Amazon Associates to Terminate North Carolina Members

http://insight.makovision.com/amazon-com-north-carolina-tax/

by smakz • 17 years ago

73 37 17 years ago

insight.makovision.com

iends2• 17 years ago

Misleading headline because the email says "Please note that this is not an immediate termination notice and you are still a valued participant in the Associates Program". They are only going to terminate things if the legislation is passed, which it has not yet.

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.

jerf• 17 years ago

Here's a bit more: http://www.news-record.com/content/2009/06/17/article/amazon...

Maybe somebody else can find the law itself based on that.

iends2• 17 years ago

S202:

"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...

sili• 17 years ago

I guess its an attempt by Amazon to make sure NC residents know about this legislature and an attempt to galvanize them to act against it.

asolove• 17 years ago

I understand that this has an "adverse" affect on those who use these programs, but any taxes have an adverse affect on any commerce. Is there a reason why other transactions should be taxed and these shouldn't?

ghshephard3• 17 years ago

Traditionally, transactions that do not take place _within_ a particular state are not taxed by that state's sales taxes. (Edit: That does not mean the recipient shouldn't pay Use Taxes - In California, our (Edit: Out of state) Online Vendors don't charge us sales tax, but we still owe Tax to the State of California as a business - see http://www.ftb.ca.gov/current/usetax.shtml)

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.

amalcon2• 17 years ago

Well, there's actually a legitimate dormant commerce clause argument to be made here. The commerce clause is the most abused part of the U.S. Constitution, but this is precisely the sort of thing it is supposed to apply to.

ryanwaggoner3• 17 years ago

I'd really love to hear that argument.

ryanwaggoner3• 17 years ago

It sounds like North Carolina is trying to claim that they are owed sales tax on any transactions that occur between Amazon and a customer if the referral came from an Amazon Associate in NC, even if neither Amazon or the customer is in NC. Why stop there? Why not tax all transactions where the person originally heard about the product from someone in NC, or where the computer they use to purchase was bought in NC. Give me a break.

This is bullshit and unconstitutional and will hopefully be struck down if it's passed at all.

viggity• 17 years ago

For those of you wondering why this is probably unconstitutional:

http://en.wikipedia.org/wiki/Commerce_Clause

vaksel• 17 years ago

What I don't understand is why Amazon doesn't get it's shit together, and sue North Carolina over this. They have plenty of cash to make it happen, and the positive outcome will stop other states from pulling this crap in the future.

jhancock2• 17 years ago

I can see why some would argue it violates the Commerce Clause. But interstate commerce has been well contorted for a long time to the desires of the feds (e.g. marijuana) and states (e.g. alcohol). The North Carolina position is most likely a sign of things to come as state revenues continue to decline.

The choice is simple from a state perspective: follow a strict interpretation of the constitution or have funds to open public schools this fall.

gojomo4• 17 years ago

"[O]riginally heard about" is a weak analogy. The issue with Associates is that actual money is changing hands. It's almost like having a storefront physically in NC, which would traditionally require a multi-state retailer to collect sales tax in that state.

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.

ghshephard3• 17 years ago

California residents who purchase from Amazon owe a use tax. Nevada Residents don't. The rationale is that if you are charging out of state residents sales tax when they don't pay it in their state, then they won't do business with you - unfairly creating an advantage for merchants in other states.

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.

ryanwaggoner3• 17 years ago

It's almost like having a storefront physically in NC, which would traditionally require a multi-state retailer to collect sales tax in that state.

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.

rsheridan62• 17 years ago

>Why should a distant seller have an 8+% cost advantage over local sellers?

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.

anamax2• 17 years ago

> 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?

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.

kqr2• 17 years ago

California has something called a use tax. Turbo Tax will prompt you about this.

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.

sachinag• 17 years ago

I remember filing in New York State in 2000 or 2001 or thereabouts where the state actually went after use tax. The form actually had a line - you could calculate your use tax or just give up and give them 38 bucks, which was their average estimated amount. I think everyone just gave up.

stress• 17 years ago

North Carolina has a Use Tax, too.

zaidf• 17 years ago

Not a proud moment for my state.

ghshephard3• 17 years ago

California had a similar "Amazon Tax": AB 178. It was killed:

"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...

sutro• 17 years ago

Time for TechCrunch to do another poll. What's more important: Amazon or North Carolina?

jhancock2• 17 years ago

"We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of North Carolina."

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.

Amazon Associates to Terminate North Carolina Members

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