CA taxes internet sales. Amazon bails.

[DarrinS]

http://www.ocregister.com/articles/amazon-306409-affiliate-california.html





Gov. Jerry Brown has signed into law California's tax on Internet sales through affiliate advertising which will immediately cut small-business website revenue 20% to 30%, experts say.

The bill, AB 28X, takes effect immediately. The state Board of Equalization says the tax will raise $200 million a year, but critics claim it will raise nothing because online retailers will end their affiliate programs rather than collect the tax.

Amazon has already emailed its termination of its affiliate advertising program with 25,000 websites. The letter says, in part:

(The bill) specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, 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. We deeply regret that we must take this action.

The new law won't affect customers, Amazon said, but added that the immediate termination of the affiliate program also applies to endless.com, myhabit.com and smallparts.com.

(Full disclosure: I have a personal website that has been an Amazon affiliate. It made $2 last quarter. That is not 30% of my income.)

Almost all the California Amazon affiliates have fewer than 75 employees and a large percentage have no employees, according to Rebecca Madigan executive director of the Performance Marketing Association, a Camarillo-based nationwide trade association.

"This law won't impact Amazon that much but it is a crisis for website owners who make revenue by placing ads on their websites for thousands of online retailers," Madigan said. "Most of them don't have a physical presence in California."

California Retailers Association stated: "We thank Governor Jerry Brown and the leaders in the California State Legislature who have demonstrated their leadership and commitment to California businesses by passing and signing e-fairness into law. Small and large businesses across the state have been held at a major disadvantage by the current law that out-of-state online companies like Amazon.com and Overstock.com have exploited for years. This has cost us jobs and revenues."

The U.S. Supreme Court in 1992 ruled that states cannot tax businesses that aren't physically within their boundaries. Such taxes would regulate interstate commerce, which is a federal government prerogative.

However, New York in 2008 passed a law to require companies with online affiliate advertising programs to collect sales tax for sales through those affiliates based in New York. Since then Rhode Island, North Carolina, Illinois, Arkansas and Connecticut passed similar laws.

Amazon is suing New York over the law, and the Performance Marketing Association is suing Illinois.

Amazon affiliate Keith Posehn, owner of zorz.com in San Diego, said he had affiliate advertising agreements with more than 70 companies and these programs were 35% of his company revenue before the California legislature passed a similar bill last year. Then-Governor Schwarzenegger vetoed that bill.

"We got 70 termination letters in one night before he vetoed it," Posehn said. After that, he started changing his business away from affiliate advertising and has started a new mobile application company.

"I have pitched investors and several question the wisdom of staying in California," Posehn said. "Some venture capitalists are very keen on placing startups outside California because start-up costs are less."

However, another Amazon affiliate, Glenn Richards, an independent recording artist in Orange County (MightyFleissRadio.com), is angry with Amazon and its head Jeff Bezos.

"I think that Amazon.com's decision to throw their affiliates, (including myself) under the bus is a national disgrace," Richards said. "Jeff Bezos should be ashamed of his conduct. His bully boy practice and tactics of extinguishing small business in California should be (condemned). Small business has no power...and no hope to confront Internet giants like Amazon.com."

Board of Equalization Member George Runner blasted Brown for signing the law. "Even as Governor Jerry Brown lifted his pen to sign this legislation, thousands of affiliates across California were losing their jobs. The so-called 'Amazon tax' is truly a lose-lose proposition for California. Not only won’t we see the promised revenues, we’ll actually lose income tax revenue as affiliates move to other states."

[ElNono]

Bezos has been trying to sidestep paying local taxes when the businesses/warehouses the goods are shipped from are in-state. Brick and mortar stores don't get that exception.

We can argue wether the sales tax is high/low, but what applies to the goose should also apply to the gander.

[boutons_deux]

Tax moves like this put the states in competition with each other.

The Internet is "established" now, online businesses don't need "tax expenditure" loopholes. Tax policy should apply to everyone, or no one.

[George Gervin's Afro]

does darrins believe anyone should pay taxes?

[DMX7]

They bailed on Texas too because we said that they had to collect internet sales tax. Many local brick and mortar retailers in Texas were upset that Amazon would get away with not collecting taxes for transactions and they obviously would have to collect normal sales tax which put them at a competitive disadvantage. Texas told Amazon to get lost and so they did.

[DMX7]

Amazon.com Inc. (AMZN) is closing a Dallas area fulfillment center and canceling a planned expansion of its operations in Texas after the online retailer failed to reach an agreement with the state over taxes.

In an email to staff, Dave Clark, who runs the company's operations in North America, said the state's "unfavorable regulatory climate" prompted the decision.

