Amazon threatens to shut down California Affiliates program

[jalandar]

Originally Posted by karunaji

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.

Amazon has an EU Presence, so there is no distinction between Amazon UK and US in that regard, because as you say, the EU rules would apply thus giving a substantial nexus of jurisdiction.

There is no such nexus in these states except for the affiliates, who are more like publishers than like salesmen.

It may seem to be reasonable, but that only seems to be the case. The law is clear on this point, and the states have said as much. They know they are merely trying to keep the issue alive and push Congress to act.

[jalandar]

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.

The Constitution and the Supreme Court say otherwise. They require something to give the state jurisdiction over the company who otherwise has no presence in the state. If I am California, what jurisdiction does NY State law have over me? California currently asks on the state form for you to voluntarily report said owed taxes. It really is not Amazon's problem that people do not report the taxes they owe. Amazon is not subject to California's jurisdiction and thus cannot be ordered by the state to do anything.

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.

And it is up to the state to collect the tax from the citizens who owe it. They have jurisdiction over local businesses to require them to collect it from the customer, they do not have any such legal jurisdiction to demand others collect it that have no presence in the state.

California is now saying "if a web publisher in the state is lawfully allowed to place ads for your company on their web properties, then that means Amazon is legally present in the state and can be required to collect taxes as if they were resident."

That's simply not true under the constitution's commerce class, and well established Supreme Court precedent.

A Russian court can order me to do anything they want, but I have no legal obligation to comply, because they have no nexus of jurisdiction over me, regardless of how reasonable or fair you might think the demand to be. Same applies here.

I understand some say it isn't fair or what not. Fine, that's a valid view, but it doesn't change the law. The law is clear, and established. The only way that can be changed is by the US Congress. They have tried many times in the last 20 years to do that, and have failed every single time. The public screams and does not want it.

You say it is up to the voters, the voters speak through their elected Congress.

They do not want cross state sales tax collections.

So don't support passage of knowingly unconstitutional laws that only HURT legitimate California businesses, and achieve no collection of taxes.

Instead if you think you are right, convince the rest of your fellow voters of that fact.


Some reading on the subject:

The Quill case:
http://en.wikipedia.org/wiki/Quill_C...._North_Dakota

An article that mentions that such a rule would require vendors to comply with over 6,277 separate sales tax jurisdictions and 4,452 separate use tax jurisdictions.
http://www.taxfoundation.org/blog/show/963.html
What he doesn't mention, is that what exactly is taxable also varies greatly by jurisdiction. In many states, for example, a digital only good, such as an ebook or mp3 download, is never taxable. In others, they are. In some states no food items are taxable, in other states some "snack" type foods are, and then further the definition of what qualifies as a "snack" food varies. Is it really fair to ask a company that has no presence in a state and offers such a huge variety of products, to know and comply with literally thousands of variations of sales tax amounts and definitions of taxable and non-taxable goods?

Instead of passing interstate tax collection laws, Congress keeps sending the message to states to keep their hands off any "e-taxes"
http://en.wikipedia.org/wiki/Internet_Tax_Freedom_Act
First passed in 1998 and extended three times, most recently until 2014. While it does not exempt sales taxes, it also failed to include any provision to legally collect them.
There is a movement to make this act permanent, supported by many in Congress.

[Fbone]

My use tax for 2010 was $7.24 which I paid. Mostly for printer toner.

[Marseille]

Originally Posted by jersysman

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.

Well said, and rates aren't the only issue. What about exemptions in those thousands of city/county/state combos and the interpretations thereof? Will web sites be collecting special "sin" taxes on the products of ill repute in every jurisdiction? Any single regulatory system can be a nightmare to navigate. I'm not even sure there's a word for the pain of navigating thousands of different systems, but if there is, it's probably not the kind you can use in polite company.

Originally Posted by forbes

Forcing online vendors to collect local taxes would create significant burdens on interstate commerce. There are approximately 7,400 local jurisdictions in the U.S. and different definitions and exemptions further complicate the code. For example, is a cookie a “candy,” (which is taxed in most jurisdictions) or a “baked good,” (which is typically tax-exempt)?

