Amazon affiliates nixed in two more states Amazon.com is tearing out two more stars on the American flag to avoid collecting taxes. The online retailer has dumped marketing affiliates in Hawaii and Rhode Island in protest of the states passing laws that would force Amazon to collect sales taxes from locals. Amazon's affiliate program pays commissions to website owners …
Isn't Amazon's headquarters in California? I'm sure they also have warehouses in CA. I'm not sure how they get away with not paying sales tax here... do warehouses and office buildings somehow not count as "physical presence"?
Regardless of how you feel about taxation in general, I think it's fair to say that tax evasion is morally unjustifiable, and Amazon is definitely aiding and abetting.
That said, asking online resellers to enforce these rules is difficult, as even within the state of California there's a ridiculous patchwork of sales tax rules on the local level. Maybe states should be forced to develop a common API for a "what's my sales tax?" web service to mitigate the administrative costs. Just throwing the idea out there.
No amazon's HQ is in Washington state. It's nearest warehouses to California are in Nevada. You are right, however, that, if it did have either of those in California, then it definitely would have a "physical presence" there, and thus would be subject to sales tax there.
As for tax evasion.. they are not really aiding and abetting tax evasion. Mail order places are not subject to taxation if they don't have a physical presence. Amazon is/was still charging sales tax on affiliate purchases where appropriate. They just weren't demanding sales tax on any purchased from a company (themselves) that has no physical presence in the given state.
Taken to the logical conclusion, these types of laws mean that every auction on ebay should be subject to whatever the local sales tax for the buyer might be (no matter where they are... what is the sales tax in Mumbai these days, anyhow?), since ebay has "affiliates" everywhere it has sellers... which is pretty much everywhere it has buyers. Imagine the nightmare of this. Your proposed API would certainly have to have some impressive code behind it... Even calculating sales tax in some provinces in Canada is a nightmare, much less the even more esoteric options that are out there.
Amazon is not aiding and abetting, the affiliates are not the ones actually selling the merchandise.
If you live in a state where Amazon has a physical presence, you will be charged sales tax if you purchase something from Amazon, period.
The only wrinkle is if an affiliate is in a state Amazon does not have a physical presence in, by normal state laws Amazon was not required to collect taxes but now some of the states are getting greedy so consumers in these states simply bear in mind that tax and buy elsewhere to avoid it when it results in a lower total price.
While I personally agree that Internet retailers should have to collect and remit sales taxes (why should local retailers have to if non-local retailers don't have to?), it does become a logistical nightmare. Not only are there state, county, and (in some cases) city tax rates to deal with, there is also the problem of classifying what is and is not taxable. For example, Massachusetts does not tax clothing, but Connecticut does. Massachusetts does not tax non-prepared food (such as most food purchased in a supermarket), but does tax "prepared" food (such as that served at a restaurant).
I agree with Adam's comment regarding a common API to determine sales tax. It's unreasonable for states (and counties and cities) to simply maintain a list of their tax rate and taxable status entries, especially since these lists aren't always (if ever) clear about when the rates take effect. It would make much more sense for for each state to build a database of its state, county, and city tax rates and the taxable status for each product type. That way, a retailer could simply upload a list of items (description and product type/category), and the response would include the taxable status and tax rate for each item. Not only would this help out-of-state retailers who are unaware of a customer's local taxes, but it would also eliminate a lot of paperwork and administrative overhead when tax rates change (such as Massachusetts increasing its state sales tax from 5.00% to 6.25%).
Retailers are paid a handsome percentage to collect taxes. Whether it's profitable or not depends on their size, efficiency and ability to invest tax receipts short-term. For many states, byzantine rules of residence (county, parish, school, side of tracks, etc) and suffocating reporting requirements guarantee that smaller mail/internet sellers lose money on every in-state sale - which is why many refuse. Amazon is big enough to profit from collecting taxes, and is only worried that they will lose business to other out-of-state retailers crouched below the parapet.
The states enacting these laws hope that in-state buyers won't care that they are now charged sales tax, will consider it too much of a hassle to shop around, or, best case, will buy from the brick-and-mortar store owned by the Governor's son-in-law.
Some affiliates suck, and I'd be glad to see them go. However, in many cases, buying from Amazon affiliates is a free, painless way to donate to a site. In any case, the state legislatures are padding their purses at the expense of their own citizens.
The other "solution" - often presented, but never passed by the reliably selfish members of the federal senate and congress - is a federal sales tax.
