Archive for the ‘Sales Tax’ Category

Governor Brown signs California/Amazon sales tax compromise

September 24, 2011

Governor Brown signs California/Amazon sales tax compromise

Governor Jerry Brown of California has signed a compromise with Amazon regarding compelling the Seattle-based company to collect California sales tax.

http://gov.ca.gov/news.php?id=17232

It’s a remarkable development, and one which was not at all certain to occur.

I’ve written about this previously, but this makes it official.

Amazon is dropping a petition drive to overturn California’s “Amazon law” which would have compelled it to collect California sales tax at the time of sale for sales going into California (on products which would have been taxable there if sold in a store…not on e-books).

Amazon also agrees to bring ten thousand jobs to California, and there is talk of them opening fulfillment centers in the state.

What did Amazon get in exchange?

The internet retailer does not have to collect sales tax in California…until September 15, 2012.

That gives time for a national sales tax policy (such as the “Main Street Fairness Act”) to get passed, which would override California’s law.

What does this mean for former Amazon Associates in California (which includes me)?

After all, Amazon dropped the program (through Amazon pays advertising fees to individuals and organizations that use special hyperlinks to direct buyers to Amazon) in California in response to the law California had passed…which is now suspended. My guess is that they’ll restart the program…and soon. Whether a federal law is passed or not, the presence of Associates in California after September 15, 2012 makes no difference. I should say, “Most likely.” The Main Street Fairness Act might not pass, and something else might. I doubt anything else will make advertisers into a “nexus” that forces a company to collect sales tax. If nothing passes, Amazon has to collect sales tax anyway.

The Associates are a good thing for Amazon: we drive business their way. The Associates are also a good thing for California, in my opinion: we pay income tax on those fees.  The argument against it is that people buy online from Amazon rather than buying the same thing in California…and then that they don’t pay their “use taxes” on their annual taxes, which is what they hypothetically should be doing.

However, it would be hard to demonstrate that people wouldn’t just go ahead and buy online, even with tax collection.

So, I’m guessing we’ll see the Associates program restored by Monday.

There is also a rumor out there that Amazon is going to announce the AmTab (Amazon Tablet…that’s just my slang for it) on Wednesday. They’ve called a press conference in New York for that day, according to online stories:

GadgetBox MSNBC article

Having the Associates back up and running for the launch of the AmTab would make a difference, I believe, in the early sales. Obviously, I’d be favorably affected by that personally, but I don’t think that’s swaying my speculation too much. ;)

My best guess: California Associates restored by Monday, AmTab announced on Wednesday…and I get one quickly and tell you about it. :)

Amazon could also be announcing something else, but the timing seems about right.

What do you think about Governor Brown signing? What do you think will happen with a national sales tax policy? Is the AmTab going to be announced Wednesday? Feel free to let me know.

This post by Bufo Calvin appeared in the I Love My Kindle blog.

Amazon, California settle on sales tax…for now

September 8, 2011

Amazon, California settle on sales tax…for now

I’ve written quite a bit about the question of Amazon collecting sales tax in various states, California being one of them.

That state passed an “Amazon law”, designed to compel Amazon to collect sales because: they had “Associates” in California who got advertising fees for linking to Amazon; and they had non-sales related facilities in California (Lab126, which does R&D…Research and Development…for the Kindle, and IMDb.com, to name two).

Amazon responded to this in two main ways.

They dropped their Associates in California (I was one of them).

They started an initiative drive to overturn the law…I’ve seen that they were going to put five million dollars into doing that.

Now, Amazon and California appear to have reached an agreement, according to this:

Sacramento Bee article

As I’ve written about before, Amazon supports a federal law, the “Main Street Fairness Act”. It would result in internet retailers collecting sales tax for states in which they make sales. It’s not an additional federal sales tax: you wouldn’t owe more taxes, but unless you pay them on your annual state taxes like we do, you might pay more.

So, what California is doing is giving Amazon a safe haven so they can try to get that law passed (presumably, part of that five million dollars they were going to spend on the initiative could go to lobbying).

