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Thu Mar 11 2010 00:04:34

Amazon Pushes Back as States Attempt to Tax Online Shopping

By: Ina Steiner

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Hungry for revenue, states around the country would like to collect sales tax from residents who shop online, including from sites such as Amazon.com and Overstock.com, and they are introducing - and, in some cases, passing - laws that affect online shopping and content websites.

This week Amazon.com shut off affiliates in Colorado due to legislation enacted in that state. Amazon changed its User Agreement for its Associates (affiliates) effective March 10, 2010: residents of Colorado join those in North Carolina or Rhode Island who are ineligible to participate in Amazon's affiliate program.

The Performance Marketing Association (PMA) has been tracking the issue and posted a notice on its website. Meanwhile, Amazon merchants discussed the issue in a post that includes a copy of the letter Amazon.com sent to its Colorado Associates.

It's a hot-button issue that has small content publishers worry over their affiliate revenue. But state laws around sales tax are likely to impact online sellers as well, as anything that increases costs to consumers can hamper sales.

In many states, taxpayers are supposed to pay sales tax even when online businesses don't collect it - here's an interesting blog post from 3 years ago discussing the issue - what's interesting is that the author put a chart together showing which states have a "use tax." This Wikipedia entry on states' Use Tax is also enlightening, see the section on enforcement.

The Colorado legislation is different from other legislation that has passed or been considered - see this article in the Durango Herald for the details. "The bill gives Amazon and other big Web sites a choice: Either they can collect sales taxes, or they can send their customers a yearly invoice that details how much the customers owe in use taxes."

All eyes will be watching Colorado, and expect other states to follow if it appears to be working.




Comments (16) | Permalink

Readers Comments

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Fruity This user has validated their user name.

Thu Mar 11 05:41:18 2010

amazon will just use out of country affiliates so I dont think they really care so much about the affiliates, vs wanting to use it as leverage.

I really dont like the spammy affiliates so I hope they go away. THe developer affiliates, they can compete and make competitive products for ecommerce businesses instead of letting amazon & ebay be their sugar daddy

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: DD

Thu Mar 11 07:02:10 2010

I don't blame Amazon for pulling the affiliate program in Colorado. If the state can establish nexus for Amazon (that they have a presence in the state) then the next move would be to start charging them sales tax, which of course would be passed along to the consumer.

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Ron

Thu Mar 11 09:50:31 2010

I don't really see a problem with online sellers having to pay or collect tax.

Up here in Canada, we are obliged to collect Federal Sales Tax for items sold within Canada.  In return, we receive credits for taxes that we pay for supplies and overhead.

Online sellers have an unfair advantage over B&M retailers in this regard.  True, in some cases, they have to subsidize shipping costs, but overhead costs are probably substantially less than for a B&M business.

Taxes have an unfair reputation.  They are needed to pay for all sorts of public programs and infrastructure that only government can provide.  The problem is not the taxes, it's the wasteful spending that government is guilty of.  The public should focus on waste not on equitable and reasonable taxation.

I don't blame Amazon for trying to fight this, but they should be a good corporate citizen.  It's been too easy for multinational companies to ship jobs overseas and avoid paying taxes through offshore tax havens while the middle class has had to bear an unfair share of the tax burden.  

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: zztopshlf

Thu Mar 11 11:19:33 2010

"Taxes have an unfair reputation.  They are needed to pay for all sorts of public programs and infrastructure that only government can provide."


Spoken like a true socialist. Glad that you are in Canada. Stay there.

