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Dave Taylor Posted 03.10.2010

The day Amazon cut me off

Affiliate tax hits home -- hard

By Dave Taylor
 

Here in Colorado, we've been battling a greedy bill from the state legislation that sought to tax all affiliate transactions by establishing a "nexus" for tax with any company that had any affiliate that sold more than $100 from that state. Effectively it would mean that all but the most unsuccessful of affiliate programs would then require those merchants to not only pay Colorado state tax on all transactions, but figure out that tax on a per city/county basis.

From what I've heard, that's over 400 tax zones in the state.

We fought it: I wrote letters to my representatives and many of my friends camped out and testified in hearings; but it was obvious from their reports back to me that the zeal to raise money through closing a perceived tax "loophole" was greater than their interest in hearing how affiliate merchants would leave the state, effectively meaning that there'd be no revenue, and we affiliates would be screwed in the process.

The bill passed in a modified form, but Amazon.com's Affiliate team still thinks it's too onerous. As of March 8, my account is shut down with them for the foreseeable future. (Here's the email I -- and may other Coloradans -- received.)

In a nutshell, Amazon believes that the sales tax isn't that onerous (indeed, the rise of Internet commerce has drastically affected tax revenue on transactions, as I have written about before) but that having to worry about hundreds of different taxation zones, and being potentially audited by any and all of these zones, is ridiculous.

Really, it's something that we need to address on a Federal level. We need a Federal online sales tax that is then distributed through some sort of formula so that it's easy to compute, easy to distribute, and helps alleviate the tax burden that brick and mortar stores face in an increasingly digital age.

Until then, well, Gov. Ritter, I sure don't appreciate losing a revenue stream because of short-sighted greed in the legislature. I encourage you and the rest of the Colorado legislators to reconsider the issue of implementing HB-1193 and tweak it before more and more affiliates drop us hard-working small businesses or we are forced to change our corporate headquarters to be in another state that is more Internet business-friendly.

Dave Taylor has been watching movies for as long as he can remember. Along the way he’s become a nationally recognized expert on technology, an accomplished writer, and award-winning public speaker and blogger. You can find his film writing at  www.DaveOnFilm.com and follow his film commentary on Twitter at @FilmBuzz or just email him at taylor@intuitive.com.

Enjoy this article? Sign up to get ColoradoBiz Exclusives. The opinions expressed in this article are solely that of the author and do not represent ColoradoBiz magazine. Comments on articles will be removed if they include personal attacks.

Readers Respond

Come on man - your lack of presenting the facts is deplorable. What you fail to clearly acknowledge (which you SHOULD since apparently you were there fighting it) in your rant about "zeal" and "greed" is that YOUR Colorado government LISTENED to its concerned citizens who were in affiliate programs and specifically REMOVED the wording creating nexus between businesses and the referred customer if the affiliate was from Colorado. The fact of the matter is that Amazon chose to drop their affiliates with NO JUSTIFICATION whatsoever, this was an attempt to make puppets out of Colorado Affiliates by blaming their questionable business judgement on the law. I'm disappointed that a company like CoBizMag with such a high reputation in Colorado is allowing you to write right-wing ultra-conservative propaganda and call it "truth". The truth of that matter is that all Colorado citizens should be mad as hell that Amazon thinks we are all a bunch of polititards like you that don't know how to read the facts and simply spew Republican mumbo jumbo about taxes. COBIZMAG - you just got added to the list of places that I'll be actively boycotting, with Amazon obviously at the top. Just have to throw it out there as well since I am a professional web developer. If you seriously think calculating and collecting tax on online transactions is really a problem, than you have serious issues, the biggest issue being a complete and utter ignorance of technology. Sure, in simple pea-brained organisms, the idea of looking up a "percent" value from a list of hundreds seems daunting, but to our computers that are doing millions to trillions of calculations per second, it is laughable. The ability to calculate sales tax is a simple, easily solvable computer program that has already implemented. Now - if Amazon had said "we will no longer sell to Colorado residents to protest the tax", then that would be a valid argument. But to say "we will no longer let people promote us in Colorado because we don't like the Colorado governments actions" is despicable and downright wrong. Way to show your true colors Dave and jump into evil the boat with those that are truly the greedy and zealous.

