Amazon threatens to shut down California Affiliates program

[basschick]

just to clarify, amazon doesn't pay a referral fee - they pay a small percentage of actual the actual sales money collected that was referred via an affiliate link.

[doreenjoy]

Originally Posted by L.J. Sellers

An article from TechCrunch

"Due to a sales tax measure recently passed in the California state legislature and on its way to be signed by Governor Jerry Brown, Amazon has sent all participants in its California Amazon Associates program the below email, warning of the termination of the program..."



With states so financially strapped for cash, I expect to see more of these sales tax measures, and I'm not sure Amazon can win this one in the long term.
L.J.

Considering my CPA told me the other day that there is already a U.S. Supreme Court decision that declares these state laws unconstitutional, I think Amazon can make a pretty good case that the California law needs to be struck down.

[jalandar]

Originally Posted by doreenjoy

Considering my CPA told me the other day that there is already a U.S. Supreme Court decision that declares these state laws unconstitutional, I think Amazon can make a pretty good case that the California law needs to be struck down.

They are making this case, but not in CA, in NY.

They picked their battleground to be NY to fight this.

The states know it will likely get struck down. They are doing it to make a point and to try to force Congress to take action. Congress repeatedly fails to pass it, because..well..half the internet goes up in arms pushing everyone to write their congress critters each time it comes up =) So they table it.

The court case left it up to Congress to develop a way to enforce cross state collection of sales/use taxes.

The states have gotten impatient, since this court case was originally decided back in the 70s when mail order was becoming real big. The late 90's and since have seen the internet retail business explode at such a huge rate, that the issue is really front and center for every state now, except those rare ones that don't have a use tax of any kind.

Frankly, I'm of the opinion that Amazon should file suit against all the states that have done this, join the cases in the 4th District, and start to collect and place into trust the use taxes that would be collected, to establish an undeniable precedent on the matter. Doing so would also likely cause all the other states contemplating this to table it while the case works its way through the court system.

To those who are arguing that it is right that the tax be paid, you don't get what is going on. The states always HAVE a legal right to collect the tax, but they must collect it from their residents. What they are trying to do now is take entities that are not under their legal jurisdiction and give them a legal obligation to collect the tax.

THAT is why this is being fought. It would be akin to a Russian court telling me I have to collect Russian imposed use taxes from Russians who buy one of my products online. They have no jurisdiction over me, and no right to make that demand.

Now the reason the residents of the states don't remit the tax voluntarily...well hell, most of us feel, rightly so IMO, that California is taxing us way too much as it is. The tax and fee regimes in this state are the worst in the nation. And the idiot voters in California passed a proposition that allowed them to pass budgets with a less than 2/3rds vote, thus making it easier for them to pass more idiotic tax and fee regimes.

A county supervisor in southern California suggested this week that 13 counties from central to southern California start an effort to create a new state and succede from California. She has my vote. Sadly, the movement would require a statewide vote, and the northern counties would never agree to it. Why are these counties upset? The state didnt want to cut spending, and were too scared of what voters would do to them if they raised taxes more, and were upset over the fact they weren't getting a paycheck because a new law docks their pay if they cant pass a balanced a budget. So the state decided instead to SEIZE from county/city governments the portion of vehicle registration and other fees that has legislatively belonged to the local governments.

If it wasn't for family, I'd have left California long ago. And even that's getting to be not enough of a reason to keep me here. Nevada and Oregon are both looking might good right now. More business friendly, more libertarian, and lower cost of living.

[Elfwreck]

Originally Posted by jalandar

A county supervisor in southern California suggested this week that 13 counties from central to southern California start an effort to create a new state and succede from California. She has my vote. Sadly, the movement would require a statewide vote, and the northern counties would never agree to it.

All the norcal people I know would love to split the state. Some claim this would mean we keep our water, or charge for it; I don't know the water politics enough to know how true that is. But the state is HUGE, enough so that it's hard to get laws passed, hard to allocate money, hard to plan for the future. Splitting it would allow for the two halves to pursue separate interests. I'd love that.

