artificial.
Charging sales taxes to online sales but not for mail order is unfair. Mail order has traditionally been exempt except when there is a physical facility in the state. I pay taxes on online purchases that are made within my state from companies that have facilities in the state. That's a fair playing field.
Whether online retailers have an unfair advantage might be debatable as I assume there are other costs associated with operating an online venture that brick and mortars do not have to shoulder.
Brick and mortars have the advantage of being able to offer instant gratification to customers who want a product sooner rather than later. They can compete online for local buyers, too.
|I assume there are other costs associated with operating an online venture that brick and mortars do not have to shoulder |
That would be a different discussion unless those costs are tax-related.
IMHO, if online retailers and B&M are in competition, they should be able to compete based on the actual costs and advantages of their respective modes of doing business.
It's not fair that one side has to deal with the burden of consumer resistance created by the fact that the other guy doesn't have to charge taxes. The cost differential that creates for the end consumer is totally artificial.
|Charging sales taxes to online sales but not for mail order is unfair. |
I would agree with that. Whatever the policies are, they should apply consistently to all out-of-state sales, regardless of the method by which contact was made.
The problem is unless the buyer and seller are in the same state it really shouldn't be a state sales tax.
I'd opt for something logical like a flat Federal Interstate Sales Tax of 5% that can be collected by states on Interstate transactions, but it's one flat see, not the dizzying array of fees states assess per state, county and city.
Think more how Minimum Wage works, it would be Minimum Tax, set so that it's fair for anyone paying a tax nationwide and simple enough it's not a burden on ecommerce vendors.
|Brick and mortars have the advantage of being able to offer instant gratification to customers who want a product sooner rather than later. |
Not exactly true.
Often times I can't find what I want in the store and Amazon Prime will have it delivered the next day vs. B&M's that will order it for you to show up 1-2 weeks later.
Heck, I don't even bother going to most of the B&M stores anymore and save on gas and time wasted dealing with incompetent sales people.
Want a book? Amazon will have it on my doorstep in a day or two or I can download it electronically now. Same with music and movies, no new CDs or DVDs for me, instant downloads.
Want totally crazy? I can't even afford to drive to the local Walmart to pick up a shirt or a pair of pants for the price they'll ship them to my door: $0.97! The local Walmart return trip here incurs a $4 bridge toll so if they'll ship it that cheap, I'm staying home.
Same with Amazon Prime, we buy a lot from them and still would even if we got charges sales tax for the sheer convenience alone. You think of it, you order it now in mere minutes, no need to leave the house and waste and hour in a store.
Not to mention the fact that during the cold and flu season some of us with compromised immune systems (damn chemo) find online ordering the safest way to avoid catching a cold.
The difference is Internet sales can be "tracked" better than mail order... one of the reasons why sales tax is not collected (USA) for interstate sales. All sales are subject to sales tax. Additionally most states require a minimum Use or Property tax (should the item fall in that category).
Just because mail order and internet has managed to duck the sales tax thus far does not mean it will last forever. And I'm not all that happy with Amazon ducking this issue by dropping states like Colorado, Hawaii, California... instead of meeting it head on for legislative resolution.
Taxes will eventually be collected and they will not be 5%... coming to your website in the not-too-distant future.
Since states/cities may or may not have a sales tax,
maybe tax based on whatever sales tax the seller has at their selling location.
Let the states decide if they want more business for their local businesses or more sales tax revenue.
Want more businesses to locate in your city/state and create more jobs for your citizens? Lower your sales tax rate.
Make the same apply to all distant sales.
Funny how the governor and others reacted. It shows that there might be a price to pay politically. Bad press for the governors might not be worth the tens of millions the state might get.
What's worse, many cities have local local taxes, in addition to the state taxes. Go ahead and deal with that if you are a retailer!
Quite frankly if I get canned because of where I live I intend to move. If my city/state doesn't protect my interests I will.
The small revenue increase they'd collect on me with this wouldn't be worth the much larger revenue loss from what they won't be collecting from me.
|With Meg Whitman running to replace Gov Schwarzenegger in California I suspect that California may be next |
Rethink that position as she runs eBay and eBay has a big affiliates program as well.
