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Old 07-02-2009, 10:24 AM   #1
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Amazon cancels affiliates

It was reported in the past couple of days that Amazon has decided to terminate affiliate agreements with affiliates in Rhode Island and (I think the second was) North Carolina because of the sales tax issue. The same article indicated that Amazon is not accepting affiliates in Hawaii over the same issue and that Amazon has threatened to drop affiliates in additional states if those states require Amazon to collect sales taxes like resident businesses of those states do.

Interestingly, however, Amazon threatened but then changed its mind about dropping affiliates in New York over the same issue.

It's always good to see Amazon doing its best for for those who helped it become so successful. Makes me want to rush out and buy from Amazon.
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Old 07-02-2009, 10:32 AM   #2
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Quote:
Originally Posted by rhadin View Post
It was reported in the past couple of days that Amazon has decided to terminate affiliate agreements with affiliates in Rhode Island and (I think the second was) North Carolina because of the sales tax issue. The same article indicated that Amazon is not accepting affiliates in Hawaii over the same issue and that Amazon has threatened to drop affiliates in additional states if those states require Amazon to collect sales taxes like resident businesses of those states do.

Interestingly, however, Amazon threatened but then changed its mind about dropping affiliates in New York over the same issue.

It's always good to see Amazon doing its best for for those who helped it become so successful. Makes me want to rush out and buy from Amazon.
What is going on with that company? Within the space of a year they've gone from the first place I'd shop for many different products, to the very last place I'd bother with. Every new announcement and news item from them seems like it's geared towards annoying and alienating as many people as possible.
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Old 07-02-2009, 10:50 AM   #3
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As a NC resident, let me try to clarify the sales tax situation here for retail sales, and why Amazon doesn't want to deal with it. About a year ago, to speed up payment of sales tax revenues to the state, NC passed a revision to its Sales & Use Tax regulations: Companies with retail sales, which formerly transmitted sales tax collected to the state once or twice a month, now have to PREPAY sales tax for the upcoming month. In other words, you have to prepay sales tax on sales you haven't made yet - kind of govenment financial time travel extortion. How this works:
You collected $10,000.00 in sales tax on retail sales done in June. You send that in after your June business month is over. You then also have to prepay at least 65% of that amount for July sales that haven't occurred yet! Another $6500.00 to the state. Once this cycle started, NC was able to pre-collect on sales that hadn't occurred. Don't ask me why this is legal, but it is in force.
This may be the reason Amazon is dropping states - that have these wacko schemes for collecting sales tax. Too much trouble for the amount of business from its affiliates?
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Old 07-02-2009, 11:48 AM   #4
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Quote:
Originally Posted by poohbear_nc View Post
As a NC resident, let me try to clarify the sales tax situation here for retail sales, and why Amazon doesn't want to deal with it. About a year ago, to speed up payment of sales tax revenues to the state, NC passed a revision to its Sales & Use Tax regulations: Companies with retail sales, which formerly transmitted sales tax collected to the state once or twice a month, now have to PREPAY sales tax for the upcoming month. In other words, you have to prepay sales tax on sales you haven't made yet - kind of govenment financial time travel extortion. How this works:
You collected $10,000.00 in sales tax on retail sales done in June. You send that in after your June business month is over. You then also have to prepay at least 65% of that amount for July sales that haven't occurred yet! Another $6500.00 to the state. Once this cycle started, NC was able to pre-collect on sales that hadn't occurred. Don't ask me why this is legal, but it is in force.
This may be the reason Amazon is dropping states - that have these wacko schemes for collecting sales tax. Too much trouble for the amount of business from its affiliates?
Nah, it's legal, stupid, but legal. Makes about as much sense as making people pay income tax quarterly based on last year's income. If you don't make as much, sure they refund the excess, but meanwhile, they've had the use of your money, and they don't pay you any interest for the period of time they've had it .... which is just wrong on so many levels.
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Old 07-02-2009, 11:51 AM   #5
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Old 07-02-2009, 11:56 AM   #6
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Quote:
Originally Posted by poohbear_nc View Post
As a NC resident, let me try to clarify the sales tax situation here for retail sales, and why Amazon doesn't want to deal with it. About a year ago, to speed up payment of sales tax revenues to the state, NC passed a revision to its Sales & Use Tax regulations: Companies with retail sales, which formerly transmitted sales tax collected to the state once or twice a month, now have to PREPAY sales tax for the upcoming month. In other words, you have to prepay sales tax on sales you haven't made yet - kind of govenment financial time travel extortion. How this works:
You collected $10,000.00 in sales tax on retail sales done in June. You send that in after your June business month is over. You then also have to prepay at least 65% of that amount for July sales that haven't occurred yet! Another $6500.00 to the state. Once this cycle started, NC was able to pre-collect on sales that hadn't occurred. Don't ask me why this is legal, but it is in force.
This may be the reason Amazon is dropping states - that have these wacko schemes for collecting sales tax. Too much trouble for the amount of business from its affiliates?
I rather imagine it is not just Amazon droping these states.
And the podunk legislature is likely too inbred to realize tha the businesses who cease doing business do not all get replacements stepping in. So after the initial revenue surge there will be an overal net loss.
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Old 07-02-2009, 12:01 PM   #7
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Amazon isn't necessarily in the wrong here. This is mostly a move by the states to grab more tax revenue. Traditionally, a brick and mortar store is not required to charge sales tax if they do not have a physical presence in the state. IE, if Amazon's offices are located in state A, and I'm in state B, then Amazon is not required to charge sales tax on behalf of state B when I place an order.