If it wasn't for family, I'd have left California long ago. And even that's getting to be not enough of a reason to keep me here. Nevada and Oregon are both looking might good right now. More business friendly, more libertarian, and lower cost of living.

As nice as those sometimes look... I can't count on being safe in another state. I can't count on being safe outside the SF Bay Area; someone who's openly Pagan is still a walking target in much of the US. And while I could potentially deal with the risks, I won't put my kids through them. (There are other places as tolerant--in the middles of large cities. There's no advantage in moving from SF to New York.)

[karunaji]

Originally Posted by jalandar

It would be akin to a Russian court telling me I have to collect Russian imposed use taxes from Russians who buy one of my products online. They have no jurisdiction over me, and no right to make that demand.

I don't know about Russia but Amazon US already collects import tax and Latvian VAT on shipments to Latvia on behalf of Latvian government. Previously Latvian shoppers had to go deal with customs directly and pay the tax themselves and it was a big inconvenience. Now Amazon apparently has made a deal with the Latvian authorities that they can collect import taxes in advance at the time of purchase and all imported items from Amazon will be cleared automatically by the customs agents. I don't know exactly what goes behind the scenes but I only know that it is a big relief to shoppers.

Amazon UK also is obliged by law to collect Latvian VAT for shipments to Latvia. In this case it is due to certain EU VAT rules which apply to big companies that exceed certain limits of commerce.

The analogy is not perfect because California is not another country. Still, it sounds reasonable that Amazon would be asked to collect taxes on behalf of the state authorities.

[JayB]

Originally Posted by jalandar

They are making this case, but not in CA, in NY.


To those who are arguing that it is right that the tax be paid, you don't get what is going on. The states always HAVE a legal right to collect the tax, but they must collect it from their residents. What they are trying to do now is take entities that are not under their legal jurisdiction and give them a legal obligation to collect the tax.

THAT is why this is being fought. It would be akin to a Russian court telling me I have to collect Russian imposed use taxes from Russians who buy one of my products online. They have no jurisdiction over me, and no right to make that demand.

I dont really know what you are saying here. Its always up to the vendor to collect sales tax. How would a state be able to charge you for something they did not even know you bought.

This is not a new tax this is just getting people to pay what they would already pay if they bought in a local store. This would level the playing field for local business. I see many things online being sold for the same price locally but throw in sales tax and people will bypass their local retailers to save a few bucks online.

Whether your individual state sales tax is too high is up to the voters and local government in your state.

[cfrizz]

I think the only way they will be able to pull it off is if congress simplifies it as much as possible. One uniform tax that all vendors automatically tack onto the price at time of purchase, to be given to the state that the purchaser lives in. That way the states all get a share in pot.

It is the only fair, sane way in which to make this come to pass.

[vaughnmr]

Originally Posted by JayB

I dont really know what you are saying here. Its always up to the vendor to collect sales tax. How would a state be able to charge you for something they did not even know you bought.

This is not a new tax this is just getting people to pay what they would already pay if they bought in a local store. This would level the playing field for local business. I see many things online being sold for the same price locally but throw in sales tax and people will bypass their local retailers to save a few bucks online.

Whether your individual state sales tax is too high is up to the voters and local government in your state.

You are the one that doesn't understand. Out of state vendors are NOT required to collect your state sales taxes, YOU are (use tax). This is a ruling by the Supreme Court. YOU are the one that has been cheating the local business, not the out of state vendors, by not paying your use tax.

[JayB]

Originally Posted by vaughnmr

You are the one that doesn't understand. Out of state vendors are NOT required to collect your state sales taxes, YOU are (use tax). This is a ruling by the Supreme Court. YOU are the one that has been cheating the local business, not the out of state vendors, by not paying your use tax.

Just so YOU know I dont cheat anybody out of anything. I pay my taxes and always shop locally unless absolutely necessary to buy online. I've spent less than a $100 for the whole year online.

I reread my last post and my tone did not come across like I meant it. I honestly was asking how could the state charge someone taxes on something they did not even know you purchased.

