At issue here is sales tax. By state law, the tax is owed by the citizens to the state no matter where they make the purchase. To make enforcement easier, the tax is supposed to be collected by businesses. In theory the tax is owed regardless, but as a practical matter when businesses do not collect the tax, customers don't volunteer the information and the state loses revenue.
This annoys states to no end. However courts have long ruled that a company that is not in a state cannot be forced to be regulated by that state, even if it does businesses with residents from that state. They can't do that because that is interstate commerce, which the Constitution says is regulated by Congress, not the states. But if the company has a presence in that state, then it can be forced to obey state regulations, even if the actual commercial act crosses state boundaries.
This is all old hat, and was settled back in the 1800s with catalog companies.
The new twist here, that several states (now including California) have pursued, is declaring that the existence of an affiliate program with state residents is a business presence in that state. Because it is a presence, they can make Amazon collect taxes.
Amazon's position is that affiliates are not Amazon employees, and are not a presence of Amazon in that state. And therefore those laws are unconstitutional. However Amazon has chosen to not contest these laws in court. Instead Amazon has chosen to cut off all affiliates in any state that tries this tactic. It thereby guarantees that it no longer has a presence in that state, and it doesn't go about trying to collect taxes from people in that state.
The net result is that Amazon loses some business, the state continues to not get taxes, and some residents lose a source of income.
Yup. Politicians and governments are, by and large, oblivious to the fact that laws induce behavioral changes. Like extending unemployment benefits to 99 weeks, then somehow being surprised when the rate increases of people staying on unemployment rather than finding jobs. Or creating a tax credit for low-income families who have children, then being surprised when the low-income birth rate increases. In the politician's world, if a $100 million business exists and a tax rate of 7% is imposed, that is obviously $7 million in revenue, because no company would ever think to try to work around the tax structure or would lose business to competitors not subject to that tax.
I don't think politicians are nearly as ignorant of the situation as you claim. They know full well what they're doing, however their main objective is to get reelected, so they're going to do things like extend unemployment benefits, because their unemployed constituents will no doubt vote for them come reelection, and the negative consequences are abstract and vague, thus easily dismissed.
Like extending unemployment benefits to 99 weeks, then somehow being surprised when the rate increases of people staying on unemployment rather than finding jobs.
Wow. I've never seen a better example of the phrase correlation does not imply causation.
> Yup. Politicians and governments are, by and large, oblivious to the fact that laws induce behavioral changes.
Come on. Politicians are some of the smartest people in the society. Do you really think they are oblivious or do you think they're just looking out for #1?
The closest answer would be willful obliviousness. Like how voting for war funding means borrowing the money from sometime in the future. Politicians know these consequences on some level, but willfully just push them out of consideration.
Whatever politicians pushed this in California were counting up the tax revenue that would be collected from Amazon. They couldn't have truly been ignorant that Amazon would pull out, but just kind of put the thought aside to push through the tax plan.
edit: I like btilly's point in the child post too.
You have an excellent point and I think that it is even more cynical than that. They know full well that they wouldn't collect that revenue, but by passing the bill they can pretend that they will, and then they can add that line item to the budget to make it easier to balance on paper (which it has to be before it can be passed).
But are they really looking out for themselves by doing so? A captain that helps sink the ship he's on (and keeps him from drowning) is not "looking out for #1" long-term.
The problem with this is that there is no such dinghy in real life. Immigration is hard (try it sometime), and there's no guarantee that there will be anywhere better to go.
> The University of Chicago’s Bruce Meyer and Harvard’s Lawrence Katz found that for every week that unemployment benefits are extended, the average duration of unemployment goes up by 0.16 to 0.20 weeks. According to a paper coauthored by Alan Krueger, President Obama’s Assistant Secretary of the Treasury for Economic Policy, the unemployed more than triple the time they spend job-hunting, from 20 minutes per week to 70 minutes per week, in the weeks right before benefits expire.
The referenced papers (which aren't actually referenced) are hard to find.
I did find this though:
One of the best-known empirical results in public Önance and labor economics is the ìspikeî
in the exit rate from unemployment around the expiration of jobless beneÖts (see e.g., Robert
Mo¢ tt, 1985; Lawrence Katz and Bruce Meyer, 1990a; Katz and Meyer, 1990b). This sharp
surge in the hazard rate is widely interpreted as evidence that recipients are waiting until their
beneÖts run out to return to work
However, from the same paper:
Our main finding is that the way in which unemployment
spells are measured has a large e§ect on the magnitude of the spike at exhaustion, both in
existing studies and in our Austrian data...