By Brad on 2010 03 24

"It is completely unrealistic to expect that an internet business maintain tax tables that can calculate taxes for all tax jurisdictions across the country." Fail. How does Target do it? Oh yeah...Amazon runs their e-commerce site and implements these tax tables. "People that by (sic) from my Amazon website could be from ANYWHERE in the world. Why should Colorado benefit from those sales that are outside of Colorado?" Again, fail. The law requires out-of-state retailers to help enforce collection of the 2.9 percent state tax that online consumers in Colorado are technically supposed to pay already, though few know about it or do it.

By Ryan on 2010 03 22

Yep..well said sir. Short sighted, greedy, poorly researched that is in red from the get go. Rhode Island lost money rather than making money. I can't really blame Amazon but I've had months of hard work go down the tubes without warning. I am about sick of our government, state and federal. They've gone rogue and do what then what without regard for the people.I am expected to live by my budget. They just raise taxes to cover lame brained programs. And Ryan, he did propose a solution, a federal level tax that can be distributed to the states. It is completely unrealistic to expect that an internet business maintain tax tables that can calculate taxes for all tax jurisdictions across the country. And while I am a Colorado resident, I am not an Amazon employee and should not be viewed as a Colorado toehold for Amazon. People that by from my Amazon website could be from ANYWHERE in the world. Why should Colorado benefit from those sales that are outside of Colorado?

By Robyn on 2010 03 22

It is so nice to see reasonable people making comments. I personally felt guilty buying Xmas presents on Amazon while local businesses are having such a hard time. The state (and Amazon)has given me the incentive to buy locally.

By Nancy on 2010 03 10

I agree with Truman and Ryan above. It is inappropriate and stupid to waive sales tax for remote internet sellers EXCEPT if they have a presence in Colorado. All retailers should be subject to sales tax ESPECIALLY if they are not in Colorado. What's up with protecting classes of businesses that do not contribute to the state's infrastructure? It is simple web programming to calculate tax correctly. Its done every day.

By Jim on 2010 03 10

Thomas, This problem has already been solved by Amazon itself! From the NY Times: "Most telling, calculating sales tax for online purchases is a problem that has already been solved. Walmart.com sells all kinds of things in all sorts of places. And because Wal-Mart has stores everywhere, it has to collect sales tax following all those rules. So does Target.com, and who runs Target’s Web site? Amazon."

By Ryan on 2010 03 10

Yes, I received the same letter from Amazon. If other Affiliate programs will not do business with people based in Colorado I will need to consider moving me and my businesses out of the state. I am all for leveling the playing field with appropriate taxes. Why can't the state just set a basic 4% or similar for the entire state and not have the crazy system we have here with all its taxing districts. The other solution I would offer the State of Colorado (and all the states) is to write some internet based software for them. This software would, given a USPS standardized address, give the appropriate sales tax(es) for the vendor. Given this kind of software all the states would then have an EASY way for any vendor to get the appropriate tax information for any transaction.

By Thomas Green on 2010 03 10

Bill- I received your point. I just did not understand why you thought it was poorly thought out.

By Ryan on 2010 03 10

Ryan: As I've said, I'm not anti tax. In fact, I think we citizens have a responsbility to pay for the government services we receive. I just think this bill is poorly thought out, and not good for Colorado. Bud

By Bud Bilanich on 2010 03 10

Oh, and by the way - they're ALREADY DOING THIS for New York, and a handful of other states - http://www.amazon.com/gp/help/customer/display.html?nodeId=468512/ So why the "i'm taking my toys and going home" attitude in CO? Cuz they think they can make a change and stop the new law in the short term. Obviously they're not about to cut out New York, but here they can probably make their stand without that big of a hit to their pocketbook. So the argument about their not being able to do it efficiently is bunk. They CAN and ARE doing it - they just don't WANT to.