"Despite much hard work and the support of other Texas officials, we've been unable to come to a resolution with the Texas Comptroller's office," Clark wrote in the email. "Closing this fulfillment center is clearly not our preferred outcome."

Read more: http://www.foxbusiness.com/markets/2011/02/10/amazon-close-distribution-center-texas-tax-dispute/#ixzz1Qlz1RP1f

Texas has an "unfavorable regulatory climate"... :lmao

Amazon is so pathetic.

[scott]

I'd like to hear some of our Legal/Constitution guru's weigh in as there is the hint at a reverse-commerce clause claim here - a state's laws hamper in-state business to favor out-of-state (note this is the same argument we made in front of the Texas legislature in regards to it's beer laws).

I'm curious as to the validity of any such "reverse" commerce clause claim. If California wasn't taxing their local store on the sales tax but was charging out-of-state stores -then there would be an obvious 14th Ammendment violation. But it appears the opposite evades the eye of the courts.

[George Gervin's Afro]

Amazon.com Inc. (AMZN) is closing a Dallas area fulfillment center and canceling a planned expansion of its operations in Texas after the online retailer failed to reach an agreement with the state over taxes.

In an email to staff, Dave Clark, who runs the company's operations in North America, said the state's "unfavorable regulatory climate" prompted the decision.

"Despite much hard work and the support of other Texas officials, we've been unable to come to a resolution with the Texas Comptroller's office," Clark wrote in the email. "Closing this fulfillment center is clearly not our preferred outcome."

Read more: http://www.foxbusiness.com/markets/2011/02/10/amazon-close-distribution-center-texas-tax-dispute/#ixzz1Qlz1RP1f

Texas has an "unfavorable regulatory climate"... :lmao

Amazon is so pathetic.



anyone know when darrins will start the TX thread?

[ChuckD]

No state has ever benefited from this kind of "Amazon tax". Bezos simply puts the small businesses affiliated with Amazon in that state out on the street and out of business, and continues to sell there with no tax from out of state vendors. The state collects nary an additional dime, and they've cost their state the jobs of the small businesses that used to sell through Amazon.

[boutons_deux]

No state has ever benefited from this kind of "Amazon tax". Bezos simply puts the small businesses affiliated with Amazon in that state out on the street and out of business, and continues to sell there with no tax from out of state vendors. The state collects nary an additional dime, and they've cost their state the jobs of the small businesses that used to sell through Amazon.

I read 10K Amazon affiliates in CA are now out of business. Some of them are probably living off their Amazon revenue.

[DMX7]

Where will Amazon go if a federal internet sales tax is implemented?

[IronMaxipad]

Californians will have to start paying sales tax on their purchases from Amazon.com starting Friday after Gov. Jerry Brown signed legislation earlier this week requiring online retailers to collect the tax.

At least, that is what California’s tax authority says.

The law had said that an online retailer needed to collect taxes on purchases if it had a physical presence, or a nexus, in a particular state. Any retailer with an office or warehouse qualified. Amazon had no such facility in California.

So the state changed the law. California legislators passed a bill that broadened the definition of a nexus. A company’s affiliates and subsidiaries would qualify as a physical presence. Amazon quickly responded on Wednesday by cutting off thousands of affiliates, those third-party Web sites that display links to Amazon products. It is a step Amazon has taken in a number of other states.

The company said that that law did not apply to its business and that it had no plans to collect taxes starting Friday, or any other day.

“This legislation is counterproductive and will not cause our retail business to collect sales tax for the state,” Mary Osako, an Amazon spokeswoman, said in an e-mail.

The stakes are high for Amazon, which until now has avoided collecting sales tax in California since the company’s founding in 1994. By not collecting taxes, Amazon can have a price advantage over its rivals, most of whom collect sales tax from customers.

States with tight budgets are increasingly looking at Amazon and other online retailers as potential sources of tax revenue. Amazon, in fact, is engaged in battleson the issue across the country.

Until recently, Amazon avoided the issue in California, the most populous state, by building its facilities elsewhere. The responsibility for paying the tax was therefore left to its customers, who are supposed to declare on their state tax form any purchases they make.

The reality, however, is that most people never volunteer the information. California estimates that it is missing out on close to $1.2 billion from all sources, including online retailers.

The new law is supported by many big bricks-and-mortar retailers, who complain that Amazon has an unfair advantage by not collecting the tax.

California’s new law goes further by including related companies, or subsidiaries in its definition of a nexus. Several Amazon subsidiaries have offices in California like A9, which works on search technology, and Lab126, which designs Kindle digital book readers.

