Amazon Associates to Terminate North Carolina Members
insight.makovision.com
insight.makovision.com
This is bullshit and unconstitutional and will hopefully be struck down if it's passed at all.
After that, it's probably cheaper to get someone else to do it for them.
Only if the losses were substantial, or too many other states started following the lead (which could then make the losses substantial) would Amazon bother.
Odds are it's not cost effective for them.
The choice is simple from a state perspective: follow a strict interpretation of the constitution or have funds to open public schools this fall.
I am a very anti-tax individual overall but the cross-state-delivery sales-tax loophole, which advantages distant sellers, has grown with the rise of e-commerce and efficient long-distance shipping to now seriously distort economic activity.
Why should a distant seller have an 8+% cost advantage over local sellers? Why should extra fuel/pollution/time be expended because of that jurisdictional anomaly?
Consider the similar case of NewEgg vs. Amazon for purchases by California residents. Amazon has subsidiaries in California. Amazon employs people in California. Amazon advertises in California. Amazon enters into long-term business agreements with California residents and businesses, including through the Associates program.
But because of some legal maneuvering, and keeping a few offices and warehouses outside California, Amazon can avoid collecting sales tax, while NewEgg must. Simply because NewEgg has more operations in California -- operations that are already subject to payroll, property, and income taxes -- it also faces an extra tax on each customer transaction.
(And as much as I would like to eliminate sales tax for all merchants, the state's legitimate activities have to be financed somehow, and often the alternatives to a broad consumption tax like a sales tax are even worse: higher income or property taxes.)
The best constitutional solution would be for the federal Congress to equalize the playing field somehow. (Note also that if the sales tax base is broadened, the rate can go down.) But until that day, I don't blame states that see large-scale retail, contractual, commission-paying, operational activity happening inside their own borders and say: this counts as in-state commerce, and should be treated the same as other retail activity.
http://www.ftb.ca.gov/current/usetax.shtml
My company is pretty good about paying the Use Tax, and, in general, encourages our vendors to charge us California Sales tax where possible.
It's nothing like this. This isn't about NC wanting to collect sales taxes on purchases made by buyers in NC. And while Associates are involved, they're not involved in the purchase at all. They simply forward traffic to Amazon and if the customer buys, they get a commission. This is completely different from a retail store that's holding inventory from vendors and handling the actual transactions with customers. This is quite literally just like hearing about something from someone. If I live in NC and I send an affiliate link to a friend who lives in NY for a book on Amazon and that friend purchases it, NC is claiming they're owed sales tax on that sale. That makes zero sense. They're taxing my income on the commission, which is enough.
Better, in that your hypothesized shipment to NY won't be subject to NC sales tax -- only the payment of the commission occurred in NC, not the sale.
Worse, in that all shipments to NC residents will be subject to sales tax -- even if those sales did not start with an in-state Associate referral.
In the view of the law, the presence of the in-state Associates means that Amazon has a paid sales force operating inside the state borders. That, just like having offices or warehouses or storefronts, makes Amazon liable to collect sales tax on all sales into NC.
They are paying people and facilities inside NC to help them sell. In some cases -- and I imagine those cases that generate the most commissions -- the in-state facilities display product names, pictures, descriptions, and prices. Sounds enough like a 'storefront' to me that Amazon should pay the same taxes as their in-state competitors.
States don't have to have an 8+% sales tax. Some states (at least Oregon last time I checked) don't have any sales tax. There are other ways to collect taxes, which, in addition to not punishing local retailers, are less regressive.
But if a non-regressive tax system is your goal, let's analyze Amazon's loophole for its progressivity:
Who benefits most from tax-free online shipping? It's definitely not the poor, who don't spend a lot on high-dollar, easy-to-ship-across-state-lines products bought with credit cards.
When rich people use this loophole to save money on their books/ipods/electronics/housewares, in-state retail businesses that employ less-skilled people and pay other taxes shrink. Because the transaction base is smaller, if there is a sales tax, the rate has to be higher -- and that covers things poor people buy with cash.
There might be a federalist argument for preventing individual states from compelling sales tax collection, even if states are allowed to charge a use tax or delivery fee. But there's no progressivity argument for using the tax code to favor distant online retailers over local businesses.
Of course you have to raise other taxes or cut spending if you do away with sales tax. TAANSTAFL.
>But if a non-regressive tax system is your goal, let's analyze Amazon's loophole for its progressivity <snip>
Only in the presence of state sales tax. No sales tax = no advantage for Amazon.
Part of the argument for sales tax is that it's recovering costs that the state pays to support the biz. You know, things like police and fire.
