The Amazon Tax
At issue: Colorado HB 1193 . The sailent issue: Amazon Fires Affiliates. I received the email, like other affiliates. I didn’t particularly care, since I’ve never made any actual money off affiliate links, but there’s certainly been a big stink and this will likely be a huge issue next election. Actually, some distant derivative will be at issue, i.e. the supposed unfriendliness of Colorado to business vs. the need to do something about the state budget shortfall. There’s been other, less visible fallout: Sylvane Ceases Product Orders to Colorado In Lieu of Internet Sales Tax Law and Hammacher Schlemmer drops Colorado Affiliates, for example.
The Westword also ran a pretty good article on the subject. The main point is that while a number of states have passed laws taxing online purchases, Colorado’s reporting requirements and penalties for violating them are especially stringent and the obvious solution for an online retailer is to collect the tax. As a number of commentators have pointed out, it’s certainly a solved problem for any number of online retailers with a national presence (Wal-Mart, Sears, Target, Best Buy, Home Depot, etc. etc. etc.). Dropping affiliates is simply an effort by Amazon to avoid a “physical presence” with respect to the definition in use in North Carolina, for example. I’ve read claims that this is in fact, not true, that Amazon will still be subject to the reporting requirements, associates or no. I’d guess that Amazon believes otherwise and intends to take the issue to court if pressed.
The trouble is that this is turning into a debate over the “Amazon Tax”. In the end, the Associates program probably serves little purpose for Amazon other than good will. Years ago, it was along the lines of viral marketing; these days, Amazon could probably axe the whole program and never notice the difference – any loss in sales I would think be made up in gains from not paying commissions. The associates program is just advertising, nothing more. The interesting part of the story comes from the smaller businesses who are actually selling something: eBay sellers, 3rd party Amazon merchandisers (i.e. used book sellers, etc.), Etsy merchants; namely the small players using these new online marketplaces to create an online storefront at low cost.
Now where does this stop? Do subscription fees for online content count? The little bit I found on the relevant law would seem to indicate it does, but I’m no tax expert.
— Gordon Weakliem
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The problem isn’t how this impacts Amazon; it’s how such laws impact small vendors (the “brick and mortar” businesses that are supposedly being protected). It’s easy enough for a large vendor like Amazon to comply with the varying sales taxes (I’ve seen estimates that there are over 8200 tax jurisdictions in the US) – but the small guy who wants to try to expand his sales beyond the immediate driving area?
He’s basically screwed. This kind of law is essentially corporatist – it favors both big govt and big business, and hammers small players.
— James Robertson · 15 March 2010, 03:16 · #