Originally Posted by Dulin's Books

if they didn't like that then they could move their sales force to somewhere else- say Oregon- and then they wouldnt have to collect a sales tax.

That definitely seems more sane than taxing based on the point of consumption, and does less to encourage poor governance. Anyone who enjoys employment should want states competing to bring in businesses. That's a rare game where even the losers win.

Originally Posted by forbes

If you buy a book in a Seattle bookstore, the local sales tax rate applies, regardless of where you “consume” it. Why not tax Net sales the same way? Under an origin-based sourcing rule, all sales would be sourced to the principal place of business for the seller and taxed accordingly.

State officials protest the vigorous tax competition such a sourcing rule would spawn since some companies might locate their business in more hospitable tax environments. But that’s real federalism at work. Federal lawmakers should favor it over the cozy tax cartel the states want them to bless.

[RainingLemur]

Originally Posted by Fbone

My use tax for 2010 was $7.24 which I paid. Mostly for printer toner.

YOU FIEND.

[Dulin's Books]

Originally Posted by forbes
Forcing online vendors to collect local taxes would create significant burdens on interstate commerce. There are approximately 7,400 local jurisdictions in the U.S. and different definitions and exemptions further complicate the code. For example, is a cookie a “candy,” (which is taxed in most jurisdictions) or a “baked good,” (which is typically tax-exempt)?

perfect example:

Washington state started a "sin" tax 2 years ago for candy, soft drinks etc. Of course to tax candy you have to define candy. The legislature drew a line at flour content. So a Snickers was taxed as candy but a Kit Kat or Twix wasnt because those last too have significant flour in them.


Washington voters repealed the tax in a referendum in 2010.

Someone selling energy bars over the internet would have had to comply with two sets of rules for that one jurisdiction over the period of 12 months.

[Harmon]

Originally Posted by HarryT

Surely you have to pay use tax on your purchases if you consume them in your own state, don't you?

That's generally true. One problem is that most people aren't aware of the obligation to pay, and the mechanism for paying involves keeping track of all your purchases, adding them up, multiplying them by an obscure percentage (the base sales tax rather than the local one,) and submitting the form to the twelfth bureaucrat on the left on a Tuesday in November. In other words, the government assumes that not only will people pay, but that they will do an excessive amount of paperwork to do so, even though the liklihood of getting caught is practically non-existent.

In Illinois, where I live, it dawned on some bright fellow that maybe the state should make it simple. So they devised a nice simple form where you pay a flat amount based on your net income, filed along with your income tax return. (It's still a separate form, which is dumb, but better than what it used to be.) This new process will be generally ignored, but anyone who makes significant internet purchases should be smart enough to recognize that using the new form lets you understate your actual liability.

[Harmon]

Originally Posted by HarryT

Perhaps if tax evasion were not so widespread, state finances would be in a better shape?

Only in theory.

In practice, when the government collects an extra $1.00 in revenue, it increases spending by $1.20 or thereabouts. Every now & then I see a study that claims this, at any rate. And it sure seems to be true - Illinois raised taxes this year to "pay the deficit" and next thing you know, we have a budget that spends even more than last year.

Dealing with government spending more than it takes in is not a simple task, because of this kind of perverse effect of what appear to be obvious remedies.

For example, most people (generally but not always liberals) seem to think that if you want to collect more money for the government, all you have to do is raise the tax rates. But actual experience shows that if you want to collect more money, it is often better to lower the tax rates. There are lots of reasons for this - one is that when you lower taxes, business have more to spend on making things, which increases their profits, so they wind up paying more tax on the increased profit than they would have paid before. Another is that when you lower rates, it makes tax evasion or avoidance less profitable, so more people actually pay.

I think that there's a kind of psychological sweet spot in the overall tax rate which maximizes the revenue that can be collected. I believe it to approximate just under 20%, which interestingly, as a rabbi explained to me once, is what the ancient Hebrews collected by imposing a tithe. The trick was, they collected the tithe twice a year. I don't know if that's true, but I wouldn't be surprised if it were, because surveys routinely show 20% as an amount that people regard as a fair tax to pay.