What motive would she have for hobbling eBay?
She doesn't run eBay and eBay undid her "pet projects" when she left. Google "Undoing Meg Whitmanâ€™s eBay", the NY times did a great write up. Is there bad blood there? California affiliates will likely find out soon enough with her lead in the early popularity polls.
OK, ran eBay until 08, a quibble of words.
My point was she knows something about ecommerce and of all people I would be shocked if she helped hurt a large part of the CA economy that's already bleeding jobs.
Interestingly enough. Colorado also recently lowered ... yes LOWERED minimum wage there. How crazy is that.
Here's an article that nicely summarizes the current outlook for spread of this sort of legislation.
From that article Go60Guy...
|Colorado is not alone. Fifteen other states have considered or are considering enacting laws targeting Amazon and other e-commerce companies that typically do not charge sales tax for shipments sent outside their home state |
It amazes me that people still feel this isn't happening or this won't spread. It is and it will if nobody opposes it in time, which Amazon is.
Good for Amazon. They don't have presence in Colorado so they don't have to collect sales tax.
Affiliates should be angry with their state government and vote with their feet by moving to a tax and business friendly state.
This is certainly interesting and worth noting concerning the Colorado legislation:
|Bennett Kelley of the Internet Law Center says: “Merchants should not rush to follow Amazon’s lead since the “affiliate nexus” provision that has defined “Amazon Tax” bills to date has been stripped from the new law such that having in-state affiliates does not trigger any tax liability. |
It seems Amazon, nevertheless, pulled the plug on it's Colorado affiliates in a ploy to drive home it's strong opposition to the state's action. On the other hand, there ought to be some encouragement that state legislators are listening to the plight of affiliates, although Amazon appears to have been insensitive to it.
|The problem is unless the buyer and seller are in the same state it really shouldn't be a state sales tax. |
What does "should" have to do with anything related to tax policy? According to current law, only the primary residence of the buyer matters. To the best of my knowledge, in every state in the US with sales tax, official law is that if I drive to another state, load up my car with a flat screen TV or a truckload of laundry detergent, I need to pay sales tax on that. Same with items I mail order.
This is why various criminals engage in cigarette smuggling within the US from states that have low sales tax on cigarettes to states with low sales tax.
The only item that is consistently caught by this is out-of-state auto purchases, because they hit you for sales tax upon registration.
Now as soon as we have to register our TVs and laundry detergent before we can use them, we'll have this whole problem licked.
In theory, items purchased via mail order are NOT exempt from state sales tax. Merchants are exempt from charging sales tax, but the customer is still legally obliged to pay it.
It is a travesty that mail-order, be it online or catalog sales, are exempt from sales tax altogether, thus undercutting local businesses.
It's also a travesty to apply the taxes is this idiotic way, as buckworks says.
One problem is that there are hundred, if not thousands, of sales tax districts in the US and they have all kinds of arcane rules - in some places food is included, in most places it isn't. In Minnesota, last I knew, clothes were exempt.
Meanwhile, when you go from county to county, the taxes change. In my county, we have to track *two* county taxes for a vacation rental.
We need federal legislation on this to put all states on an equal footing and start charging the same state sales tax for mail order.
While I agree with the spirit of the above, I can't see the individual states (USA) giving up that control to levy the tax appropriate for their locale. Not an argument, merely an observation this is a very difficult question!
I don't think multiple tax jurisdictions and rates are confined to the US alone. Seems to me that last time I was in BC I was paying both a Provincial and National VAT.
I am glad to say I live in one of the few States without a sales tax. That, of course, throws a wrench in the idea of federal legislation to equalize sales taxes, since such legislation would clearly infringe on State's rights. Were the feds to impose a State sales tax I might have to explore moving to a State with no income tax ;)
|According to current law, only the primary residence of the buyer matters. |
That's kinda dumb right there. If I go shopping in person when I'm travelling, no one offers me any tax exemptions based on my primary residence, I just get charged sales taxes based on the location I'm visiting, the location of the seller.
