Amazon threatens to shut down California Affiliates program

[HarryT]

Originally Posted by Andrew H.

I do feel bad for the local people who want to start their own business and find that their sale prices are higher than Amazon's because they have to pay 7-9% tax if they sell, say, bicycle equipment...but customers who buy from Amazon do not have the pay this tax.

I'm sorry to disagree, Andrew, but you DO have to pay it - as "use tax". There's no excuse for tax evasion; not paying it is stealing from everybody.

[HarryT]

Originally Posted by jersysman

If it does come to that (I still have doubts) then they will effectively shut down sites such as ebay and the like

Why do you say that? eBay manages to operate very successfully in markets where VAT has to be paid, and the sky has not fallen yet .

[Kali Yuga]

Originally Posted by BooksForABuck

I think they built themselves largely on the affliate program and it's a shame that, now that they're dominant in the eCommerce arena, they are abandoning their affliates.

Amazon built themselves on their own hyper-efficiency and ability to stock far more items than any physical store could ever offer.

The affiliate program is not, and never was, all that important to Amazon. It's a way to fill in some of the cracks rather than stock certain items on their own dime.

[jersysman]

Originally Posted by HarryT

Why do you say that? eBay manages to operate very successfully in markets where VAT has to be paid, and the sky has not fallen yet .

That's because with VAT (correct me if I am wrong) you pay or collect a standard fee, whatever it may be, i.e. 10%, 20%, etc. If you had to collect sales tax, you would need to know over 50 different rates (50 states that vary by county and city). It would be a nightmare for someone who just wants to sell some surplus books.

[HarryT]

Originally Posted by jersysman

That's because with VAT (correct me if I am wrong) you pay or collect a standard fee, whatever it may be, i.e. 10%, 20%, etc. If you had to collect sales tax, you would need to know over 50 different rates (50 states that vary by county and city). It would be a nightmare for someone who just wants to sell some surplus books.

But the point is that eBay does all for you. You don't pay the VAT - eBay does. Is there any reason that it couldn't do the same for sales tax? eBay knows where the buyer lives, and could presumably do all the appropriate calculations and make the payment automatically.

[ATimson]

Originally Posted by HarryT

eBay knows where the buyer lives, and could presumably do all the appropriate calculations and make the payment automatically.

eBay knows where the buyer lives, but there's no authoritative lookup source to go "okay, I'm selling this type of item to a person living here on this day, what's the tax rate?" (Yes, both item type & day of the year can change the tax rate.)

And is the tax rate for the billing address or the shipping address? If the former, I could see Delaware and Oregon post office boxes getting a lot more popular...

[joenunya]

Originally Posted by Dulin's Books

and there is the argument about where the sale is taking place.

is it taking place in the state where the company is located, where the customer is physically located or where the server that hosts the site is physically located?

it makes the most sense to me to have that be where the business is located. my business is in Oregon. We have no sales tax. Customers come to my store and dont get charged a sales tax. just as if they came to my physical store in a local mall.

If we change that and say the transaction takes place where the customer is physically then I, the small business owner with very little margin and nearly 0 profit, would have to know the tax law in every state AND country( and perhaps provinces or states in those) my customer's are from. that's too costly a burden. it would kill small business because only large businesses would be able to afford to keep track of it all.

if you want to change it to where the servers are located I will set up a server farm tomorrow and business's will flock to it because there is no sales tax here. Oregon will benefit from the increased revenue of my profit making and states with sales taxes will lose revenue. that would be ok with me

Also in the case of a customer from Oregon buying something from me in person here in CA, if they show me their drivers license I cannot legally charge them CA sales tax due to reciprocity for state sales tax laws. Or has that changed since I last checked into it, oh I guess about a decade back.

It is very complicated but it is time for Amazon to step up and make sure this gets handled. Then again to try and wade through the taxes paid for each district in a state it is insanely complicated. Some places here in California the sales tax is about 8% but in say downtown San Francisco the sales tax is over 10%. How is a company like Amazon to know what amount of tax to collect? With the penalties for not collecting the proper tax as draconian as they are don't blame Amazon for simply not wanting top put the business at risk by no longer allowing sales from affiliates in some areas.

States have an obligation to make it EASY to pay our taxes but have done anything but and it is illegal for the Fed to collect any sort of tax for individual states which is as it should be if you believe in the very important issue of state's rights. State's rights has already been smashed to almost nothing as it is and I don't care to see it made worse over this.

I am in the process of moving out of CA because of the mess it is due to all manner of reasons not the least of which is I am not going to pay taxes for the state to go bankrupt in the next 2-3 years. But if I make a mistake on taxes somewhere along the line CA will come take my home or anything else they want even if they made a mistake to begin with. So because of a soon to be formalized new contract with a client, my attorney has incorporated me in Delaware and I am moving to WA as well as Wyoming and will never look back at the state of my birth.

But Amazon is not in the wrong here. But neither are they lily white. What should have been done a decade back was to build a system when the numbers were manageable and the system could be refined over the years. Now it is going to cost 10x what it would have for the past decade or so. Oh, the consumer was not absent blame here as well. If you remember back a decade when this issue began to appear, everyone who had a keyboard and zero ability to reason was on a soapbox that they were completely against states daring to collect tax on these sales for things which otherwise would have been purchased in the state.

This issue will have some significant effects on all online commerce in the US as well as items purchased OUTSIDE the US as well. Because we are required to report and pay those taxes as well.