[Harmon]

Originally Posted by soondai

My wife made a 90 dollar Amazon order on June 28 (we live in California), and we were charged 39 cents of sales tax. So somehow we paid tax on one item.

That happens when the actual seller isn't Amazon, but a business located in your state, or in a state which has a sales tax of its own.

[Harmon]

Originally Posted by Dulin's Books

Powell's won't. They're here in Oregon where there is no state sales tax. They hardly want to pay it to California

There should be no tax on the sale of books, food or medicine.

Please note that beer is all three. You might not understand this until you have had a few beers...

[theducks]

Originally Posted by HarryT

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.

Harry
Have you looked at the convoluted Sales and Use tax laws in the various states?
It takes a large company with many tax lawyers to determine which ITEMS are Taxable and at What rate.
Take Food: Single serving is taxable. A Sheet of Brownies is not.
Books and newspapers: Taxable. Periodical Magazine subscriptions: Not.
Thank goodness, California only has one List. There are States where the Counties and Cities have different 'what is taxable' and those may vary by rate.

The Feds can't do a thing (Except prohibit stepping across state lines to collect from non-residents) as these are 'Local States rights'

I used to sell books on the Internet (before Amazon) and had a Tax presence in other states (requires that I collect destination taxes , even if mailed from California) . Many of my customers, could not even tell me what County they lived in (the rate chart was by county) or accuratly tell me what the current rate was.
Mom-and-Pop don't stand a chance of filing 48 different Tax forms (IIRC 2 states have No sales or Use tax) on a varying periodic basis.

[jalandar]

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.

Read the decision, it is pretty clear that the nexus must be substantial, not sufficient.

`minimal connection' was found not to be enough. They also specifically ruled on the question of "attaching constitutional significance to a semantic difference" as not being sufficient to equal a physical presence (and they REQUIRE the presence be physical under the decision).

They state clearly that they must emphasize the importance of looking past "the formal language of the tax statute [to] its practical effect." In effect here, California is trying to create a fiction of physical presence where none clearly exists.

And then they go on to basically extol Congress to pass a law to create a way to resolve the underlying issue. Which they have failed to do since the early 90's when they first picked up the issue (though then about Mail order/Catalog, and not online).

If mailing catalog and even computer programs to help promote their sales products does not create a physical presence and substantial nexus, then how does web publishers who place links on line sites that may not even be hosted in the state, just admined by someone in the state, satisfy the clearly required "physical presence" that the court demands?

Originally Posted by rhadin

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.

More like publishers. Sales Agents take a more active approach than placing links. One of the backup decisions for Quill addressed this point as well. By this term, television stations that air ads for a company with no other nexus also create a physical presence nexus. How is that logical, much less in line with the Quill demand for a clear and defined physical presence?

As the Quill decision notes, "In National Geographic Society v. California Bd. of Equalization, 430 U.S. 551, 556 (1977), we expressly rejected a " `slightest presence' standard of constitutional nexus."

So slight presence is not enough, it must be substantial and physical.

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.

Big companies with big resources. You expect a small business like..well Dullin's to track almost 10 thousand tax jurisdictions? And which ones except digital goods and which don't? And which ones that do tax digital goods tax them differently than physical goods? By the time you add in all the different permutations of what is and is not taxable, you are taking tens of thousands of different rules. Then you have reporting requirements and forms they must file.

Late edit:
I also forgot to note that they addressed the issue of fairness as well. They noted that North Dakota was arguing that the "touchstone of Due Process is fundamental fairness" and that the "very object" of the Commerce Clause is protection of interstate business against discriminatory local practices, [thus] it would be ironic to exempt Quill from this burden and thereby allow it to enjoy a significant competitive advantage over local retailers.

The court rejected that argument, noting that the Commerce clause in the Constitution isn't about due process fairness, but about a constitutional limit on the power of the states that does not have to satisfy the fairness requirement of a due process limitation.