Here are the key dates, according to the article:

“If no federal deal emerges by July 31, 2012, Amazon would have to begin collecting California sales taxes starting on Sept. 15, 2012.  <snip>

If Congress strikes a deal by July 31, 2012, online retailers would begin collecting taxes starting on Jan. 1, 2013, under whatever federal requirements are approved.”

Could something get passed by the US Congress by then? Well, let’s say that getting anything passed has been hard lately, but I think this might happen. If internet retailers were compelled to collect the sales tax for the states, it would get the states more revenue and reduce their expenses…which in turn, benefits the feds.

This isn’t a done deal. Governor Jerry Brown still has to sign off on it. I intend to e-mail Governor Brown to let him know that I support this compromise. You may want to comment either way. You can do so here:

http://gov.ca.gov/m_contact.php

While I don’t like the name “Main Street Fairness Act”, I’d love it if internet retailers collected my sales tax. It’s a bear to calculate it every year and then send a lump sum…I’d rather pay as I go along.

You can also let your representative know if you support the Main Street Fairness Act:

https://writerep.house.gov/writerep/welcome.shtml

The bill would have to go through both houses. You can contact your Senators through this link:

E-mail your Senator

Feel free also to comment this post to let me know what you think.

This post by Bufo Calvin appeared in the I Love My Kindle blog.

Amazon, Sears both support federal sales tax collection plan

August 4, 2011

Amazon, Sears both support federal sales tax collection plan

I’ve written quite a bit about so-called “Amazon laws”, which basically seek to compel retailers to collect sales tax for a state when they previously did not have to do that.

There have been a hodge-podge of approaches by the states…and different reactions from Amazon.

I’ve suggested before that it was going to be settled at the federal level: by the Supreme Court (because it involves interstate commerce, it is a constitutional issue) or by the Congress.

Now, Senator Dick Durbin and Representatives Dick Conyers and Robert Welch (along with other co-sponsors) have introduced a bill to standardize sales tax collection (but not rates) at the federal level.

Bills don’t always become laws, of course…you may remember the Schoolhouse Rock “I’m Just a Bill” video. :)

One of the big things that affects that is who supports a bill and who opposes it. Organizations (including corporations) may spend a lot of money on one side or the other…even run television advertising.

That makes sense: they may be seriously impacted by something becoming a law.

The two corporate sides in this case are large internet retailers (Amazon, Overstock, eBay), and large brick-and-mortar retailers (Wal-Mart, Target, Sears).

The idea of federal sales tax collection standardization is presented as protecting small businesses…this one is called the Main Street Fairness Act. Many bills have names which have more to do with stirring up emotions than describing what they do. In this case, one could argue about what is fair (internet retailers don’t collect sales tax on certain sales…but brick-and-mortar stores don’t have to deal with shipping and handling), but you also aren’t going to find those big retailers on Main Street…unless it goes five miles out of town and has pastures along the side. ;)

So, the first interesting thing about this bill is that both Amazon and Sears support it.

Amazon has said that they wanted a national policy, and a

letter

from Amazon’s Paul Misener, Vice President for Global Public Policy, is linked from the

Press Release

on Durbin’s official site.

eBay is reportedly opposing the bill. eBay certainly has a lot of “small businesses” (many wouldn’t even qualify as a business to most people), and sellers who aren’t used to collecting sales tax. Amazon certainly knows how to collect sales tax…I think more than half of their revenue comes from places where they collect sales tax. You can see why there might be a split there.

My guess is that the bill will have a lot of corporate support.

However, it is worth noting that all of the sponsors and co-sponsors are, I believe, Democrats. That might suggest some opposition from within the House and Senate.

What does it actually say?

Well, that should be, “What do they actually say?” The House of Representatives and the Senate will have different bills, then they’d have to reconcile them…you probably know how that back and forth can go.