If I want to recover those taxes I have to make application later, and the process for that is not well designed and even less well promoted.
If sales taxes were consistently based on the location of the SELLER, regardless of who is making the purchase (or via what medium), that would cut through the Gordian knot.
That's effectively what happens now for in-person shopping; make that official and extend it to all shopping.
Each seller would have to comply with the tax rates of their own jurisdiction but not the maze of rates where their purchasers might come from.
As Tangor points out, the most challenging aspect of addressing the situation would be getting all the states to agree.
Turf wars impede a lot of progress....
|the idea of federal legislation to equalize sales taxes, since such legislation would clearly infringe on State's rights. |
The feds are already involved with interstate commerce authorized under Article I of the U.S. Constitution.
The feds can also regulate commerce within a state when it may impact interstate movement of goods and services and may strike down state actions which are barriers to such movement.
So technically applying a flat interstate tax to keep goods and services moving via ecommerce isn't a far stretch IMO.
So...let me make sure I have this correct...
During a recession, with over 10% real unemployment in this country, states are forcing small businesses OUT OF BUSINESS by creating new taxes?
This seems rather short sighted to me. Those businesses were paying taxes in the state where they were located, and those businesses were no doubt supporting people who spent money in their communities, again paying taxes in the process.
So now, those businesses are in danger of going out of business which means they will no longer be paying taxes, nor will the people who depended on them for income.
BRILLIANT! Is it any wonder things are so screwed up?
If the brick and mortar retailers were so great, they wouldn't be worried about the internet retailers. Smart moves like Circuit City, who fired all the employees who could actually HELP customers...all to save money. And it cost them their business. Another brilliant move!
Shopping in person is a pain in the neck. Associates who can't answer questions. Out of stock items. Trying to find someone to ring you up when you're ready to leave. Sitting in traffic. Trying to find a parking spot.
You really have to want something bad to go shopping in person, unless you just do it for sport.
I don't propose to have the answer to this, but I'm pretty sure what we're seeing from New York, North Carolina, and Colorado isn't it.
|During a recession, with over 10% real unemployment in this country, states are forcing small businesses OUT OF BUSINESS by creating new taxes? |
The stupid part is that they use the the physical presence of affiliates as the criterion for deciding whether a merchant has to pay taxes. And really, that wouldn't be a problem if the tax had to do with the residence of the consumer.
The not so stupid part is the short-term math.
As an Amazon affiliate, I get about $50. Once I take away my deductions and writeoffs, I'll pay about $15 in income tax. Maybe less if I have a bad year or a major capital writeoff or who knows what.
Now if they charge sales tax on that item, in my county that means $87.50.
So, the state is theoretically up $72.50.
Where the states are screwing up, is creating laws that allow merchants to sidestep them simply by dropping affiliates in that state. In which case, the state loses both the $87.50 and the $15, which is what's happening now.
Also, I wish people would quit calling this a new tax. The only difference is who has the burden of reporting.
Current law in most states requires you to pay sales/use tax on items purchased from out of state, but the consumer is expected to report this. However, nobody does, so now they're trying to enforce reporting on the merchant side.
In theory, not paying sales tax at the end of the year on items you purchase over the internet is tax evasion. It is, however, like going 66 in a 65 zone. You're not likely to get prosecuted.
The California State board of Equalization says
|If you make such a purchase and then use, give away, store, or otherwise consume the item in California, you may owe California use tax. This is true whether you order the item over the Internet, by telephone, or by mail. The use tax rate for any California location is the same as the sales tax rate. ... If the out-of-state retailer does not collect the California tax which is due on your purchase, you are required to report and pay use tax |
-- [boe.ca.gov...] (PDF)
|The feds are already involved with interstate commerce authorized under Article I of the U.S. Constitution...So technically applying a flat interstate tax to keep goods and services moving via ecommerce isn't a far stretch IMO. |
But here you are talking about a new fed tax. I don't believe that the feds can interfere with an individual State's right to control its own tax methods and rates. Nor, I suspect, would any fed sales tax be remitted back to the States.
In short, be careful what you wish for. You just might get it!
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