[joenunya]

Originally Posted by Harmon

I think that there's a kind of psychological sweet spot in the overall tax rate which maximizes the revenue that can be collected. I believe it to approximate just under 20%, which interestingly, as a rabbi explained to me once, is what the ancient Hebrews collected by imposing a tithe. The trick was, they collected the tithe twice a year. I don't know if that's true, but I wouldn't be surprised if it were, because surveys routinely show 20% as an amount that people regard as a fair tax to pay.

Interestingly enough, the idea of sort of a percentage did not come into existence until the middle ages. Percentage calculations were not around even in Ancient Greece, they did not have decimals or fractions needed to understand or express the concept in mathematical terms. It was their practice to count things in rate per 100 with no fractional amounts. Still the real use of the idea of a percentage did not develop until around the middle ages.

They did not even have the concept of something like one-third, one-half, one-tenth and so on. It was all based on some number relative to 100 or other round number. Back then they only knew about counting things in whole numbers. Seems weird but it's a factoid.

I mention that because it makes me laugh when I read that whatever "owners manual" for a given belief system states a tithe as a percentage, impossible unless dealing with a revisionist document. The mathematics just did not yet exist to describe percentages as fractions or anything more than gross ratios in relation to some integer, typically 100 but it could be any integer that worked for the situation. And any revisionist document calls into question the motivation for the info.

Again not anything more than a historical aside because almost all of these "owner/operator manuals" use some sort of percentage, it's just interesting to me.

Leave the thread to beat it's dead horse with all the 'expert' rants, errr, testimony.

[karunaji]

Originally Posted by jalandar

Amazon has an EU Presence, so there is no distinction between Amazon UK and US in that regard, because as you say, the EU rules would apply thus giving a substantial nexus of jurisdiction.

You are trying to apply a Federal law to the EU and that's simply wrong. Please, try not to see the world as the US extension only. The EU doesn't care about US law about substantial presence. The issue is much simpler, if a foreign seller wants to sell things to another country, it has to comply with certain things, otherwise its imports will be banned.

It may seem to be reasonable, but that only seems to be the case. The law is clear on this point, and the states have said as much. They know they are merely trying to keep the issue alive and push Congress to act.

Probably less clear than you try to make it otherwise there wouldn't be an issue. I think that Amazon is going to lose this because when you start boycotting your own business, it is not going to end well. I personally would prefer books (paper or electronic) to be sold tax free in all jurisdictions.

[BearMountainBooks]

Originally Posted by karunaji

You are trying to apply a Federal law to the EU and that's simply wrong. Please, try not to see the world as the US extension only. The EU doesn't care about US law about substantial presence. The issue is much simpler, if a foreign seller wants to sell things to another country, it has to comply with certain things, otherwise its imports will be banned.



Probably less clear than you try to make it otherwise there wouldn't be an issue. I think that Amazon is going to lose this because when you start boycotting your own business, it is not going to end well. I personally would prefer books (paper or electronic) to be sold tax free in all jurisdictions.

The law is clear--if Amazon loses it will merely be because of the convenience of politicians giving in to allowing another tax. Our Constitution forbids double taxation, but you'll notice that we have income tax, sales tax, and property tax. If I already pay an income tax on everything I learn, then a sales tax is a double tax. That shouldn't be happening. Every once in a while, we're allowed to "write that off" but only on a state-by-state basis. The fact is, by Constitution, it should not exist. Property tax is an additional tax that also should not exist--BUT if you don't make a lot, you "can write that off" as well--sort of, so long as it is greater than the standard deduction.

See, the actual law only applies to the extent that Congress allows it to. And if they want the money badly enough from Amazon, they will simply "redefine" the English words until they say it's okay to tax. That will not make it okay, nor will it change the original intent of the law.

As someone else said above: If they can tax Amazon for having affiliates, then a TV commercial running in my living room constitutes a "presence."

The heart of the matter, once again, is states have overspent their budgets. THAT is the real problem. Now they look to redefine entities to gain more taxation.

And remember, Amazon is not the loser in this. The people having to pay the tax--consumers--is the real loser.