Here’s the House bill:

H. R. 2701 (pdf)

This is Section 3, the findings:

4 SEC. 3. FINDINGS.
5 Congress makes the following findings:
6 (1) States should be encouraged to simplify
7 their sales and use tax systems.
8 (2) As a matter of economic policy and basic
9 fairness, similar sales transactions should be treated
10 equally, without regard to the manner in which sales
11 are transacted, whether in person, through the mail,
12 over the telephone, on the Internet, or by other
13 means.
14 (3) Congress may facilitate such equal taxation
15 consistent with the United States Supreme Court’s
16 decision in Quill Corp. v. North Dakota.
17 (4) States that voluntarily and adequately sim18
plify their tax systems should be authorized to cor19
rect the present inequities in taxation through re20
quiring sellers to collect taxes on sales of goods or
21 services delivered in-state, without regard to the lo22
cation of the seller.
VerDate Mar 15 2010 04:21 Jul 30, 2011 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2701.IH H2701 smartinez on DSK6TPTVN1PROD with BILLS
3
•HR 2701 IH
1 (5) The States have experience, expertise, and
2 a vital interest in the collection of sales and use
3 taxes, and thus should take the lead in developing
4 and implementing sales and use tax collection sys5
tems that are fair, efficient, and non-discriminatory
6 in their application and that will simplify the process
7 for both sellers and buyers.
8 (6) Online consumer privacy is of paramount
9 importance to the growth of electronic commerce
10 and must be protected.

There are some important points there, certainly.

Here is the Senate bill:

S. 1452

At this point, they are not substantially different. I’ve skimmed both, but I’m not sure they are exactly the same…they’ll both change going forward anyway.

What impact will these have on you, as a Kindleer?

Let’s assume they pass pretty much as proposed. States have to simplify their sales taxes, and wherever you buy something (in a store, online), sales tax is collected at the time of sale.

Are you going to owe more sales tax?

Nope…unless for some reason states raise sales tax rates in response,  but they are going to get so much more money this way I don’t think that’s likely.

Are you going to pay more sales tax?

I would guess that’s true for the vast majority of internet shoppers.

When we pay our annual state taxes, we calculate what we purchased from internet retailers, which ones haven’t taxed us already, add up the appropriate sales, and then pay a lump sum…and it can be pretty high.

When I say “appropriate sales”, that doesn’t include Kindle books…my state, California, doesn’t tax e-books delivered electronically. We go ahead and pay taxes on everything else: it’s just too complicated to figure out which items should be taxed and which shouldn’t.

I’m sure that means we tend to overpay. Philosophically, we’d rather accidentally pay too much than pay too little. My understanding is that the majority of people pay too much on their taxes…but that may be due mostly to not finding all the deductions.

This legislation would be a big advantage for us: we’d be paying those sales/use taxes throughout the year, rather than all at once, and I wouldn’t have to do the calculations myself.

It could lead to more standardization of sales tax rates, but I think that’s not as likely. We pay close to nine percent, quite a few other states pay around five percent. That doesn’t mean I want to see their taxes go up, though.

There are a lot of possible ramifications here: would people who are tax collectors for the states lose jobs? Would states start taxing more things, since it would be easier to collect the tax? Would having Amazon and other e-tailers collect taxes at the time of sale hurt their marketshare? Would this save your Mom & Pop bookstore (if any)? Does this have any chance of becoming legislation…before the Presidential election? After? Feel free to let me know.

Oh, and I want to thank regular reader and commenter Edward Boyhan for alerting me to this

Wall Street JournWall Street Journal article on Amazon on taxes. It doesn’t mention the MSFA, but it’s still interesting.

A few other related articles:

DC Metro

Retail Leaders Industry Association expresses support

WebProNews

One minor thing: my Internet went out temporarily after I wrote part of this, so I had to recreate it. I’ll review it more in the morning, but I apologize if it might be a bit disjointed.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

Amazon goes the state initiative route in California against the Amazon law

July 12, 2011

Amazon goes the state initiative route in California against the Amazon law

This is fascinating! I first heard about it on a 24-hour news channel.

I’ve written quite a bit about Amazon dropping their Associates program in California, in response to a change in the law in that state.

Full disclosure: I was an Amazon Associate at the time the program ended, and benefited from that program financially.

Now, it appears that Amazon is going to fight the law…by sponsoring or supporting a state initiative to effectively repeal it.

This

Bloomberg article

is, unfortunately, really misleading in my opinion. I will no longer be able to trust Bloomberg’s writing to the same extent in the future, which is too bad.