We conclude that most job seekers in Austria are not waiting to return to work until their
UI benefits are exhausted. Rather, a large fraction simply leave the unemployment registry
once their benefits end and they are no longer required to register to maintain their eligibility
for benefit
It might be a win for non-Amazon retailers, if the removal of Amazon's affiliate program reduced the total % of internet book-related links that go to Amazon versus other booksellers (keeping that % up is of course one reason Amazon has the program in the first place).
That's assuming that people's choice of bookstore is influenced by links. When I buy a book from a website (or pretty much anything from a website) I always check the price on Amazon. So the only way the affiliate program helps them to sell to me is by encouraging bloggers to write reviews. I'd guess that's true for a lot of people.
Many of them already do, e.g. local booksellers. They might not be price-competitive, but if Amazon provides the linker with no incentive to link Amazon versus linking some other bookstore (say, their favorite local bookstore), some percentage of linkers will (I would guess) defect from choosing to link Amazon.
For example, I have a site with some book reviews which currently links the Amazon page for all the books, because they pay me. If Amazon terminates its affiliate program in my state, why would I continue to link Amazon, rather than someone else? I would first look into alternate affiliate programs, like AbeBooks. If I couldn't find any worth using, I'd probably change it to just link the official publisher page for each book. Or maybe to a local-bookstore aggregator like indiebound.org. Or the Wikipedia article, when one exists.
Even if I were making money on Amazon's affiliate program and it got cut I would continue linking to Amazon. For the reader using my site to find information going to an online location where they can purchase the book easily will help them come back to my site.
Especially if I have diverse traffic from around the United States or bigger linking to a retailer that is more likely to ship to my readers will let me keep their eyeballs.
Like many here, I have many book reviews myself that link to amazon. I link to amazon because that's what's most convenient for most people. I do not use an affiliate link because it's a conflict of interest. In the past magazines would have honest product reviews that sometimes were negative. Nowadays nearly every magazine only has glowing reviews and no negative ones. Editors tell writers that bad reviews will result in lost advertising revenue since publishers/manufacturers threaten to stop advertising in magazines with bad reviews of their products. Contrary to this I have many reviews that rip apart products and point out their numerous defects. I also have reviews that praise good products. Perhaps some people who read my reviews notice this and find the integrity refreshing or bizarrely archaic. In any case I certainly don't need the pitiful income from affiliate links, it makes more sense for me to just use a plain link.
So what about actual Amazon employees, like Lab126 in Cupertino? Are they hiding Amazon affiliation through fancy corporate footwork and shell companies?
Texas is trying to go after Amazon shell companies; I'm not sure if California has tried that route.
In Texas, there are two companies involved: Amazon.com.kydc, Inc. is a wholly owned subsidiary of Amazon.com, Inc. The sole business of the former is to operate physical facilities, some of which are in Texas, and which provide warehousing and shipment of books for the latter. Texas argues that this constitutes Amazon having a physical presence in Texas, but Amazon disagrees.
So Amazon has physical buildings in Texas, and Amazon disagrees with that state's position that they have a physical presence in Texas. Only a lawyer could argue for such a twisted interpretation of reality with a straight face.
Amazon owns a company that has physical buildings in Texas, and disagrees as to whether that constitutes a tax nexus or not. Pretty easy to argue with a straight face! Tax law is a matter of technicality, not "does it seem about right".
If I own a house, I own a house.
If I own a company (which is just a paper entity, made-up), and that company owns the house, then, I pretty much actually own the house. Maybe not in a technical legal sense, but in a reality sense.
Always be wary of "paper reality" created by lawyers. It's not real. It can be a useful tool, a useful abstraction, but it can also separate us from physical reality, and can be used for evil purposes, and produce non-sensical results.
Another point related to this is that there's a lot of precedent in the courts where, even in a case where someone is claiming to be doing something which is technically consistent with the law, and/or are very carefully exploiting a loophole or ambiguity, there are judges who give rulings based on the principle of, "if it walks like a duck, and talks like a duck... guess what? it's a f*cking duck!"
Amazon doesn't have buildings in Texas. A subsidiary company does. That company is required to pay taxes in Texas. Amazon however, by not having a presence there is not required to pay taxes. This is old hat and a tactic used by almost every successful company in the world for at least 150 years.
In the long run it is far more beneficial for consumers and corporations. The only ones that lose out are the governments (the citizenry don't lose out by proxy because any potential revenue would be spent in non-beneficial ways regardless).
Small companies lose out also, because in general only large-ish companies can afford the overhead of maintaining shell companies. (Not just for this particular loophole, but for lots of loopholes involving shell companies.)
I guess there is a significant risk of the result being found in the States' favor so that they don't directly challenge the law.