Amazon doesn't use any NC services.
And if NC is like other states with which I'm familiar -- CA and TX -- the resident already owes a 'Use Tax' on the items bought from Amazon. That tax is hard to enforce, and most people think nothing of ignoring it -- so in a sense Amazon is just assisting tax evasion by the residents who do use NC services.
In theory, you need to pay a use tax for things purchased outside of the state from a vendor who did not collect sales tax (e.g. Amazon or other internet retailer outside of California)
So, while it is true that California cannot levy taxes on out of state vendors, they can levy a use tax on its residents.
http://www.boe.ca.gov/sutax/usetaxreturn.htm
http://www.boe.ca.gov/sutax/faqusetax.htm
Do I owe use tax?
You generally owe California use tax when you use, consume, give away or store tangible personal property (i.e., products you can see, weigh, feel or touch, such as clothing, books, computers, DVDs or CDs) in California that you purchased from an out-of-state vendor. If the out-of-state vendor does not collect the California tax on your purchase, you must pay the tax.
This morning when I got the email I could not find out the specifics of the bill. If anybody has more information, please post it.
Maybe somebody else can find the law itself based on that.
"TO PERMANENTLY IMPOSE THE STATE AND LOCAL SALES AND USE TAX ON SALES OF DIGITAL PRODUCTS EFFECTIVE OCTOBER 1, 2009; TO PERMANENTLY REQUIRE A REMOTE SELLER TO COLLECT SALES TAX WHEN THE SELLER ENTERS INTO AN AGREEMENT WITH ONE OR MORE STATE RESIDENTS PROVIDING FOR A COMMISSION WHEN THE RESIDENT REFERS CUSTOMERS TO THE SELLER AND THE SELLER HAS GROSS RECEIPTS OF AT LEAST TEN THOUSAND DOLLARS ANNUALLY FROM SALES TO ALL CUSTOMERS REFERRED TO THE SELLER BY ALL SUCH RESIDENTS, EFFECTIVE WHEN IT BECOMES LAW;"
Bill: http://www.ncleg.net/Sessions/2009/Bills/Senate/PDF/S202v6.p...
"Current law, under Quill v. North Dakota, requires a business have a physical presence or “nexus” in a state in order for the state to compel that business to collect and remit sales taxes. AB 178 represented an attempt to circumvent the federal interstate commerce law by presuming that a company has a physical nexus if business is solicited through a third-party advertiser that is based in California."
April 28th: "However, a bit of rare good news for California taxpayers came out of Sacramento yesterday. Just as the bill was scheduled for consideration, the Assembly Committee on Revenue & Taxation voted to remove AB 178 from the docket, effectively taking this odious piece of legislation off the table, at least for this year."
http://www.atr.org/california-amazon-tax-bill-dies-quick-a31...
North Carolina is trying to tax a transaction taking place on the "internet." Amazon's response is not unexpected.
The Net-effect of the North Carolina tax legislation may be to drive a lot of economic activity out of their state, including the referral income which was previously subject to North Carolina state income taxes.
And if a case related to this goes all the way up the federal court system, it could get really interesting; Scalia and Thomas don't buy the idea of the dormant commerce clause.
-The Constitution divides up powers, granting some to the federal
government, and reserving others for the states or citizens.
-The ability to regulate (that is, tax) interstate commerce is one
granted to the federal government.
-Therefore, the power to regulate interstate commerce is not the
domain of the states.
This same reasoning has applied to mail-order catalogs (not to mention driving to other states for purchases) for years. States generally try to get around this by instituting a "use tax", but these are pretty well unenforceable in the general case.
In any case, I think we can agree that this is an entirely different matter than the typical uses of the commerce clause, to basically do whatever crazy thing Congress wants to do.
The dormant commerce clause power doesn't prevent states from having incompatible vehicle compliance measures...the commerce clause does b/c Congress has passed legislation on point. States are allowed to have incompatible vehicle standards (Cali and NY/NJ can set their own emissions and fuel efficiency standards) b/c the legislation allows them to seek waiver. If the dormant commerce clause applied, they wouldn't be able to do this b/c there wouldn't be any waivers available b/c Congress was silent on the issue.
IAALBYANPM.
There are two factually false parts to this quote.
"enact an unconstitutional tax collection scheme"
Its fine to say it should be challenged in court, but its not at all clear its patently unconstitutional.
"would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates"
I'm willing to bet if other states followed suit, Amazon would find the "choice".
State taxes on internet sales are going to be sought after as states look for ways to solve their revenue problems. I'm not arguing in favor of such taxes but do see this as a sign of the times.