The article suggests that the law was going to place new taxes on Californians, and that our notoriously tax-averse population (see Prop 13, for example) would rally against the law for that reason.

The “Amazon law” levied no new taxes…it just changed how they were paid. It forced Amazon to collect the state sales taxes because they paid advertisers (“Associates”) who put links on their websites that resulted in sales for the e-tailing giant.

So, without the initiative we are back where we were before it: you are supposed to pay “use taxes” on your annual state taxes in California for the things you buy from companies outside of the state that do not collect those taxes and submit them to the state for you.

The initiative would presumably repeal the definition of those advertisers as a “sales force”  for Amazon (as employed salespeople would be), which created a “nexus” in California, allowing the state to make Amazon take on the expenses of collecting those taxes and submitting them.

Some of you outside California may not know how our initiative process works. Essentially, you collect a bunch of signatures, they get verified, and your proposition is put up to the voters in the state. We’ve had all sorts of propositions on which to vote…many don’t pass, of course, and it’s no sure bet.

I would need to read the proposition, but regardless of whether I would support it or not (and my strong intuition is that I would), I’m happy Amazon is doing this. It’s going to pump probably hundreds of millions of dollars into the cash-strapped state…as brick-and-mortar superstores like Costco and Wal-Mart buy advertising to fight it, and Amazon buys advertising to support it.

Feel free to tell me what you think about this. Is it appropriate for Amazon to spend corporate money to fight a California law? Would you support the proposition, depending on how it is worded?

For more information, see this

previous post

To share how the end of the Amazon Associates program in California affected you (if you are an ex-Associate), please see this

previous post

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

The Ex-Associates Club of California

July 4, 2011

The Ex-Associates Club of California

I’ve been writing about Amazon ending the Associates program in California in response to a recent change in the law in that state.

While I’ve seen (and continue to see) a lot of opinions on this, it’s been largely of a technical nature.

There were approximately ten thousand Associates in California, and I’m starting to see some interesting personal stories. Those can really put a face on a decision like this, and give readers a special connection, regardless of their assessment of the rightness of the law.

I’d like to invite ex-Associates of Amazon in California to comment on this post and let us know how it has or will affect you.

If you are a former Associate from another state, such as Colorado, please identify that in your story. If you weren’t an Associate, of course, you are welcome to comment as always.

If you work in or own a brick-and-mortar store and want to say how you think internet retailers not collecting sales tax at the time of sale affects you, you are welcome to do so.

If you want to make a comment to me personally and not have it published to the group, please indicate that in your comment.

I’m most interested here in personal narratives, but I do want to do some polls to get some higher level information. Also

, the polls can be answered anonymously, while published comments have some identifier (although not necessarily a real name).

Again, please feel free to comment on this post with your own story.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

Barnes & Noble Thanks California Governor Jerry Brown for Signing AB 28x-E-FAIRNESS

July 1, 2011

Barnes & Noble Thanks California Governor Jerry Brown for Signing AB 28x-E-FAIRNESS

Barnes & Noble has issued this

press release

praising California’s Governor Jerry Brown for signing a law that redefines a “nexus” in California, compelling more out-of-state organizations to collect sales tax.

In response, Amazon dropped its Associate program in the state, cutting off advertising fees to ten thousand Californians (including me).

Depending on how things go, Amazon may also need to remove subsidiaries from California to avoid being compelled to collect California’s sales tax.

Barnes & Noble says in part:

“We believe that e-fairness will improve the economy, add jobs, and help struggling businesses everywhere in California.”

It would be interesting to hear them articulate the mechanism by which these elements will be achieved.

This law does not “level the playing field”, as you will hear, between internet retailers and brick-and-mortar stores. It could be argued that the fact that internet retailers do not collect sales taxes at the time of sale for purchases outside of states where they have a nexus (buildings, a sales force) gives them an advantage over stores which do.

However, this law has not resulted in Amazon collecting sales tax. Instead, Amazon will continue to take money from California (by way of sales), but stop sending money into California (by way of advertising fees to Associates…and more, if they withdraw their subsidiaries).

Let’s say that the average Associate made only one thousand dollars a year in advertising fees. That’s ten million dollars in what was probably largely discretionary funds that California loses. That money was also taxed by the state.