So if I'm understanding you correctly someone who shops online is supposed to track all their out of state purchases and pay their state the sales tax.

If this is the case it would be news to just about everyone I've ever talked to. I do not know a single person who does this. Some of the people I know buy just about everything from Amazon to avoid paying sales tax.

[RainingLemur]

Originally Posted by JayB

I reread my last post and my tone did not come across like I meant it. I honestly was asking how could the state charge someone taxes on something they did not even know you purchased.

Through magic.

I mean, speculation. I always get the two mixed up.

[rhadin]

The question that the U.S. Supreme Court has not yet addressed and which is the basis of the laws passed by California, New York, and other states, is this: What is a sufficient nexus? The Supreme Court said having no physical nexus except shipping into a state is insufficient. But in California, Texas, and New York Amazon may have a sufficient nexus -- the affiliates or subsidiary businesses that are wholly owned by Amazon. The issue is not clear cut and Amazon does not have a guaranteed winning hand.

The affiliates are in essence sales agents. Call them whatever you want, but the reality is that is what they are. That Amazon prefers to call them something else doesn't make it so. Just like with insurance, the affiliate gets paid for a sale made through the affiliate's link. I personally think that is a sufficient nexus if the affiliate is within the state. But it remains to be seen what the courts will think.

Amazon also, in Texas, for example, has distribution warehouses. That is a physical presence. The fact that Amazon chooses to have a wholly owned subsidiary run the warehouse does not seem to me to be sufficient separation to avoid the tax issue. I think the way it could be avoided would be if the warehouses were independently owned by persons or companies that have no affiliation whatsoever with Amazon except for a limited term contract to provide distribution services.

As for incorporating in another state such as Delaware does not solve the problem if you are still running a warehouse in California. If incorporating in a low tax state were a panacea, there would be no companies incorporated in higher tax states.

As for how to track the sales tax for each jurisdiction, there are several software programs that do this. After all, Barnes & Noble, Sears, the Agency 6, and WalMart, for example, have to collect sales tax for online sales and do so, so clearly this is not a mountain that can't be readily conquered.

[BearMountainBooks]

Originally Posted by Skydog

NO -- countries "fall apart" because they spend too much of what doesn't belong to them in the first place!!

I'd agree with this.

California did pass a law requiring them to collect sales tax, but the supreme court has already ruled on this from other states: Unless they have a presence in Cal. they do not have to. California (like other states) is trying to redefine "presence" to include affiliates and anyone who has ever looked westward for more than 3 seconds.

Proving it... well.

I'm not for collecting the tax. We pay enough taxes already. California made the decision to have some of the highest pensions in the US. They have some of the highest pay in the US for the public sector as well. Turns out their tax base doesn't support that pay (and other services.)

So they go looking for more tax base.

I shop where it is cheapest and include tax in that. Amazon is far from the cheapest vendor MANY times. I don't think they have a huge advantage over other retailers. I shop from Walmart online all the time. I have to pay the tax on that and it's often cheaper than Amazon or other retailers.

[BearMountainBooks]

Originally Posted by rhadin

The question that the U.S. Supreme Court has not yet addressed and which is the basis of the laws passed by California, New York, and other states, is this: What is a sufficient nexus? The Supreme Court said having no physical nexus except shipping into a state is insufficient. But in California, Texas, and New York Amazon may have a sufficient nexus -- the affiliates or subsidiary businesses that are wholly owned by Amazon. The issue is not clear cut and Amazon does not have a guaranteed winning hand.

The affiliates are in essence sales agents. Call them whatever you want, but the reality is that is what they are. That Amazon prefers to call them something else doesn't make it so. Just like with insurance, the affiliate gets paid for a sale made through the affiliate's link. I personally think that is a sufficient nexus if the affiliate is within the state. But it remains to be seen what the courts will think.

Amazon also, in Texas, for example, has distribution warehouses. That is a physical presence. The fact that Amazon chooses to have a wholly owned subsidiary run the warehouse does not seem to me to be sufficient separation to avoid the tax issue. I think the way it could be avoided would be if the warehouses were independently owned by persons or companies that have no affiliation whatsoever with Amazon except for a limited term contract to provide distribution services.