There is a big difference between "Tax Avoidance" and "Tax Evasion", one ends up in the jail, the other doesn’t. Most companies be they "Bega Buck Corp" or "Corner Shop Limited"
Tax avoidance is the legal utilization of the tax regime to one's own advantage, to reduce the amount of tax that is payable by means that are within the law. By contrast tax evasion is the general term for efforts to not pay taxes by illegal means.
Everyone assumes that tax is collected in equal measure in each Country, Territory, State, County or Borough. This is obviously a fallacy.
When I worked for HMRC it was given that In the UK, most of the tax in collected was in the South East Region surrounding and incorporating London. No doubt there are reasons why this skewed the figures, and I am sure many people will pole up to put forward how their part of the country pays just as much as another.... but keep in mind that the entire population of Shropshire is not far off that of Leicester (midlands) or Guildford (Surrey) plainly there is not parity on a "per head basis".
There was prevailing argument that the tax offices in the Celtic crescent of Scotland, Northern Island, Wales and Cornwell be closed as it cost more to collect than was received. Some sense has now prevailed and they use these staff to collect and process the taxes from the South East.
I imagine that similar arrangements may exist for more commercial organisations; there are probably more Starbucks in Guildford than the whole of Shropshire. Certainly there are more on single street in London such as Kingsway?
I dont know the relative economic values of the US states, but California was once alleged to be the 5th ot 6th largest economy in the world if it was spun off as a separate state, I'd imagine that there are many of those American states that are actually a bit thin on the revenue
http://en.wikipedia.org/wiki/List_of_U.S._states_by_population
It would appear Mexico City has a larger population than 12 American states combined!
Wales has a larger population The Dakota's and Hawaii have combined....
Amazon's HQ is in Seattle, and no, they are not aiding and abetting tax evasion. The laws requiring that people outside a State collect taxes for sales that cross State borders are almost certainly unconstitutional.
Imaging that I (in California) buy a T-Shirt from Vulture Central in the UK ... you're saying that Vulture Central has to calculate my sales tax, add it to the invoice, then remit the tax to California? Oh yes - and every now and then, the State of California is going to send someone out to audit your books to make sure that you're paying them their pound of flesh.
P.S. Seattle is not in California (not yet anyway).
Affiliates are essentially paid for putting up links, and they get paid typically 5-10% when someone clicks and buys. It's advertising. The pay scale may be tied to conversions, but it's still advertising. Are these states also going to tax the TV and radio stations according to how many sales they drive?
Where it applies, affiliates also pay income tax on what they make.
Because local retailers are subject to ONE specific set of tax rules. Or to clarify by reversal, if Internet retailers are required to collect sales taxes from everybody based on where they live, why shouldn't local retailers be required to remit taxes to all the locations where their purchasers live?
Frankly, AC 2-07-2009 12:25 hits the nail squarely on the head. This is not an issue of fairness, it is one of the greed of politicians who've never had an honest job.
By Tam Lin Posted Thursday 2nd July 2009 08:53 GMT
" Retailers are paid a handsome percentage to collect taxes."
Not in Florida, not hardly . . . we are *required* to collect it, account for it, and send it in periodically. We don't make so much as a thin dime on it unless we are HUGE businesses, then there's a tiny, tiny discount for prompt payment (and the payment window is just 21 days long, including any weekends or holidays - alien invasion? We don't care, send your sales tax.)
I *wish* they'd pay me to collect and remit sales tax. The whole sales tax cluster**ck is an item of overhead and a straight expense. They require us to work for them for free as a condition of doing business.
If I buy a product in New York but live California, I'm required to pay the tax in California. Good luck on getting New York to refund the taxes so you can pay them in California.
Here is some thing else people might know, If you are visiting the the States from another country you don't pay sales tax. IF you are charged sales tax , you can fill out a form at the airport to get your money back.
Its an unworkable system.
We need a national law excepting internet purchases from any local sales tax and then giving individual states the option to implement a state wide internet sales tax. Any change in the internet sales tax would only come into effect once a year.
So the online retailers will have to update a table of 50 sales tax rates once a year ... and consumers will pay the same sales tax no matter what store they buy from.
And the tax collected should be sent to one national agency for distribution to the states.
So one small table of taxes updated yearly .. one tax agency to deal with ... consumers don't have to keep track of which sites will and won't tax them.
I could see that working.
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