IANAL, but it seems like the Supreme Court would very likely rule in their favor though. Quill v N Dakota is a very similar ruling and when looking through the notes I found this:
"As we noted in Heublein, Inc. v. South Carolina Tax Comm'n, 409 U.S. 275, 280 (1972), in enacting § 381, "Congress attempted to allay the apprehension of businessmen that `mere solicitation' would subject them to state taxation. . . . Section 381 was designed to define clearly a lower limit for the exercise of [the State's power to tax]. Clarity that would remove uncertainty was Congress' primary goal.""
So... if I understand correctly, if I am a resident of California and I buy books from Amazon, I pay no sales tax (isn't that the same as VAT)? Does this mean that Amazon books in Washington are more expensive (because I Amazon must collect the taxes, because the state can force it to, because it has a physical presence there)?
If you live in CA and buy books from Amazon, Amazon does not collect sales tax. You are still required by law to pay it. The onus is now on you to calculate the amount and include it when you file your income taxes.
In most tax jurisdictions they call this a "Use Tax". In theory here in Washington you're supposed to file that with the state annually/quarterly/monthly/whatever interval they set for you, but in practice no individual actually does. Businesses that remit sales tax to the state do have a field on the form to include their own use tax as well.
The books are the same price. Amazon simply tacks on WA sales tax. Here's an example from a purchase I made last month:
Amazon.com items (Sold by Amazon.com, LLC) :
1 Apple iPod touch 8 GB (4th... $204.99 1 $204.99
--------------------------------------------------------------------
Item Subtotal: $204.99
Shipping and handling: $3.99
Sales Tax Collected: $19.85
Total: $228.83
Paid by Visa: $228.83
--------------------------------------------------------------------
Not surprisingly, items that are sold by third parties on Amazon, but still fulfilled by Amazon are not subject to sales tax, as long as the third party is not located here in Washington state.
I don't get it now... tedunangst and ojbyrne claim, that I would pay no tax, and you say that I still pay WA tax. So if Callifornia would collect its sales/use tax as well, I would pay tax twice, or no WA tax, or what?
Sales tax tends to be 5-10%, affiliate kickbacks tend to be less than that, which means that the increased revenue from affiliate links is in the same ballpark. It would be bad enough if these laws forced amazon to pay sales tax on purchases where the affiliate lived in the same state as the purchaser. Instead these laws force amazon to pay sales tax on all sales where the purchaser lives in a state where there is a significant number of affiliates. The former would not make business sense (raising prices for a much less significant benefit to affiliates) the latter makes even less sense economically.
This isn't Amazon trying to skirt paying sales tax, it's merely amazon making a level headed business decision in the face of irrational and grasping legislation.
Amazon (or more accurately, the purchaser) should be paying all sales taxes in the state where the purchaser lives, period. Seems cut and dried to me. If the corner store has to run sales tax, Amazon should too.
I don't see why a "[adjective] business decision in the face of [adjective] and [adjective] legislation" is in any way different from "skirt paying sales tax".
You say it's "cut and dried" at the same time that you are clearly reaching beyond what the laws say. It is not cut and dried as to what one state may make a resident of a completely different state do. Amazon probably is correct, and forcing Amazon to collect sales tax for your state probably is an overreach.
It should be pointed out, since so many people forget this in this discussion, that as a resident of a state you are frequently required to pay the sales tax to the state directly in the form of a "use tax". This isn't about consumers owing sales tax, technically the states have already made that happen. It isn't about Amazon "not paying" this tax, because it is the consumer's responsibility at that point. It is about one state forcing an entity not in its jurisdiction to do something for the convenience (and little more) of that state. Amazon's got a pretty strong case here; any principle that makes this compulsion legal is likely to have numerous and manifold "unanticipated results" beyond merely getting Amazon to collect tax.
California residents should be paying the California sales tax on things they buy, and the state has a right to make that happen. Nobody's talking about forcing Colorado residents to do anything.
I agree that they should find a way to make it a reasonable burden for Amazon to collect that information, but if local retailers have to collect and Amazon doesn't, that seems unfair and noncompetitive.
>Uh, who brought in residents of different states?
That's the whole point of this issue. It involves parties in different states.
You're argument is that if someone from state A does business in state B, then it is the responsbility of the business in state B to collect the sales tax required by state A.
How can you not understand why this is a terrible argument? It means that every business would have to know and calculate the sales tax for all 49 other states and that every purchase would require proof of residence to verify which sales tax needed to be charged. Then the business would have to deal with filing taxes in 50 separate states.
Ugh...I can't even imagine how this makes any sense to anyone.