Barnes & Noble: how does the loss of the Associate advertising fees coupled with no sales tax being collected by Amazon (maintaining the status quo) lead to helping the economy?

For more information on my opinion on this law, see this earlier post.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

Lose/lose/lose: how California’s Amazon law hurts the state, Amazon, and individuals

June 30, 2011

Lose/lose/lose: how California’s Amazon law hurts the state, Amazon,  and individuals

Full disclosure: I am one of 10,000 California Amazon Associates. Perhaps I should say “I was”, since Amazon is ending the program in my state.

What is that program?

We Associates sign up for free with Amazon. We then are able to create special links to Amazon products (and pages). When someone clicks through that link and purchases things at Amazon, we get an advertising fee.

Amazon does not tell us where to put the links, where to report in the morning, pay us workers’ compensation, have to pay us minimum wage, or any of a number of other things that would define us as employees.

We advertise: Amazon compensates us when the advertising results in sales.

That’s how it was until California passed a law that says that because Amazon has these Associates in California, they can be compelled to collect sales tax at the time of sale on all taxable products sold into California by them.

In response, to avoid collecting the sales tax, Amazon is terminating the program in California.

I’m explaining all this up front because it does affect me personally, and you should know that. I get a small amount of money each month from those advertising fees. When I say a small amount, I get more from having subscribers. None of that compares to my regular salary for my regular job. The money helps, no question, but we don’t budget anything based on the advertising fees.

I’ve had months where those advertising fees were under $100…June will have been a good month, in part due to the Sunshine Deals sale.

So, I do have a dog in this…although it’s more like a puppy. :)

Sorry, you can see I can’t help being a bit light-hearted (that’s my nature), although I think this is a very serious issue.

I think it was a mistake on California’s part to pass this…so I want to start out with presenting the argument in favor.

California brick-and-mortar stores have difficulty competing with online retailers where sales tax is not collected at the time of sale. That’s unfair to those stores….and the stores employ people right here right now. When the interstate commerce clause was created, there was no idea that you could buy from another state and have the items in a day. There really is very little difference between what Amazon does when it makes a sale in California and Wal-Mart does.

Amazon has a mechanism to collect sales tax at the time of sale. They already do it in other states. These Associates are a sales force for Amazon. This doesn’t add a burden to California consumers, because they already owe the tax: it just makes sure it is collected.

That is one viewpoint. That would make it seem like California is going to get some much-needed income by passing this.

The reality is different.

Amazon still isn’t going to collect the sales tax…because they will drop the Associates program instead.

This is going to hurt cash-strapped California, not help it.

The situation before the law: California residents were expected to pay that sales tax (it may be called a “use tax” when they pay it) on their annual state taxes. My family does that, and it’s a bear. Many people don’t pay it, and it’s hard to get them to pay it.

If Amazon collected it, it would be easier for the state…but Amazon still isn’t going to collect it. The state didn’t gain anything from that.

Still, if it’s status quo, that doesn’t hurt the state, right?

It does, because the state was getting taxes on the money the thousands of Associates were receiving from Amazon. The Associates won’t get that money, so they won’t pay taxes on money they didn’t get.

California loses a source of income without gaining another one.

If this was a surprise, unprecedented move on Amazon’s part, it might make more sense that California passed this law. It’s not, though: Amazon has done the same thing in other states.

California loses on this deal.

Does Amazon lose on the deal?

Yes. Those Associates were recommending things to people that they bought. Amazon loses those additional sales. If there were ten thousand Associates in California generating sales of, say, five thousand dollars a year apiece on average, that’s fifty million dollars in sales. Yes, Amazon would be paying advertising fees, but not as much as they would make (the fee is usually under ten percent). There is also a cost in maintaining the program, of course.

Why can’t Amazon make those sales other ways?

The Associates program leverages both the social networking aspect of the internet and expertise. If someone has a blog on beekeeping, a respected blog, people are more likely to buy books that person recommends on beekeeping.

Individuals are rewarded for their expertise, and that expertise results in more sales.

Amazon is hurt by the deal.

What about the Associates?