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: pete
Web Site

Thu Mar 11 12:30:24 2010

@Ron  You in Canada may not see a problem, but in the US, collecting Sales Tax for over 8000 tax districts which are not defined by zip code would be a paperwork nightmare. Transactions may/may not have shipping taxed, clothing, food, or other goods have different tax rates, and then districts may want extra tax for goods going in, goods going out, or both.  How would you as a seller like to keep up with 8000 tax 'rules'?
And this 'level the playing field' argument is an absolute MYTH.  What law prevents a B&M from selling online?  A B&M has a bigger tax load on a community (fire police, sanitation) than online retail. Why should online retail subsidize that? States have laws on the books now to get that tax, it's called USE TAX.  Have the Merchant account (Visa, MC, PayPal) collect the Use Tax and remit directly to the States [States pay related fees] That would be a win-win for everybody involved.
http://www.thedumbdog.com/blog/?p=82

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Diana Hsieh
Web Site

Thu Mar 11 14:05:42 2010

I'm a Colorado Amazon Associate sickened by this whole fiasco with the cancellation of the accounts of Colorado Associates.  But contrary to the claims of many on the left, Amazon is NOT to blame.  

The Colorado government -- our legislators and governor -- created this mess by its imposition of an "Amazon Tax" with HB 1193.  Given its Colorado-based affiliates, that law would have crippled Amazon with an onerous and expensive confusion of red tape, plus a crazy patchwork of local taxes.  The only way for Amazon to extricate itself from that nightmare was to terminate the Affiliate Program.

I've posted about it to my blog:

http://www.dianahsieh.com/blog/2010/03/colorado-screws-am
azon-and-its.shtml

And
Ari Armstrong has a long post here, with some excellent analysis of the law:

http://blog.ariarmstrong.com/2010/03/stop-amazon-tax.html<
BR>
I've
also created a super-quick web site.  The "Amazon Tax" must be repealed!

http://www.RepealTheAmazonTax.com/

If you want to help pressure the Colorado legislature to repeal this awful law, please join the low-volume e-mail list, NoAmazonTax:

http://groups.google.com/group/noamazontax


Please
spread the word!

-- DMH

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: EventHorizon1984 This user has validated their user name.
Web Site

Thu Mar 11 15:34:13 2010

Amazon is based in Washington State.  With Washington State collecting taxes from Amazon, eventually that State may take matters into their own hands to stop Their revenue from going elsewhere.

As long as the U.S. Supreme Court decision 'Quill Corp. v. North Dakota (91-0194), 504 U.S. 298 (1992)' (http://www.law.cornell.edu/supct/html/91-0194.ZO.html) stands, expect rigorous opposition to illegal State imposed taxes.

> zztopshlf anonymously spoofed ZZTopshlf

Appears to be the Yahoo! person who has been using lower case versions of other Auctionbytes posters, i.e. ZZTopshlf (http://www.google.com/search?q=zztopshlf&hl=en&filter=0), etc.

Apparently this person conveniently forgets that parts of taxes collected do pay for services and things used IN COMMON that local municipalities are unable to provide.  Like the Interstate Highway (President Eisenhower).  Or should Never provide, like ICBMs, the FBI, communications bandwidth allocation, etc.

Then again this might the same individual who makes political posts from one perspective with anonymous IDs, and then posts with an opposite perspective with different IDs.  Purely for attention.

//

''We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.''
Preamble, United States Constitution (1787)

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

This user has validated their user name. by: Tula

Thu Mar 11 16:26:50 2010

The states are trying to put the onus on online businesses to collect taxes that the citizens are supposed to pay. This isn't fair to businesses who have no physical presence -- and thus don't benefit from government spending -- in the state. It's the responsibility of the citizens to pay sales tax on their purchases. It's not the fault of online retailers that they aren't doing that.  

How is a business supposed to know what state a person is a citizen of, anyway? Nothing says that your billing or shipping addresses have to be in the state where you claim residence. It's very easy to get a PO Box or a private mailbox in another state. I live in one state but am a mere 15 minutes from the border of another. I could easily set up all my addresses in that neighboring state and the company would never know.  What's next, requiring every online retailer to gather SS# from everyone in order to validate their place of residence?