Amazon has argued that considering subsidiaries a physical presence for another company is unconstitutional. Amazon did not respond to an e-mail asking whether it planned to file a lawsuit.

Ms. Osako said that Amazon had no plans to close those offices.

Betty T. Yee, a member of the California Board of Equalization, the state authority for sales tax collection, said that it expected the state would collect an additional $200 million annually from the new law. However, she expects Amazon to fight the law in court.

“The state is going to be very vigilant,” Ms. Yee said.

http://bits.blogs.nytimes.com/2011/06/30/amazon-com-fights-california-tax-collectors/

[DarrinS]

anyone know when darrins will start the TX thread?

Does amazon have a "physical presence", i.e. a fulfillment center in CA?

[DMX7]

California Retailers Association stated: "We thank Governor Jerry Brown and the leaders in the California State Legislature who have demonstrated their leadership and commitment to California businesses by passing and signing e-fairness into law. Small and large businesses across the state have been held at a major disadvantage by the current law that out-of-state online companies like Amazon.com and Overstock.com have exploited for years. This has cost us jobs and revenues."

[ElNono]

Looks like they had in-state affiliates selling to in-state customers and receiving a proceed of the sale up until two days ago...

We'll see if the subsidiaries argument stick... I can see where it would, seeing they're wholly owned and controlled by Amazon. But I'm sure it's gonna get in front of a judge sooner or later.

I just think it's great to see Cali closing a tax loophole that put their local business at a competitive disadvantage.

[Wild Cobra]

Looks like they had in-state affiliates selling to in-state customers and receiving a proceed of the sale up until two days ago...

We'll see if the subsidiaries argument stick... I can see where it would, seeing they're wholly owned and controlled by Amazon. But I'm sure it's gonna get in front of a judge sooner or later.

I just think it's great to see Cali closing a tax loophole that put their local business at a competitive disadvantage.
As you know, I am a States Rights fan. However, our Founding Fathers put the interstate commerce clause in for a reason. I find it ironic that congress abuses it for things it was in my mind, never meant for. However, congress should also protect states from this unfair advantage of outsiders selling with no sales tax.

You think it's great for California to close this loophole? Wish you felt the same about the tax advantage foreign nations have because they don't pay our corporate tax rates. I could take your remarks and past comments to read that it you care about what could be California's trade imbalance with other states, but not the nation as a whole, with other nations.

[ElNono]

As you know, I am a States Rights fan. However, our Founding Fathers put the interstate commerce clause in for a reason. I find it ironic that congress abuses it for things it was in my mind, never meant for. However, congress should also protect states from this unfair advantage of outsiders selling with no sales tax.

You think it's great for California to close this loophole? Wish you felt the same about the tax advantage foreign nations have because they don't pay our corporate tax rates. I could take your remarks and past comments to read that it you care about what could be California's trade imbalance with other states, but not the nation as a whole, with other nations.

If Amazon had absolutely no presence in the state, I wouldn't have a problem with it. That's what Inter-state commerce is.

But when goods are sold and shipped from in-state to in-state customers, and other businesses that do the same have to pay taxes, then it's simply a loophole. Their affiliate stores sold and shipped form in-state and they reaped a percentage of the sale. It was a in-state sale all along.

[Wild Cobra]

If Amazon had absolutely no presence in the state, I wouldn't have a problem with it. That's what Inter-state commerce is.

But when goods are sold and shipped from in-state to in-state customers, and other businesses that do the same have to pay taxes, then it's simply a loophole. Their affiliate stores sold and shipped form in-state and they reaped a percentage of the sale. It was a in-state sale all along.

I agree with you. So why are you apparently not concerned about our tax differences affecting foreign trade?

[IronMaxipad]

If Amazon had absolutely no presence in the state, I wouldn't have a problem with it. That's what Inter-state commerce is.

But when goods are sold and shipped from in-state to in-state customers, and other businesses that do the same have to pay taxes, then it's simply a loophole. Their affiliate stores sold and shipped form in-state and they reaped a percentage of the sale. It was a in-state sale all along.

tbh i never received anything i order off of amazon from California. Everything i order is shipped from Nevada or Kansas.

And i frequently buy shit from amazon, im even a prime member.

[ElNono]

I agree with you. So why are you apparently not concerned about our tax differences affecting foreign trade?

I have exactly the same concerns about tax loopholes used to stash money overseas for sales made in the US.

Stated so many times, even posted a an article about it about a month ago.

[ElNono]

tbh i never received anything i order off of amazon from California. Everything i order is shipped from Nevada or Kansas.