Amazon is located in Washington, as a convenience to the user and to the state Amazon collects tax in accordance with Washington state law if someone ("user A") purchases an item from its site in Washington.
This way "user A" in Washington doesn't owe the state any taxes for that purchase, and doesn't have to declare it on any tax forms.
Now someone in California ("user B") purchases an item from Amazon. Amazon is located in Washington and in accordance with federal law is only required to collect taxes for the state it is located in. So "user B" buys the product and Amazon does NOT collect the California state tax. "user B" now has to put all of his purchases down on his tax forms, and pay the tax for the items he bought.
Amazon had an affiliate program in California. This affiliate program was claimed by the state of California to mean that Amazon was located in California ("to constitute a physical presence"). If that is the case, then Amazon would legally be required to collect tax for "user B"'s purchase and remit it to the state of California.
This would effectively mean that Amazon would now have to file taxes in Washington as well as California. Not a problem for a big corporation you say, imagine then that all 50 states implement said system, Amazon would now be on the hook for filing and paying tax in 50 different states, even-though it technically does not have a physical presence in the state.
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Local retailers have a physical presence in the state, and are by law required to be registered businesses and thus are required to collect state sales tax for the state they are in. If however they also shipped out to other states (lets say they are located in CA, and ship to NJ) they would not have to collect sales tax on the sale when shipping to NJ since that is interstate commerce.
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This may not seem fair, but if any company doing any business with another business or individual out of the state where they have a presence has to keep track and file tax paperwork for each state they do business with it would become unmanageable, especially for smaller businesses where doing tax for one single state is already a big burden, imagine having to do it for all 50 and each one having different laws or different rules regarding taxation.
The states are basically attempting to close a loophole consumers are using, whereby they purchase items out of state so that they don't have to pay taxes on it, and then technically they are breaking the law by never declaring those items.
Look, if we want a competitive marketplace, it makes sense that everyone operates under the same tax constraints. This isn't a pro-tax, anti-tax, pro or anti commerce clause thing. It's just basic economics, the best services will float to the top that way.
No, it isn't fair to the retailer that ships to 50 states, since they unlike the local only retailer now have to file and keep up with tax laws for 50 states, not even considering all of the counties and stuff like that.
Everyone /is/ operating under the same tax constraints. The difference is, your local retailers aren't selling their products out of state like Amazon.
So if an amazon customer living in California buys an item that is fulfilled from Arizona, why should a California sales tax be involved? Why are we suddenly redefining the meaning of local sales tax? Are we now to the point where every state with a local sales tax will also impose tariffs on out-of-state goods? That seems to be the argument here.
Because it was purchased by a Californian from California? I don't get how Arizona's involved at all, Best Buy prob has distribution centers there too, it's not a part of Best Buy's point of sale tax calculations.
Again, it's not a tarriff on out-of-state goods, it's assessing the same tax on out-of-state as you do on in-state goods.
A non-reverse-tarriff, if you will. Level playing field is all I'm arguing for here, don't see how that message keeps getting lost.
Because you are asking a business to file taxes in all 50 states it does business with instead of the consumer that is purchasing the goods who should be declaring them and paying tax on them directly to the state.
I carefully restrained myself from accusing you of having a predetermined conclusion and rationalizing it at all costs to logic, sanity, and undesired side effects, but after seeing your studious refusal to address the situation as it actually is, rather than how you'd like it to be, I regret my restraint.
I'm sorry this is actually an issue about cross-state jurisdiction, rather than the duty of large companies to be responsible to society and dutifully pay as many taxes as they can, but this is the situation as it actually is.
> Amazon (or more accurately, the purchaser) should be paying all sales taxes in the state where the purchaser lives, period. Seems cut and dried to me. If the corner store has to run sales tax, Amazon should too.
Actually, the "corner store" doesn't have to collect sales tax. The "corner store" collects sales tax for the jurisdiction it is in. (Car dealers are an exception because of licensing.)
CA says that its residents owe sales tax on anything that they use within the state. For example, if a CA resident walks into a store in Nevada, buys something, and takes said something back to CA, CA thinks that it is owed sales tax.
I've never seen a Nevada store collect CA sales tax for sales to CA residents. I've never even seen someone suggest that said store has an obligation to collect CA sales tax. Why is Amazon different?
Amazon's different because they're bigger than a rounding error, basically.
The principle is "same amount of taxes for everyone". I don't live in California but if I did, I wouldn't be huge on the idea of tax-disadvantaging local businesses against out of state businesses.
Then pursue the customers and force them to actually report their rightful use-tax when they file their taxes at the end of the year. Amazon isn't not collecting CA sales tax because they think it shouldn't be paid. They're not collecting the sales tax because they have no legal requirement to.
