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Comment by gaius | Hacker News Reader

Actually, it only goes as far as if you're making money, they should get a share of it. Pork barrels aren't just Federal.

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Indeed.

I find it very difficult to underscore this point without going on a rant -- perhaps because I find it so bad.

Let's say I'm living in IL and making 10K a month with Amazon sales. This is all because of a lot of hard work putting bits on a server somewhere in Austin or something. People come from all over the world to consume content and buy things.

Aside from the legal discussion, in practical terms what part of this equation involves the state of Illinois? I don't mean to be facile, but looks to me like the only reason they're coming for the money is because they can. In any other scenario we'd call this a shakedown. But because politicians do it we call it policy. Weird.

I'm not by any means arguing for no government, just pointing out that most times when I pay a tax there's something concrete and direct in return. If I pay property taxes, it goes to the local school. If I pay a road toll, it goes for road maintenance. If I buy a fishing license, I pay for game inspectors. This payment and feedback loop allows me to be able to judge if a tax is working or not -- and form some kind of opinion about what rates might be best. Here I'm just paying the state because they have the power to hurt me if I don't pay them. Seems to me once you reach a certain point in decoupling taxes from benefits, there's no rational basis to have any kind of compromise any more. Instead you get these hugely polarized debates. This is not a good system for people to live in.

What part of it involved IL? Are you being deliberately obtuse? You living in IL. States charge taxes to provide services to the people who live and enter the state. You live in the state, therefore it is entirely appropriate for IL to charge you income tax. If you don't like it, vote in different representatives because the other thing that you get to do in IL is vote for IL state representatives.

The whole point is that rather than the state happily collecting their income tax on any income generated by state residents, which they have always been able to do, they are attempting to levy a tax against all Amazon commerce transactions based on the fact that they have affiliates operating in the state.

DanielBMarkham is not making a case that IL isn't entitled to tax his income from the Amazon affiliate program. It is taken for granted that they will tax the additional income, as they have been doing since before this new budget/law. What they are attempting to do is tax more than just income generated by affiliates living in the state, which is where the argument that they are not contributing to the flow of business which would warrant that.

Vampirical, I'm not sure I understand you. Illinois spends state funds to make Chicago, Peoria, Carbondale,... attractive to live in. People with money thus move to / stay in IL and spend some of their money online. Isn't that a contribution on Illinois' part?

If I understand his metaphor and current law correctly: this law changes nothing about income tax. Regardless of this law, Mr. Amazon-Affiliate pays income tax to the State of Illinois on his Amazon affiliate income. I believe the poignant line from the blog post is:

  ... imposes the collection of taxes from consumers on sales
  by online retailers – including but not limited to those
  referred by Connecticut-based affiliates like you – even if
  those retailers have no physical presence in the state.

I interpret this as saying "if a Connecticut resident refers customer X to company Y, and X buys a product from Y, then company Y must pay tax on that sale." The only necessary tie to Connecticut is the referrer.

Of course, they'd also tax Mr. Amazon-Affiliate's affiliate income as well. That smells like double taxation.

Also, I think your comment suggesting that "If you don't like it, vote in different representatives," is rude. Obviously, Mr. Markham is aware of his Democratic rights and duties. He very well might vote against this sort of legislation, and he doesn't deserve to hear derisive comments when voicing his disapproval.

edit: formatted the quote for easier reading

I actually don't understand that part of it. How do sales tax on CT consumers -- who may or may not be driven to Amazon by a CT affiliate -- compel Amazon to terminate the affiliate programme?

CT-based affiliates may be driving traffic from outside CT, and CT-based purchases -- the thing being taxed -- might have been driven by an affiliate in Iceland.

Terminating _sales_ to Connecticut would amount to a refusal to pay the tax. Instead Amazon has chosen to raze the profits of a minority of CT constituents. They must be hoping that the ousted affiliates will march on New Haven.

(If I were a successful affiliate, though, I'd just make an out-of-state LLC and pass income through.)

I believe the problem comes from having a physical presence in the state. Most states have sales tax rules that say if you have a physical presence, you must charge sales tax. The rules were changed such that Connecticut is treating affiliates as a physical presence. If Amazon keeps the affiliates, they have to charge sales tax on everybody who purchases in Connecticut, which they really don't want to do.

While I'm sure part of the reason they don't want to charge tax is that no tax makes Amazon cheaper, I bet a bigger portion is the headache of trying to manage every single municipalities convoluted sales tax rules. I know in my city (in Utah), there are dozens of rules for types of goods that determine different rates. Imagine doing that on a nationwide scale.

I think the problem is that they want to apply a sales tax to anyone that is referred to Amazon /worldwide/ by a Connecticut referrer. That is why Amazon argues that it is unconstitutional. If it were simply taxing Connecticut consumers it would be similarly complicated, but I think there is more constitutional grounds for this. I'd have to check.

It's not like Amazon is going to pull out of the state.

>Let's say I'm living in IL

>Aside from the legal discussion, in practical terms what part of this equation involves the state of Illinois?

In practical terms, the argument goes that you benefit from the safety and health services that are (at least in part) provided by the state during the hours you work, marketing for Amazon. By extension, Amazon is also benefiting from these services provided (at least in part) by the state, which can be proven by identifying a single payment made from Amazon to an affiliate that is a resident of IL.

Legally, this could be grounds for one to argue that, by providing marketing services for Amazon while working in IL, nexus[1] has been created.

[1] http://www.bna.com/state-tax-nexus-p9122/

Care to comment on why this was down-voted? Did I misunderstand Daniel's question or not appropriately address it?

I would assume that some have taken this as advocating on behalf of states that impose sales tax on companies due to the residency of their affiliates. I carefully worded my comment so that this was not the case. On the other hand, if you feel I'm wrong about the position that these states have taken, please correct me...

UPDATED: My position on tax policy is not germane to Daniel's question and based on the rest of this post, would just be redundant to include. When a thread strongly reflects one side of an issue, it's much less dull to try and articulate the counter-point of view... wish more people would try this.

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