Amazon Terminates Affiliates In Battle Over State Taxes

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News Posted: Mon, Jun 13 2011 8:05 PM
The battle between Amazon and certain individual US states continues to escalate, with a number of small business affiliates caught in between. Over the last few years, a number of cash-strapped states have attempted to hold Amazon liable for sales tax based on its business in each area. While Amazon isn't required to pay taxes in a state where it has no presence, state legislatures have argued that affiliate relationships between Amazon and state residents constitutes a 'presence', which can then be taxed.

Amazon's respose to such attempts has been to terminate its relationships with the affiliates in question until the tax issues are resolved. The company has yet to blink in what amounts to a high-speed game of chicken--Amazon has terminated agreements in Illinois, Colorado, North Carolina, and Rhode Island. The most recent termination affects Conneticut and Arkansas; Amazon is also threatening to terminate affiliate relationships in California.  

The letter sent from the company to its affiliates reads, in part:  "We opposed this new tax law because it is unconstitutional and counterproductive," Amazon said in the letter to Connecticut affiliates. "It was supported by big-box retailers, most of which are based outside Connecticut, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue."

One potential solution is known as the Streamlined Sales Tax Initiative. The SSTI "minimizes costs and administrative burdens on retailers that collect sales tax, particularly retailers operating in multiple states.  It encourages "remote sellers" selling over the Internet and by mail order to collect tax on sales to customers living in the Streamlined states.  It levels the playing field so that local "brick-and-mortar" stores and remote sellers operate under the same rules. This Agreement ensures that all retailers can conduct their business in a fair, competitive environment."

At present, 24 of the 44 states covered by the agreement have become members with some degree of participation.



Company CEO Jeff Bezos has weighed in on the issue himself, arguing that previous judicial decisions that determined mail order companies aren't required to collect sales tax in most situations apply equally to the Internet. He calls for the issue to be settled by appropriate federal legislation and vows to continue shutting down affiliate programs in any state that attempts to collect taxes through them.

Assuming the company is willing to make good on its threat, the states have precious little to gain. Terminating affiliate relationships can greatly damage a relatively small number of individuals who are citizens of the states in question. State governments that pursue Amazon run the risk of upsetting individual citizens who have already borne some of the brunt of the recession these past several years. It's virtually certain that a number of websites need Amazon more than Amazon needs them and will therefore look unkindly on the state's legislation.
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"It's virtually certain that a number of websites need Amazon more than Amazon needs them and will therefore look unkindly on the state's legislation." Well said. If these state governments do find a way to get Amazon to pay state taxes, how much will that tax money really help balance these state's budgets? Not much, in my opinion. Cut spending, tax large businesses and wealthy individuals.

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AKwyn replied on Tue, Jun 14 2011 3:14 AM

I have to say that the sales tax works effectively well or consumers if it's a low priced item; I hate the california sales tax for anything above $250; mainly the reason why I don't shop at newegg.

omegadoom13:
Cut spending, tax large businesses and wealthy individuals.

The government is thinking of doing that already.

 

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To be honest with you I am surprised we don't have a flat federal government sales tax that then would get distributed to the states how they see fit. Anything is better than the VAT tax in Europe though.

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jonation replied on Tue, Jun 14 2011 12:46 PM

nothing surprises me anymore

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rapid1 replied on Tue, Jun 14 2011 6:30 PM

This has been going on for years (IE: states trying to get or figure out how to get taxes from web sales), Amazon is the biggest so there bear the brunt of it. One of the reasons the US as well as the world economy is like it is is due to this. I do not know the amounts versus other sales in a state or country. I would imagine just like everything web based it has been creeping up for a decade.

The big part is world wide computing is going mobile as is commerce. I hate to say it but if you cut 5% of a municipalities tax ratio out of the picture, that will hurt there budget considerably, being as a areas positive tax ratio Vs. the services they provide (which are very many generally), then it will hurt that state.

The government has not dealt with this issue in the US in any real way therefore the national budget, debt, and everything else financially is partially in the current status because of it at least to a percentage. Think about our national debt and say 1/2 a percent of our GDP is not there because of these things. The number you come up with would be very large especially extended over multiple years.

Don't get me wrong I am not saying the internet is to blame for the worlds budget woe's. I am saying unless they adapt the tax practices in this country, and this being some part of that it will continue to grow. The IRS should have been dead 20 years ago. The taxes period should be one of the retail based models, and if it was we would not see what we see today in the US I can almost promise you. On top of that everyone here legally or illegally would be paying there taxes which would be another very large amount of money.

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nhwynter replied on Tue, Jun 14 2011 6:46 PM

People really don't understand how "big businesses" pay their taxes, do they. Businesses DON'T pay taxes. They past the cost onto the consumer. Period. And it doesn't matter if it's a property tax or a sales tax. The consumer is the one who ends up paying. So raising taxes on "big businesses" does nothing but hurt the consumer.

What needs to be done, is that the current tax structure in the US needs to be tossed. That means eliminate the business tax. Eliminate the death/inheritance tax. That means eliminate the IRS and the wasteful spending they do and move to a Federal sales tax on sales of NEW items only.

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nhwynter replied on Tue, Jun 14 2011 6:54 PM

One thing not mentioned in this article is that Amazon has cancelled the planned expansion of their facility in Irving, TX because of this issue. Not only that, they are now planning on shutting the facility down entirely. About 800 people are going to lose their jobs. It's sad because the expansion would have added like 800 jobs..

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omegadoom13:

"Cut spending, tax large businesses and wealthy individuals."

I don't agree, just because you have money, doesn't mean you should be shelling it out. The only time I feel like the wealthy should be taxed more than others is when they are purposely keeping others poor.

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nhwynter:
Eliminate the death/inheritance tax. That means eliminate the IRS and the wasteful spending they do and move to a Federal sales tax on sales of NEW items only.

While I have to somewhat agree with you... The IRS does waste tons of money and the people in this country illegally don't pay taxes as Rapid1 pointed out. A model solely built on sales tax might not work. Take into consideration the current world recession we are going through people are spending a lot less money. Granted without income taxes and everything else taxes people would have quite a bit more money.

The other consideration is that more than 1/2 of the "taxes" that come out of my check each week go to Social Security and Medicare so I am not quite sure how they would work that.

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realneil replied on Tue, Jun 14 2011 10:38 PM

I think that a 10% tax on all income. No matter the amount, no matter who you are, how rich or poor, a citizen or a corporation, is the way to go. No loopholes, no way to avoid the tax. (everything is reported) If you're a corporation and try to go offshore to avoid taxes, then a 50% tax on any goods shipped into the US please,.........Any US corporation making money in another country, pay the tax.

After this is in place, a standard 2% or 3% State tax on all retail sales, anywhere in the US, would be more than fair. No exemptions, for anyone should be tolerated.

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JShokunbi replied on Sun, Jun 19 2011 9:04 PM

Def going to start writing letters to Governor Quinn. Big business will not be pushed around by the states. They can and will say "screw you" in a second. And the only ones that get hurt are the little guy.

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