They are clearly hurt by this deal. They lose that money. I doubt very many people are making their sole income this way, although some might be. What is probably being lost in many cases is discretionary income…which may have been spent in California (another way the state is hurt, by the way). Associates, I would guess, tend to be hobbyists, and I know there are  non-profits that use this as a way to raise some funds so they can carry on their work.

Associates are hurt by this deal.

How about consumers? Are they hurt by this?

It’s not going to directly affect anything for the consumers. They didn’t pay more for products they got from Associates: prices will stay the same (unless they were higher to account for Associates’ advertising fees…they would have been higher for everyone who bought the product, not just for those who bought it from an Associate…I think that was unlikely to have been a big factor).

They may lose some information…and possibly products. Let’s say you were an author, independently published through Amazon’s Kindle Direct Publishing. In addition to your royalty, you may have been selling the book through your website, getting an advertising fee from Amazon for doing so. Now, that piece of it is gone. You might even elect not to publish a book for that reason.

There are probably specialty bloggers who will stop blogging. The income I get from this (the royalties from subscribers primarily, in my case) justifies the time I spend on it. It’s fun, and I feel like I help people…but it would be a time and energy sink away from my family that would be harder to justify without it paying my offspring’s rent at college as well.

I’m not planning to stop blogging, by the way. :) However, let’s say someone writes an expert blog on…power tools. Not a lot of subscribers, probably (it’s not an ongoing every day matter of concern for most people), but people find the blog through internet searches and buy a power tool, because the blogger has explained the advantages and disadvantages of various models. Without the Associates program, those advertising fees disappear…and maybe the blogger stops blogging.

That’s a negative for consumers.

Well, the law passed, so somebody most have wanted it, right?

Who benefits?

Brick-and-mortar stores, like Wal-Mart and Costco.

I would guess  that they lobbied for the bill, but I don’t know that. Since they are compelled to collect the sales tax (they do business in the state, clearly), the bottom line on a consumer’s purchase seems higher. Remember that the consumer owes that tax whether it’s collected at the time of sale or not, but it’s a competitive disadvantage. They also incur the costs of collecting that sales tax and sending it to the state.

They want to make it harder for internet retailers to do business, to hurt their competition.

They are hypothetically helped by this…however, that’s a narrow view of it.

Amazon is not going to collect the sales tax anyway (since they are dropping the Associates), so that bottom line perception isn’t going to change. Amazon will lose the advertising from the Associates, which could affect their sales.

The brick-and-mortars, though, lose the sales that the Associates would have made in their stores.

The Associates were getting money from out-of-state to spend in-state. Yes, they may have made some of their purchases online, but they probably used some of that money at the grocery store…and those big box stores.

What about those “Mom and Pop” stores? Doesn’t internet competition hurt them?

Sure it does…but this doesn’t change that. Amazon is still not going to collect sales tax.

This law hurts everyone.

There are some other interesting factors here.

Will Amazon have to move or change their R&D (Research and Development) facilities in California? That’s not part of the Associates piece, but there are some who suggest the wording in the bill may cause that. That wouldn’t help the state, certainly. Amazon would move those facilities, in my opinion, rather than collect sales tax on all taxable sales into California.

Another piece: Barnes & Noble already pays sales tax in all fifty states, I believe. They have a similar program…Amazon Associates could hypothetically go with them.

I don’t want to do that: I haven’t had good relationships with Barnes & Noble (except in the brick-and-mortar stores).

One other thing: none of this affects your Kindle store purchases if you are a California resident. California isn’t taxing e-books delivered electronically at this point (although they would if you bought the e-books on a CD). It doesn’t change sales of anything into California by Amazon, but I thought I’d point this out specifically.

I’m sure there are many of you who support California’s decision, and I would love to hear from you. I know the state is in financial trouble…I understand that this may seem like “closing a loophole”. If the US Supreme Court rules that advertisers count as a nexus, so be it. The New York Amazon law is likely to end up there, and they’ll we’ll get a definitive answer.

Please, feel free to comment on this post and let me (and my readers) know what you think. If you support California, I’d especially like to hear from you. If you are an Associate affected by this, feel free to tell your story.

Update: my account was closed when I went to it this morning…it’s there for historical purposes.

