Quote:
Originally Posted by FF2
The subject has been brought up in Congress (US) - and debated a few times since it gives internet sellers an advantage over bricks/mortar . . .
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Yep, and Amazon really likes having that advantage.
The only problem is that in their zeal to expand, they got really sloppy and brought on board what they euphemistically call 'affiliates'.
Yes,
Quill v. North Dakota, does require that a retailer have some kind of "physical presence" in a state in order to come under that states taxation statutes, but Amazon's so called affiliates enjoy a level of legal consanguinity with Amazon that exceeds that enjoyed by most other national brand franchise operators, and the presence of franchise operators within a state has long been deemed to be enough of a
physical presence to obligate the parent corporation to abide by local sales tax laws.
In a franchise operation, the parent company is basically only licensing their brand to the store owner, and though there may also be some level of marketing, and technical support, this is not required to meet the legal definition of a franchise.
So for example, your local Radio Shack store owner may sign a franchise agreement with Tandy corporation, and in return for fixed payments or a portion of profits, Tandy gives them the rights to sell under the "Radio Shack" brand. In this case Tandy also supplies national marketing, operational support in the form of store management software, and access to the national product catalog, but as I said above, those are not always elements of a 'franchise' the main element being the right to market under the parent company's brand.
Amazons relationship with their so-called 'Affiliates' is arguably even closer in many respects than that of a typical franchisee.
- The Amazon affiliates are given storefronts that appear right on Amazon's Main Web site (If I purchase a Radio Shack franchise it doesn't come with free floor space at Tandy's headquarters)
- The affiliate product offerings are fully integrated with Amazon's main product listings in the results displayed on the Amazon web site's product search page. So, unlike simple franchise operators, Amazon's affiliates aren't simply buying the right to sell an existing Amazon franchised product line, but rather to, in effect, BECOME A PART OF AMAZON'S NATIONAL PRODUCT LINE.
- Amazon collects payment, and sometimes even 'fulfills' orders by shipping from their own processing facilities (Most franchise operators run their own cash registers and handle their own local shipments)
So, whether Amazon chooses to make changes in the future, or not, the presence of these embarrassing affiliates on Amazon's web site may have
ALREADY created a
huge legal liability.
If this goes to trial, it will take about ten seconds to haul one of those "affiliates" into court, and establish that they -
A) PHYSICALLY RESIDE WITHIN THE GEOGRAPHICAL DOMAIN OF THE STATE.
- AND -
B) THAT THEY ENJOY THIS "EVEN CLOSER THAN A FRANCHISE" RELATIONSHIP WITH AMAZON, SELLING THEIR PRODUCTS UNDER THE "AMAZON" PARENT BRAND.
Amazon would probably defend the case by attacking on that second point, arguing that they simply 'sell through' and that consumers know that they are dealing with the affiliate merchants directly. This would be a tough argument to make though, given that Amazon trumpets the benefits of dealing through Amazon, which accrue BECAUSE the customer is
NOT dealing with the affiliate directly, but rather through Amazon (such as that of protecting the customers credit card billing information.)
Amazon Knows this, that's why they fell all over themselves rushing to shut down 'affiliate' operations in states that were trying to make them collect taxes.
This "close the barn door after you have already stolen the horse" is a little silly though, because as I said before, if you BREAK THE LAW, (as Amazon HAS) you don't just get to "Take a Mulligan" like in the game of golf and "do over" a bad shot.
It would appear that Amazon has made a bad play here, AND HAS ALREADY BROKEN THE LAW, so they should be attempting to find common ground, negotiate their best deal as part of a plea agreement, and move forward, not start taking actions that will just anger the government officials that they now need to reach an agreement with.