What a couple of states are trying to do, however, is say that if an affiliate is located in their state, and you click on a link at that affiliate's website that takes you to Amazon, then Amazon has to pay them sales tax. They're saying that a web link from an affiliate in that state is the same as Amazon having a physical presence in the state, which is pretty far fetched.

Amazon pulling the affiliates is a little extreme, but what they're trying to do is force those companies to complain to their local state representatives to stop the proposed law from going through.
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Old 07-02-2009, 12:36 PM   #8
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Quote:
Originally Posted by Shaggy View Post
Amazon isn't necessarily in the wrong here. This is mostly a move by the states to grab more tax revenue. Traditionally, a brick and mortar store is not required to charge sales tax if they do not have a physical presence in the state. IE, if Amazon's offices are located in state A, and I'm in state B, then Amazon is not required to charge sales tax on behalf of state B when I place an order.

What a couple of states are trying to do, however, is say that if an affiliate is located in their state, and you click on a link at that affiliate's website that takes you to Amazon, then Amazon has to pay them sales tax. They're saying that a web link from an affiliate in that state is the same as Amazon having a physical presence in the state, which is pretty far fetched.

Amazon pulling the affiliates is a little extreme, but what they're trying to do is force those companies to complain to their local state representatives to stop the proposed law from going through.

Especially since the link is really located in whatever state the ISP hosting the website is located. Geographically speaking.
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Old 07-02-2009, 12:58 PM   #9
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Reminds me of an attempt (circa 1989 if memory serves) by the Florida legislature to tax a company located in the state based not on their revenue from Florida, not on their revenue in the USA, but on the World Wide revenue across all divisions. That's akin to your income tax being based not on your own income, but that of your entire extended family.
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Old 07-02-2009, 01:05 PM   #10
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The Rhode Island issue is slightly different. I've attached an article on it courtesy of my CPA. Sorry I don't have time to give an abstract.
Attached Files
File Type: pdf 06209NewSalesTaxLaws.pdf (62.9 KB, 118 views)
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Old 07-02-2009, 01:08 PM   #11
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Another NC resident here...I don't blame Amazon one bit for cutting the affiliates...I'd do the same.
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Old 07-02-2009, 01:14 PM   #12
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seems to me that the states' plan to get extra money from internet and mail order affiliates may backfire and bring them even less revenue. after all, the affiliates were already paying taxes to the state - those taxes will be much less if businesses find it a financial / tax problem to do business with people in those states.
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Old 07-02-2009, 01:16 PM   #13
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Here's a link to a recent article, explaining in more detail Shaggy's post above.

http://tech.yahoo.com/blogs/null/145565
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Old 07-02-2009, 01:19 PM   #14
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Also, the way the law was written for affiliates, the person doing the purchasing didn't pay the tax, the affiliate did (who cares if it was more than they actually were paid). Otherwise, when you placed an order, you would have random amounts of sales tax charged, depending on the last link you clicked. If they just required charging of their states tax (and no local tax - that gets into nearly impossible for mail order places, due to crazy tax laws) for sales delivered to that state due to one or more affiliates being located in the state, Amazon might cave (especially since most other places get caught on this). It does put them in a position where mail order catalog come out ahead again (specifically exempted from this type of end-run at the federal level). Trying to track the sales based on the state where the affilate is located isn't difficult (they do it now), but collecting taxes on it would be a killer, either for the affiliates or on the customer (who would find a way to click someone from a state w/ no sales tax).
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Old 07-02-2009, 01:21 PM   #15
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As long as the states don't start taxing downloads, my company will be OK. Right now taxes are based on physical goods. If they start taxing downloads, a lot of e-publishing companies will suffer.
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