Update: not surprisingly, there are a lot of news stories about this…here are a few:

L.A. Times

CNET on Lab126 aspect

Seattle Times

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

Connecti-CUT: Amazon cuts off Connecticut Associates

June 11, 2011

Connecti-CUT: Amazon cuts off Connecticut Associates

According to this

CTPost.com article

Amazon is cutting off its Amazon Associates in Connecticut.

Why?

Connecticut passed one of those “Amazon laws” that I’ve discussed previously.

Basically, it goes like this.

States need money.

If Amazon has a physical presence in the state, Amazon can be compelled by the state to collect the sales tax at the time of sale and remit it to the state (incurring all the costs of collection and remittance, of course).

The physical presence doesn’t have to be a building…it can be an employed sales force.

Amazon has an

Affiliates program

If you have a website (even a blog), you can be an Associate. What happens is you can create links to products at Amazon. If someone buys one of those products (or something else after getting to the site using your link), you get an advertising/referral fee.

I’m an Associate.  It’s part of the compensation I get from writing this blog…although in my case, most of it comes from subscribers (thanks, subscribers!).

What the Connecticut law did was say that, because Amazon has Associates like me in Connecticut, they have a physical presence in Connecticut, and therefore Amazon is compelled to collect sales tax.

That gives Amazon a few main choices.

They can collect sales tax for Connecticut.

They can cut off the Associates in Connecticut.

They can fight Connecticut in court.

They chose to cut off the Associates.

Why not just collect the sales tax?

It’s expensive, it sets a precedent for other states…and they may genuinely think they don’t owe it.

Why not fight Connecticut in court?

They are already fighting New York in court…and that one is likely to get to the US Supreme Court and probably settle the issue.

Do I  like Amazon cutting off the Associates.

Nope.

Those are mostly hobbyists, I would presume…I doubt many people earn their livings as Associates.  I don’t, certainly.  In some cases, they are probably non-profits.

Who gets hurt by cutting off the Associates?

  • The Associates (they lose income)
  • Amazon (they lose those referrals which turn into sales…somebody who has a very specialized blog may be a powerful engine for sales to that micro-market
  • The State (they’ve been getting tax payments from the Associates they won’t get now)

That last one is important.  Sales tax is likely higher than the income tax on the cut the Associate gets (the cut may be between five and ten percent…and the income tax isn’t going to be half of that, I think).

Why would a State pass a law like that?  Who would want them to do it?

Brick and mortar retailers.

People perceive that the prices are lower online, because you typically don’t see the sales tax.  You are commonly still expected to pay it on your annual state taxes (it may be called a “use tax”)…but I would guess most people don’t do that.  We do, and it’s kind of a bear to calculate and pay a lump sum.  I’d much rather that all my online retailers collected the necessary sales tax at the time of sale and sent it to the State for me.

However, I don’t think they should be forced to do that because of Associates…but I’m guessing places like Wal-Mart and Target disagree with me.  :)

E-books are different, by the way, at least those sold under the Agency Model.  The seller of record in that case it the publisher, not Amazon…so the compulsion to collect depends on the publisher.  They often have sales forces in states…employees who service the local bookstores.

So, I don’t like Amazon cutting off the Connecticut Associates…but I understand it, and think it may be their best option.

I believe Connecticut joined New York, North Carolina, Rhode Island, Colorado, and Illinois in having some form of “Amazon law”.

Other states are considering it, including my state of California.  Arizona, Hawaii, Massachusetts, Missouri, Minnesota, Tennessee, Texas, and Vermont are, I believe, the rest.

I think those won’t get settled until the New York case gets to the US Supreme Court.  Before that, we may see other states’ Associates dropped.

I can see the emotional push to want Amazon to collect the sales tax.  It’s owed, and many states are strapped for cash. However, it’s currently owed by the purchaser.  What would solve all this is if the consumers would pay what they owed on their annual state taxes.  I don’t see that happening, though.

What do you think? Is it unfair if online retailers don’t have to collect sales tax? Is the interstate commerce clause still applicable in an increasing geography-less world?  Was Amazon unreasonable to cut off the Associates?  Feel free to let me know.

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.


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