As for incorporating in another state such as Delaware does not solve the problem if you are still running a warehouse in California. If incorporating in a low tax state were a panacea, there would be no companies incorporated in higher tax states.

As for how to track the sales tax for each jurisdiction, there are several software programs that do this. After all, Barnes & Noble, Sears, the Agency 6, and WalMart, for example, have to collect sales tax for online sales and do so, so clearly this is not a mountain that can't be readily conquered.

Hmm. I'm not a sales agent. I do not take any money or make any "sales." All I do is post about products (usually books via review.) I sometimes recommend these products and sometimes I don't. I provide a link to Amazon as an associate so that people can view that product or go to the Amazon site. I don't work for Amazon; I merely mention products. If I so chose, I could link to Smashwords and also B&N and refer customers there.

Yes, Amazon has distribution warehouses in Texas. They also have an agreement with the state that it does not constitute a physical presence for tax purposes. Recently the state discussed changing that agreement. Amazon was fine with it--and intended to leave. Now, before everyone calls "foul" keep in mind that companies get tax incentives from states ALL THE TIME. Almost without exception large companies get tax exceptions BEFORE they agree to build a warehouse or manufacturing plant or whatever in a particular state. This is essentially what Amazon did when the put the warehouse in Texas and structured it such that they didn't run it. It was not done behind the scenes or in an alleyway. Anytime Texas decides to change the law/agreement, they can. And Amazon can choose to leave.

I assure you that as an Amazon Affiliate, I am not an employee of Amazon. I don't make enough to even get a check every month, so rest-assured those who do make a lot as a referral, do a lot of footwork on their own to find products, write about them or attract people to THEIR website--which then leads to Amazon.

California will actually take in less revenue because of this law. Those who were affiliates at least paid income tax. Without that income, they won't owe as much in taxes.

[CommonReader]

Originally Posted by jalandar

THAT is why this is being fought. It would be akin to a Russian court telling me I have to collect Russian imposed use taxes from Russians who buy one of my products online. They have no jurisdiction over me, and no right to make that demand.

You are aware of the fact that the US is one of only a handful of countries that collect taxes from their citizens even if they are permanent residents abroad and also earn their income abroad? We are talking here about normal middle class incomes earned by US citizens who e.g. followed their spouses to Europe, not about some fantastically rich hedge fund speculators living in tax havens.
The US has badgered foreign banks for years into a position of collecting taxes for the US treasury. Now this is getting even worse with the "Foreign Account Tax Compliance Act": http://lexicon.ft.com/Term?term=FATCA

Looked at from abroad it is bemusing that the US goes to great lengths to install a spying network snooping on finances of US citizens across the globe, yet there seems to be no real desire to track down billions of Dollars worth of unpaid sales tax in the US itself.

[Marseille]

Originally Posted by BearMountainBooks

I'm not for collecting the tax. We pay enough taxes already. California made the decision to have some of the highest pensions in the US. They have some of the highest pay in the US for the public sector as well. Turns out their tax base doesn't support that pay (and other services.)

I can foresee some ideal situation where I would support forcing online retailers to collect sales tax everywhere. It is not this situation. Your point is well taken. States had basically already written off online sales tax revenue and filled the gap from other avenues. Now that those alternative wells have dried up, they're looking to push the limits of the constitution to dig some new wells, with no intent of letting the others recharge.

Governments really should study hydrology. They're pushing for some future droughts far nastier and far longer than what we have now. You can't just tap every source of funds the way Charlie Sheen taps every...well... and expect flows not to peter. When the resource is running low, you gotta do some conservation.

If states weren't fee-ing and taxing and regulating their tax base to death already, a nice sales tax-only solution and aggressive collection thereof has a lot going for it, IMO, at both the state and federal levels. There are ways of dealing with the constitutional issues as a community, but so long as states behave as bullies, neither businesses nor consumers are going to want to engage in the spirit of cooperation necessary to get there.