By Truman on 2010 03 10

You are unfairly characterizing the actions of the legislature in your rhetoric and not making a rational case as to why Amazon.com should be exempt from paying sales taxes - or why you, as a local affiliate using Amazon's storefront should also be exempt. I agree with an earlier poster in that if anyone is being greedy here, it's you and Amazon. Having built ecommerce applicatins for over 15 years, I certainly understand the complexities of implementing local taxes on online sales, but guess what - that's how it is going to have to work and other retailers are doing it without complaint (see Target, WalMart, PetCo, and hundreds of others). If you can cool down the rhetoric and instead encourage the Federal and Local governments to actually have a REASONABLE discussion on taxes and online channels, then maybe we can get somewhere as a society. Until the anti-tax (aka "borrow and spend") folks can actually have an honest debate and make reasonable tax policy that gets the revenue to the right places and fairly, I think this is the only step that can be made from the state level. Amazon (and affiliates) have had a FREE RIDE for a very long time. Online channels are a substantial part of the economy, states can no longer look the other way in terms of the unfair competition against local brick and mortar retailers and missing the revenue that they would otherwise have received. I'm truly sorry that Amazon cut you off - but this isn't the state legislatures fault - it's your partner, Amazons. This is how it's going to be going forward until enough states implement similar policies (or a Federal policy is enacted, but i'm not holding my breath), and Amazon has to comply or they'll become the WalMart of online sales, where only products from offshore affiliates are offered. Wonder how that will affect their revenues. For what it's worth, i don't blame you either - i blame Amazon (and Jeff Bezos specifically), and have discontinued my relationship with Amazon to degree that i can (no more Prime membership, no more emails...)in protest and I would encourage other Coloradans to do the same. You're unfortunately caught in the middle. I hope that Amazon gets with the program and learns they can't escape the taxman any more than you or I can - at least not forever.

By Truman on 2010 03 10

Short sighted greedy Legislature? Zeal to raise money? Maybe you are the one that's being greedy Dave. How do you think states can balance the budget if every business fights every tax every time? Would you rather have no street lights, parks, police, fire departments, schools, garbage collection, child vaccinations or any other services you take for granted but don't want to pay for? What else do you think the state can cut? Do you like four day school weeks? Do you want people in Colorado to have no safety net at all? Do you want the greedy Legislature to put up the thousands of new homeless people at your house?

By Jon Pushkin on 2010 03 10

Bud - I submit that this bill will actually HELP small business by leveling the playing field. While it does hurt Amazon affiliates directly (because of choices Amazon has made), it will help the state immensely, and these affiliates still have choices. People can affiliate with the Tattered Cover (http://www.tatteredcover.com/affiliate) or any other merchant. If the legislature repeals this bill, they will show they have absolutely no spine and will signal that big business simply owns government (even more so).

By Ryan on 2010 03 10

I agree. There is nothing wrong with paying sales tax. All governments -- local, state and federal -- need tax revenue to pay for the services we citizens receive. However, this bill is just not common sense. It will drive successful entrepreneurs out of Colorado and give Colorado a "small business unfriendly" tag. What can I do to help repeal it? Bud Bilanich The Common Sense Guy

By Bud Bilanich on 2010 03 10

I'm sure you are upset at losing this revenue stream, but I fail to see how it is "greedy" to tax online merchants the same as local brick & mortar businesses, especially when the state has a $1.5 BILLION budget shortfall. Why should an out of state entity receive a tax subsidy and thus competitive advantage over Colorado merchants? You rail on the state legislature, but fail to propose solutions to help balance the budget. Please propose real solutions that will help with the budget shortfall.

By Ryan on 2010 03 10

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