[joenunya]

Originally Posted by Daithi

Amazon has two subsidiaries, A9 and Lab126 both in the Silicon Valley, that work on developing Amazon's current and future technology. However, these are completely seperate businesses that are seperate from the retail business of Amazon (essentially Amazon just works as a venture capitalist). Other states have tried to link these types of subsidiaries with corporate parents so as to force the parent company to collect and pay sales tax, but they have all failed. California has even tried this in the past and lost.

If California suceeded this time around it would be truly catastrophic for them. A9 and Lab126 would leave California and so would hundreds of other tech firms that are started by venture capital from firms that don't want to collect sales tax -- not to mention all the tech firms that don't get funded in the first place. If Amazon funding tech firms like A9 and Lab126 is deemed to provide a nexus then California could expect to see VC dry up overnight. Not too smart.

Well explained and reasoned. Gets to the core of what delaying addressing this issue has created. It is now a rat nest of over complications. Even a simplified tax schedule won't work because municipalities are indeed entitled to the collection of their local taxes on sales of items which would otherwise be purchased locally and subject to sales tax.

[DianNC]

With reference to a complicated tax schedule, I think that would only affect small online retailers operating out of California who will now be forced to collect tax. Large enterprises obviously have the software already in operation.

Barnes & Noble, for instance, applies my county's 8.25% sales tax rate to my NookBook purchases instantaneously, once I hit the "Order" button.

It amuses me that they always list the "Shipping & Handling" charge as FREE (instead of N/A, which I think would be more appropriate) since they're supplying the purchase electronically

[Kali Yuga]

Originally Posted by joenunya

How is a company like Amazon to know what amount of tax to collect?

Amazon is one of the top database services in the world, and they already collect sales taxes in multiple jurisdictions. It would take their db guys a (sleepless) week to implement a system for all 50 states.

Even for small businesses, it's not necessarily that bad. Hosted ecommerce services like Vae already offer sales tax services for their clients, you can buy national sales tax databases for $50/month.... It is really not that hard.

The real issue is that they don't want to lose a competitive advantage.

Originally Posted by joenunya

States have an obligation to make it EASY to pay our taxes...

No they don't. It is in their best interests to do so, but they could make a completely unworkable tax code if they really wanted.

Originally Posted by joenunya

I am in the process of moving out of CA because of the mess it is due to all manner of reasons not the least of which is I am not going to pay taxes for the state to go bankrupt in the next 2-3 years....

CA is "going broke" because its citizens strangled its ability to raise property taxes in the 70s with Prop 13. As a result, CA is more heavily dependent on income and sales taxes, i.e. the types of revenue that drop during a recession. (Property taxes are generally much more stable, predictable and consistent.)

So if you're up in arms over the State going broke, just remember that it's because you and everyone else in CA got a huge break in property taxes for the last 35 years.

Meanwhile, every state is facing lost revenues due to the recession and has a complex tax code. You'll get a little bit more protection by incorporating in Delaware, but ultimately there are only so many places you can run, nor does everyone want to up and leave because taxes got a little higher.

[Nyssa]

1. What does being an Amazon affiliate entail?

2. How does one benefit from being an Amazon affiliate?

3. How does Amazon benefit from having affiliates?

4. How does Amazon pulling out of the program now affect its former affiliates?

[Andrew H.]

Originally Posted by HarryT

I'm sorry to disagree, Andrew, but you DO have to pay it - as "use tax". There's no excuse for tax evasion; not paying it is stealing from everybody.

I should say that I feel sorry for local businesses because Amazon customers *do not* pay the tax. I understand that they are required to, but, as a practical matter, I would be surprised if the compliance rate were above 5%.

[Andrew H.]

Originally Posted by Nyssa

1. What does being an Amazon affiliate entail?

2. How does one benefit from being an Amazon affiliate?

3. How does Amazon benefit from having affiliates?

4. How does Amazon pulling out of the program now affect its former affiliates?

Probably an actual affiliate can answer this question better - but in general an affiliate will have a website with links to Amazon. If someone clicks on those links to buy something from Amazon (instead of going to Amazon's website directly), the affiliate will get a small percentage of the sale. For example, someone might have a website on backpacking, and have a part of the website that reviews backpacking equipment, and has a link to Amazon underneath the equipment they review. So if you like their review of a tent and want to buy the tent and do so via that link, they will get a referral fee from Amazon.

If Amazon drops its affiliate program, the affiliates will no longer get the referral fee.

[Nyssa]

Originally Posted by Andrew H.

Probably an actual affiliate can answer this question better - but in general an affiliate will have a website with links to Amazon. If someone clicks on those links to buy something from Amazon (instead of going to Amazon's website directly), the affiliate will get a small percentage of the sale. For example, someone might have a website on backpacking, and have a part of the website that reviews backpacking equipment, and has a link to Amazon underneath the equipment they review. So if you like their review of a tent and want to buy the tent and do so via that link, they will get a referral fee from Amazon.

If Amazon drops its affiliate program, the affiliates will no longer get the referral fee.

Ahh..okay. Thank you.

[ImogenRose]

Originally Posted by Andrew H.

Probably an actual affiliate can answer this question better - but in general an affiliate will have a website with links to Amazon. If someone clicks on those links to buy something from Amazon (instead of going to Amazon's website directly), the affiliate will get a small percentage of the sale. For example, someone might have a website on backpacking, and have a part of the website that reviews backpacking equipment, and has a link to Amazon underneath the equipment they review. So if you like their review of a tent and want to buy the tent and do so via that link, they will get a referral fee from Amazon.

If Amazon drops its affiliate program, the affiliates will no longer get the referral fee.

Thanks.