Except that they are not... a book on Amazon may cost $10 and a book at your local Borders may cost $10. At your local borders sales tax gets collected, and the book ends up costing $13. When you purchase it on Amazon you pay $10, and are then supposed to declare that you bought the book and pay a Use Tax. That Use Tax for a $10 is $3. You as a consumer are now obligated to pay the state $3.
Having a business collect sales tax for a state it has no presence in is not in accordance with federal law, and California law does not apply due to interstate commerce laws. Thus there is no way to force Amazon to collect tax for sales to California residents.
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Go tell the consumers to pay taxes for all of the stuff they have bought, it is the consumers who should be paying the taxes and aren't.
Just carefully read through parts of this and noticed the following exception for small retailers (<$10,000 annually), which may or may not be applicable to Amazon Affiliates (could be interpreted either way, because "retailer" includes "an entity affiliated with a retailer within the meaning of Section 1504 of the Internal Revenue Code."):
"This bill would include in the definition of a retailer engaged in business in this state any retailer entering into agreements under which a person or persons in this state, for a commission or other consideration, directly or indirectly refer potential purchasers, whether by an Internet-based link or an Internet Web site, or otherwise, to the retailer, provided the total cumulative sales price from all sales by the retailer to purchasers in this state that are referred pursuant to these agreements is in excess of $10,000 within the preceding 12 months, and provided further that the retailer has cumulative sales of tangible personal property to purchasers in this state of over $500,000, within the preceding 12 months, except as specified. This bill would also provide that a retailer entering into specified agreements to purchase advertising is not a retailer engaged in business in this state and would define a retailer to include an entity affiliated with a retailer under federal income tax law, as specified. This bill would further provide that these provisions would not apply if the retailer can demonstrate that the referrals wold not satisfy specified United States constitutional requirements,as provided."
I don't think it's at all unreasonable for states to want to enforce the tax that's already on the books and supposed to be already reported/collected, as you state.
The problem is the hangup with the commerce clause. Catalog companies didn't threaten to make a significant % of all sales into postal sales, the internet does. I'd hope that we could find a way to straighten things out where the state can still assess the sales tax the way it's written legally without bringing all of these other issues about affiliates into it.
I don't really see where states can go on this, the current strategy seems to be "try and force congressional or SC action", good luck with that. Maybe they just fold on sales tax altogether and shift that burden to income tax.
Catalog companies didn't threaten to make a significant % of all sales into postal sales, the internet does.
I am not so sure of that. Particularly in rural states, companies like Sears-Roebuck were the prime source of all sorts of amenities of basic life, from phonographs to sewing machines. Sure, it took longer, but the prices were a lot better than general stores. And the selection was amazing. You could buy anything up to and including a new house! (Some assembly required.)
I can totally understand why Amazon doesn't want to have to collect municipal sales tax. Every city in my state has a different potential tax rate, with a percentage determined by the state, by the county, by whether the city participates in mass transit, etc. Same zip codes have different taxes.
Trying to manage that across the country is an ugly proposition! At least the EU has chosen a single VAT (even if it is outrageous! :).
I only we had machines which could perform these difficult lookups for us, and directories of information that could be queried to determine which taxes apply for a given address, along with some way for these machines to communicate so that different tax jurisdictions could keep the sales tax information current... Oh, that's right, we do.
The claim that determining the applicable sales tax for any given shipping/billing address is difficult is complete BS.
One small example: many jurisdictions tax different categories of items at different rates. This means that you'd have to start off by knowing those rules and categorizing everything accordingly. After that, you have tons of edge cases to work out, e.g., what happens if I group two different categories of items into a special package? What percentage of the package is taxed at what rate? Or, what if different states categorize the same item in different ways? Or, what happens when you provide a service to sellers and then need the sellers to accurately provide all of this categorization for every jurisdiction?
Of all companies, Amazon probably has the best chance of getting this all figured out if they really had to. However, calling it difficult is by no means BS.
Adding on to your excellent point, which tax configuration do you use for calculating the tax? If the affiliate is what causes nexus, do you use the affiliates local tax rates for calculating tax obligation or do you use the customer's local tax rates for calculating tax obligation? It seems absurd to me that I would pay more in taxes if I click on a link from Alice's website than I would if I were linked to the same product on Bob's website.
Oh come on. The reason Amazon doesn't want to collect sales tax is because it would make it more expensive to buy stuff on Amazon. They're well aware that few/no people actually pay their sales tax for internet purchases.
