California may be the next state to lose its Amazon affiliates
theunion.com
theunion.com
http://news.yahoo.com/s/ac/20110326/bs_ac/8148778_new_york_t...
Two. Amazon didn't either.
It's been the same story for ages with catalog orders, phone orders, or any other intrastate commerce. States either 1) looked the other way, because the sales weren't large enough to bother with, or 2) passed laws making the state residents responsible for tracking their sales and paying the appropriate tax, not the business.
Two things changed. The Internet became a Big Deal, and the volume of sales became large enough to get legislator's attention for how they could get their hand in to the flow of money. Then, Amazon actually started doing business inside of these states in the form of affiliate programs and warehouses. It is on these two points that the fight is being contested, which state governments claim absolves them of the long standing taxation between states issue, and makes Amazon liable for sales tax revenue.
They didn't intentionally build their model around dodging taxes. That was the law of the land. Don't like it? Change the law.
When I was involved with on-line retail, the existence of a warehouse in a state constituted having a presence in the state. We had a warehouse in NJ that we shipped from, and that was the only state we had to collect sales tax for. We delayed opening another warehouse because of the sales tax implications, but finally opened up up in NV in order to reduce shipping time and cost to the west coast. We only had to collect sales tax for those two states (I know because I wrote the code for it).
Now, from what I understand, Amazon tries to get around even that by having their warehouses owned/run by a subsidiary or other entity that is not strictly Amazon but ships Amazon's items to other states (not to the state itself, otherwise this sub-company would have to collect and pay sales tax). Strictly speaking, Amazon still doesn't have a presence in the state in terms of warehouses, so until the state laws are changed to recognize these shipping/warehousing-only companies as one and the same as Amazon, there's still no sales tax to collect on a pure existence-of-business-entity in the state in the form of a warehouse. Amazon effectively outsources their warehousing and shipping to other companies -- this is actually pretty common (along with drop-shipping) in the mailorder business because running a warehouse is an expensive, capital intensive operation.
Affiliate programs are outsourced services also, outsourced marketing (lead generation). Really, this comes down to an attempt to tax outsourced operations. Maybe a better way for the states to fight it is to change the zoning and the tax laws so that warehouses are taxed more aggressively (especially if they ship things out of state -- warehouses that ship intrastate would have to collect sales tax, warehouses that ship interstate would pay higher business or property taxes).
IANAL and IANA-Tax-Collector.
UPDATE: Much better link here
http://www.propublica.org/article/setting-the-record-straigh...
GE hasn't filed their 2010 taxes yet, but appears they will have a small tax liability. How small? We probably won't know unless they tell us, according to the article (which seems odd for a public company).
Whatever happened to saving in the good years to spend in the lean years? Wait, was it all spent on bribes and political promises?
Companies and families (including individuals) surely do, but has ANY government ever "saved for the lean years"?
> Wait, was it all spent on bribes and political promises?
I suspect an awful lot went (in)directly into corrupt government employees'/officials' pockets: remember Bell, CA? http://www.scpr.org/news/2011/03/24/former-bell-city-adminis...
Power (the largely unchecked ability to spend OPM) corrupts?
P.S. (from the above linked article) quick, name the party affiliation of those arraigned! I think they must be "Independents" all.
I believe some kings have, back in the absolute monarchy days.
No, it's a result. (And, it's 0 income taxes. There are other taxes.)
> 975 employees dedicated to tax avoidance.
No again - compliance.
Like you, GE is not obligated to pay any more taxes than the law requires. The law is complicated, GE's biz is complicated, therefore they need a lot of folks to make sure that they're complying.
Unlike you, GE gets to "help" write tax laws and regulations.
That's possible because "the people" want the tax system to encourage some behaviors and discourage others.
The only way to stop GE from gaming the system is to stop trying to use the tax system to achieve social goals.
Do you take your allowed deductions on your tax return? or use tax-deferred investment vehicles like IRAs or 401Ks? Do you report your investment losses?
If so, why is your tax avoidance acceptable and GE's not?
"The state estimates it loses about $1.1 billion a year in revenue through uncollected "use taxes" from online sales."
rather than
"It is estimated that consumers save about $1.1 billion a year form online sales"
And given the many (not the occasional bad experience, the many...) that I have in shopping at brick and mortar retail, I feel little to no sense of obligation to shop locally. Either they don't have it or the service is terrible.
It seems like some government entities argue that w/o the competition of online business these brick and mortars would be thriving. In what other realm is 'less' competition a good thing?
And I don't buy for a second that it's not a level playing field. I currently live in Oregon (came from California will be moving back there again relatively soon...) where there is no sales tax and retailers still generally don't have a clue on how to manage their inventory and deliver a good customer experience.
So sales tax will do nothing to resolve the issue as it relates to local retailers.
The bottom line is that good retailers that manage their inventory and provide a great experience will thrive regardless. The bad ones won't survive either way.
And for those that are always saying they will gladly pay more taxes, I say got for it. Send your money to the government - literally nothing is stopping you. Cut and check and send to the state - they can accept those checks.
The obvious benefit for CA is that it can collect more sales taxes from online purchases from companies like Amazon who have historically not collected the taxes. But a less obvious benefit is that it tilts the playing field so that merchants currently based in CA are better off (relative to itself without the tax) competitively. Additionally, companies that have avoided presence/nexus in California for the sole purpose of avoiding the tax will have less disincentives for avoiding California. As a result, perhaps more companies will open branches in California, either for sales, distribution, or development; and merchants already with presence in California will do relatively better than otherwise.
I can see why California would want to push for such a tax.
We've already seen this play out a few times. We know exactly what happens if the bill passes: Amazon cancels all of its affiliate contracts in California. California residents still do not pay taxes on Amazon purchases, Amazon no longer has any presence at all in the state, the state makes no extra money, and the competitive field is still left unchanged for local businesses.
It's a net loss for California.