And i frequently buy shit from amazon, im even a prime member.

Depends if you're buying directly from Amazon or an affiliate store. On the listing it normally says 'Sold by xxxx' where xxxx is either Amazon or an affiliate.

I've bought stuff from their affiliate stores before. I normally try not to if Amazon offers the same product competitively priced, since Amazon ships normally pretty fast, when these other stores can take a while to process stuff.

[ElNono]

Obviously, Amazon now has abandoned their affiliates in Cali, so that no longer applies. The only point of contention left is whether the subsidiaries also count or not.

[Wild Cobra]

I have exactly the same concerns about tax loopholes used to stash money overseas for sales made in the US.

Stated so many times, even posted a an article about it about a month ago.
I see you forgot the points I made in the past about the topic. Oh well, this thread isn't the place for that discussion.

[ElNono]

I see you forgot the points I made in the past about the topic. Oh well, this thread isn't the place for that discussion.

Probably not. I've always stated I want the tax rules applied the same for everybody. I don't think you'll ever find me stating otherwise.

[LnGrrrR]

I could take your remarks and past comments to read that it you care about what could be California's trade imbalance with other states, but not the nation as a whole, with other nations.

I doubt you read those with the proper context.

[TDMVPDPOY]

they thinkn of introducing that shit also down here, with local retail stores are gettin there shit pushed back in, cause online sales are dominating the market and taking up the money, well it comes to down to choice and competitive pricing....

lol fck the local retail stores who continue to offer shit range and expensive pricing....

why should you be forced to pay more tax, when there is already a sales tax on the item bought in the country, GST if you ur country has it, no taxes on overseas goods, the only way if the govt wants their share of the pie is to increase tariffs to force consumers buy local, then again you have ppl jumping to WTO...

[ducks]

California Retailers Association stated: "We thank Governor Jerry Brown and the leaders in the California State Legislature who have demonstrated their leadership and commitment to California businesses by passing and signing e-fairness into law. Small and large businesses across the state have been held at a major disadvantage by the current law that out-of-state online companies like Amazon.com and Overstock.com have exploited for years. This has cost us jobs and revenues."

what about thre jobs amazon and overstock created

[DMX7]

yay shitty warehouse jobs

lol

[ChuckD]

I read 10K Amazon affiliates in CA are now out of business. Some of them are probably living off their Amazon revenue.

California's fault. They won't collect one fucking dime more in taxes since Amazon no longer has a footprint in the state, and they just put 10,000 businesses out of business with this law. California should have known they'd do this, since they only have in EVERY state that's implemented one of these "Amazon laws".

[DMX7]

The federal government has the right to implement an internet sales tax for interstate sales transactions. They should end Amazon's unfair dirty tactics and install one, then distribute it to states accordingly. End this Amazon blackmarket.

[FuzzyLumpkins]

The federal government has the right to implement an internet sales tax for interstate sales transactions. They should end Amazon's unfair dirty tactics and install one, then distribute it to states accordingly. End this Amazon blackmarket.

Its unfair competition. Local business has taken a huge hit this last decade.

[Bender]

Local business has taken a huge hit this last decade.
local business have a crap selection. I rarely ever buy anything locally anymore. The no sales tax thing is nice, but I buy from TX companies online also, and pay s.t.
I was at a local Penneys last week looking for a Tall dress shirt, and they had a crappy selection. Salesman told me they had a better selection online.
Also Old Navy, they carry zero Tall shirts in store, only online.

screw em all.

[scott]

local business have a crap selection. I rarely ever buy anything locally anymore. The no sales tax thing is nice, but I buy from TX companies online also, and pay s.t.
I was at a local Penneys last week looking for a Tall dress shirt, and they had a crappy selection. Salesman told me they had a better selection online.
Also Old Navy, they carry zero Tall shirts in store, only online.

screw em all.

You don't seem to understand what "Local Business" means.

[Bender]

mail order & catalog companies have been around way before the internet. They did not have to collect tax on out of state sales. What's the diff between that, and what amazon is doing?

amazon collects tax in several states where they have a presence.

[Winehole23]

How many states do it?

[Winehole23]

However, New York in 2008 passed a law to require companies with online affiliate advertising programs to collect sales tax for sales through those affiliates based in New York. Since then Rhode Island, North Carolina, Illinois, Arkansas and Connecticut passed similar laws

[ManuBalboa]

<3 Amazon

AMZ is like China, they don't give a fuuuuuuuuuuuuuuk. They will pack their bags the second they don't get their way. It's wrong, but free shipping - no taxes - lowest prices....awww skeeeet skeeeet.