I'm not arguing on the rights/wrongs of this discussion, but this is what it really comes down to.
the EU doesn't have a single VAT, or a even a single VAT rate. Each country can choose its own. But if you sell from country A to a resident of country B, you have to charge your country A VAT (in most end-consumer situations) just like you charge to a country A resident. (unless you get real big, then you have to collect country B VAT instead...)
Couldn't find any news stories that weren't just reporting on the "what ifs", but the press release from the governor's office is available here: http://gov.ca.gov/news.php?id=17101
So, what exactly is deemed "presence?" Apparently an Amazon distribution center in Texas was deemed "presence" a while back. On the other hand, surely Amazon operates a fairly extensive network of data centers, warehouses, and other fixed-location logistical inputs in California? Is that "presence?" Where is the distinction lie?
I received notice today from 4 of my affiliate programs that they are terminating their programs in California. I expect the remaining few to notify me soon enough. I may end up registering again with these program using an Oregon address if I feel like my site is something I still want to work on if this goes down the way it is looking.
I got a notice from Amazon as well. Though they specifically said they plan to terminate if and when the law passes, so the program (at least at AMZN) isn't dead quite yet.
This sounds like a terrible idea from a technology standpoint as each county and city seemingly has different sales tax rates. To comply with taxation, every out of state company will now need to pull the active sales tax rates for the shipping destination and then apply this to the order.
What happens if the rate isn't kept up to date?
Are states like California actually ready to supply this data in a form that is easily consumable as a web service rather than a PDF file, to avoid hindering interstate commerce?
Personally I don't think Amazon is completely the victim in this situation. Their attorneys spend quite a bit of time and money figuring out how to avoid paying tax. I interviewed once for an Amazon.com company who's "primary" development offices were in California, yet their checks came from their "legal" headquarters in Nevada. Shady at best... for example: http://www.lab126.com
Affected companies will end their affiliate programs so they don't have to pay the tax. This means that the state won't collect the tax revenue anyway. It's obvious that this is just a ploy by competitors (Walmart) of companies with successful affiliate programs (Amazon).
They're clearly doing this because they know the affiliate marketers will complain a lot, and not because there's much of a direct relationship financially.
Not true! Amazon already has all of that obscenely complex logic coded up!
Amazon allows third party vendors to sell through Amazon. Amazon knows for each vendor of what states they are resident in, and properly collects sales tax in that company's behalf where that is required.
And for a select few of those vendors, they do have sales tax modules. For another quantity of people, they just bake sales tax into the cost of the item:
And yet somehow companies like WalMart and Target manage this terrific feat.
It'd be better if there were a unified system of national sales tax. But for a company Amazon's size, it's a laughable idea that it's somehow impossible to do this magnificent feat of implementing a lookup table.* The hard part is keeping things up to date, but a good faith effort to do the previous would get Amazon pretty far.
*I worked for a company that is a thousandth Amazon's size in revenues, but it managed to do it for the whole state of California. It genuinely can get complicated--zip codes can cross county lines, for instance--but again, far from impossible, and when this becomes widespread third party solutions will pop up a lot more.
I have no idea why you were downvoted. If the dudes running walmart.com can write code to figure out the appropriate sales tax for each item, the dudes at amazon.com should be able to as well.
Naturally, lots of people are pissed off at this turn of events. For good reason, too--everyone's losing here, including the State, Amazon, consumers, and various developers and start ups. Even the shadowy backers of the legislation (WalMart, Target, etc.) don't win an even playing field, because Amazon still isn't going to pay sales tax.
Since many people's livelihoods are very threatened by this frack-up, it's not too surprising that there'll be some itchy fingers.
More than 50 since many counties and cities impose their own sales taxes, on top of whatever the state levy is.
There's also the complication of what items are taxable where. Clothing, for example, has seen a recent trend of exemption from sales tax in some jurisdictions. There's also sales tax holidays, where a state or county suspends its sales tax on some categories for a week or whatever to spur consumer spending. Finally, there will be weird corner cases like what happens if an item is bought, then returned at a later date after a change in the sales tax levy?
It all becomes very complicated to track and implement for an online system. An entity the scale of Amazon could certainly do it if they want, but it may not be cost-effective.
actually there are far more than 50, as many counties and municipalities have their own sales tax rates on top of their state's rate. not only that, but it is far more complex than just one fixnum per jurisdiction as each is able to establish rules on what is taxed and what is not. the prime example is food, where the local laws on what counts as non-taxed food always seem a bit byzantine.
They have local managers for every region and sub-region. Amazon doesn't have a manager assigned to Sonoma County to make sure that everything's on the up and up regarding Sonoma County tax laws. Amazon's actually much better equipped to handle the problem because of their size. It would be a real nightmare for a small site that can't afford even a single full time accountant.