I don't think any state has the right to tell a business with no physical presence within its borders what to do. Many states are having budgetary problems right now so they're sticking their toes into these waters in the hopes of finding a new source of revenue. They don't seem to realize how much negative impact this will have upon small businesses. Sure, there are services to which you can subscribe to get tax rates and such, but they aren't cheap.  Then there's also the overhead of tracking and reporting on all of these numerous tax jurisdictions, making sure your items are categorized correctly (since different types of items can have different tax rates), and simply keeping track of all of that. It's the kind of expense a lot of smaller retailers can't afford and it's a heavy burden on large businesses, as well. It takes hardware, software, and time to do all that.  Are the states planning to compensate retailers for that? Not likely, especially if the retailer doesn't reside within their borders.

If everyone paid their state taxes the way they're supposed to, it wouldn't be a problem. But that can be difficult, too, since people probably don't keep track of everything they spend -- think of all the spending people did before the economy tanked.

There's no easy solution to this. I just know that as a business person and online retailer, I certainly don't want to be on the hook for collecting taxes for states where I have no presence and get no benefits or services.

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: nora

Fri Mar 12 16:31:37 2010

This is off topic, but about taxes. When I was reading about Sellers having to pay taxes next year a thought crossed my mind that one of the exceptions to reporting was having 200 or fewer transactions. If eBay continues with the 100, 99cent auctions per month, transactions could run up fast, even if they’re not worth much and then you’d have to report the income to the IRS.

Paying taxes on top of already dwindling profit margins, higher eBay fees, plus time to gather sales information and fill out another tax form, would keep me from selling more than 200 items.

From “IRS to Track Online Sellers' Payment Transactions Beginning Next Year”

''Exception: Very small merchants won't be issued information returns. ''Small'' for this purpose means annual gross sales on merchant cards of no more than $20,000 or 200 or fewer transactions. In other words, reporting is required only if gross amounts for the year exceed $20,000 and there are more than 200 transactions.''

http://www.auctionbytes.com/cab/abu/y210/m03/ab
u0258/s03

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: o.c.d.collectibles
Web Site

Sat Mar 13 09:23:47 2010

it's going to be a tough proposition going  after the smaller sellers on the smaller sites,even if they DO make sales higher than the 20K a year, the targets will always remain the larger online sites. there are SO many online venues now, it would be impossible for the IRS to chase down all of them, and all of the sellers ON them, as they come and go each year, in each state.

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Patricia This user has validated their user name.

Sat Mar 13 11:11:29 2010

Amazon needs to fight this with all they've got.   More and more states are looking to the internet for more tax money.  I collect and pay California State Sales Tax and its a b*tch to fill out their forms because many counties within the state have added sales tax or entirely different sales tax....just imagine if we had to do it for several or ALL other states!  I can understand collecting sales tax within one's own state but this greed-grab needs to be fought down by everyone!

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Joyful

Sat Mar 13 16:31:08 2010

Pete made some wise comments, and with unemployment so high, states can't collect as much income tax, real estate taxes drop along with real estate prices, etc., and I do believe government needs more money to cope with more jobless people and Great Recession problems.

I pulled all my in-state sales this year and will be paying sales tax on them, although I didn't collect it. I figure I can do that until Pete's sensible scheme is implemented.

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Lisa

Tue Mar 16 02:51:31 2010

Ahh, Joyful.  You made me happy with your sarcastic response to Pete!

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Chery
Web Site

Fri Apr 16 08:20:29 2010

What are your favorite online shopping sites?
I would like to do some online clothing shopping. Any site ideas?

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: Adam Cooper
Web Site

Sat Jun 5 03:01:02 2010

Analitics keeps getting more and more complex.

Amazon Pushes Back as States Attempt to Tax Online Shopping   Amazon Pushes Back as States Attempt to Tax Online Shopping

by: solid wood furniture
Web Site

Mon Oct 4 01:44:52 2010

good article and like to read again,"This is off topic, but about taxes. When I was reading about Sellers having to pay taxes next year a thought crossed my mind that one of the exceptions to reporting was having 200 or fewer transactions. If eBay continues with the 100, 99cent auctions per month, transactions could run up fast, even if they’re not worth much and then you’d have to report the income to the IRS.
" say my mind



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