Hundreds of them. Anyone can set up a copy of iDevAffiliate (and many do), and thousands of small businesses have programs run through networks like ShareASale, Clixgalore and CJ. You can start a professionally managed 3rd party affiliate program on a network for $75-350.
There are hundreds of thousands of products with affiliate programs on ClickBank. Most of them are info products and software being sold by an individual with no employees.
Note that brick and mortar retailers only have to know the taxes which apply to each of their locations. While this is a lot of different locations for a big chain, it's far less than knowing the taxes for the location of every single customer.
To put it more concretely, Best Buy has to manage sales tax for ~1000 stores, but Amazon has to manage sales tax for ~100 million customers.
Both national retailers and Amazon probably have the capabilities to do this, but equal protection clause states that you can't single out a single entity with a law. Would you have computing this be a barrier to entry for anyone who wants to sell over the internet? Especially as services and digital goods might also be considered taxable under certain jurisdictions.
I see your point that this could be a problem, but it's also a problem that brick-and-mortar shops have to pay tax while Amazon doesn't, no? Equal protection (or competitiveness) goes both ways.
Neither have to pay the tax, it's just a question of who the state can compel to collect the tax on behalf of customers. The real tax evaders here are the customers, who are required to pay a use tax for out of state purchases. Of course, clamping down on this is political suicide so it doesn't happen.
I think the classical argument as to why the brick and mortars have to collect is because they actually see a benefit from the local government in the form of police, fire protection and transportation in a way that Amazon does not (at least not directly).
The real tax evaders here are the customers, who are required to pay a use tax for out of state purchases. Of course, clamping down on this is political suicide so it doesn't happen.
Actually North Carolina tried to do exactly that. They did a tax audit of Amazon, and tried to get Amazon to turn over records as a part of that which would let them go after state residents for owed sales tax. The case went to court and was settled last February in Amazon's favor. Amazon wound up giving North Carolina detailed records of every item shipped to a North Carolina address, but with all personal identifying information stripped so that North Carolina could not figure out who had purchased what.
Chicago has local sales taxes in addition to the state-wide sales taxes. Sales tax is a complicated mess and that's why Amazon doesn't want to get involved. A consistent sales tax across all states (something Amazon is in favor of) would go a long way to make everyone happy (except maybe consumers).
To the best of my knowledge Amazon has no distribution centers in any states that collect sales tax explicitly because it doesn't want to be forced to collect sales taxes.
Every time I order from Amazon the delivery starts in CA almost the same day. Perhaps there's some legal entity funny-business going on to make all of its CA fulfillment not count as such, but what else would you call the place that ships me the package?
Just went through my email logs of Amazon purchases. One thing I bought from Amazon looks like it started in "City of Commerce", but this was a few days after I purchased it -- perhaps they fulfilled elsewhere and flew it over to be picked up by FedEx in CA?
Amazon offers store fronts for third party sellers. The most likely possibility is that that purchase is from such a seller, in which case fulfillment starts from their facilities, not Amazon's.
If you are in California, then Amazon should have also collected sales tax on that purchase.
Why does this need to have anything to do with affiliate marketers? "Associates" need not count as "subsidiaries" or "distribution centers" whatsoever.
I also regularly get deliveries that seem to originate within CA, even if Amazon does nor report any fulfillment centers in CA.
Let's be honest: Amazon has an unfair advantage over local retailers by not charging sales tax and it's using the loud online voice that its Amazon Associates have to keep things this way.
""Retailer engaged in business in this state" specifically includes, but is not limited to, any of the following:
(1) Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business. "
Many states and municipalities tax "cookies" differently than other food items. For a long time Fig Newton used "A cookie is just a cookie, but a Newton is fruit and cake" as their most prominent add copy, and while some people have referred to Fig Newtons as cookies, the people who produce them don't. Would you like to be the person in charge of figuring out, for every jurisdiction in the US where its relevant, whether or not a Fig Newton is a cookie based on relevant law and precedent? There isn't a consistent answer that applies everywhere. And that's just one product among the many, many that Amazon sells.
Sort of. As I understand it this law would require amazon to start collecting sales tax. It does not mean amazon would be paying more themselves. Only that customers final bill would now include the local sales tax.
I am pretty sure the payment made to Associates Program is classified by Amazon as "advertising fee". I'm not sure how it would hold up against any accounting audits by IRS, for example. Amazon do send 1099-MISC to Associates Program member.
Alright guys, so we all lost our Affiliate programs. What are the legal implications for just putting down an out-of-state friend's address in our Amazon account information?
its interesting (to me) that they avoid collecting sales taxes in various US states, but that (at least for AWS) they are compelled to collect VAT for all EU states because they have a presence in at least one of those EU states...
Can I add/posit that, perhaps the reason Amazon is also taking this pretty passively other then just shutting down and waiting to see if the law changes - is that the affiliate marketing programs are perhaps just not that valuable to them any more with their market position?
Lawyer types: if one were to, say, incorporate in Delaware, and then rejoin the Amazon program from a Delaware address (presuming that's possible) -- would that be legal?
As long as Amazon didn't know you were a California resident, you'd probably get away with it. However you'd be opening Amazon up to the possibility of a lawsuit from California. If they figure that out, they will not be happy with you.
Wouldn't creating a Delaware corp for all of this be massive overkill? Anything purchased through the corporation for an employee's (your) use would then be taxed, too, right? This sounds like a pretty significant hassle, and really only a good idea for someone who makes a lot of money from their Affiliate stuff.
I think as long as your business has a presence in CA (like your office or home office) you still have to pay taxes. Of course, you could register your business in a state that doesn't disclose stakeholder info, like Nevada or those Wyoming shell companies.
I don't mind paying taxes on my earnings from the affiliate program. It's not like the government would expect me to pay taxes on the cost of the goods sold. It's the amount made from the affiliate program.
Amazon is a significant source of income for me in California, and I was thinking of creating a California LLC this year anyway to shield from lawsuits. I'm now going to seriously think about doing it in Delaware instead.
If you need specific advice about tax liability or incorporation decisions, you may want to talk to an attorney.
Incorporating in Delaware does not necessarily make a corporation a Delaware resident only. If a corporation operates in California, it is probably subject to California taxes. In general, a corporation can be a resident of both the state of incorporation and the state of its principal place of business.
For sales/use tax, owning property in California or having regular employees in California may be enough.
Well the only one thing I do know that's a huge pain about having a California LLC is the $800 minimum tax. It sounds like you might be making enough that you owe more than that though.
I suspect Amazon secretly wish they could just get rid of their entire affiliate program. If it was so profitable, they wouldn't be getting rid of affiliates left and right. If you think about it, most people who buy thru an Amazon affiliate link probably would've bought it from Amazon anyway (due to its huge brand recognition, dominance in Google, etc).
So, when an affiliate refers a sale, sometimes they're losing money, not making money.
The reason for Amazon to continue running an affiliate program isn't to drive awareness of the site but to provide the massive number of deep product links that push Amazon results to the top of search results. Amazon's search traffic is in part dependent on the affiliate program.
I agree. Amazon loved their affiliate program while they were growing. Now that they're the biggest in town, and don't need the affiliates; they looking for any excuse to drop them.
Bringing people to a store, virtual or otherwise, is incredibly valuable for that store. Amazon has literally 1000s of people doing that, constantly. Instead of finding a good/best price on an iPod, I send people to Amazon, etc. Don't underestimate that value.
don't overestimate it either. I know people who make tons of spam thin pages ranking for searches like "Nikon D40 camera Amazon coupon". All they have is a link to the Amazon page, and they make lots of money thru it. That's a sale Amazon would have irregardless
It's probably simply more cost effective to drop the Affiliates as it is for all the smaller businesses with affiliate programs that are also dropping affiliates.
At issue here is sales tax. By state law, the tax is owed by the citizens to the state no matter where they make the purchase. To make enforcement easier, the tax is supposed to be collected by businesses. In theory the tax is owed regardless, but as a practical matter when businesses do not collect the tax, customers don't volunteer the information and the state loses revenue.
This annoys states to no end. However courts have long ruled that a company that is not in a state cannot be forced to be regulated by that state, even if it does businesses with residents from that state. They can't do that because that is interstate commerce, which the Constitution says is regulated by Congress, not the states. But if the company has a presence in that state, then it can be forced to obey state regulations, even if the actual commercial act crosses state boundaries.
This is all old hat, and was settled back in the 1800s with catalog companies.
The new twist here, that several states (now including California) have pursued, is declaring that the existence of an affiliate program with state residents is a business presence in that state. Because it is a presence, they can make Amazon collect taxes.
Amazon's position is that affiliates are not Amazon employees, and are not a presence of Amazon in that state. And therefore those laws are unconstitutional. However Amazon has chosen to not contest these laws in court. Instead Amazon has chosen to cut off all affiliates in any state that tries this tactic. It thereby guarantees that it no longer has a presence in that state, and it doesn't go about trying to collect taxes from people in that state.
The net result is that Amazon loses some business, the state continues to not get taxes, and some residents lose a source of income.