The Next Big Battle For Online Business; Sales Tax; California Becomes Latest State To Tax Online Sales & Amazon Cuts Affiliates Off
According to the Los Angeles Times a new California state law will require large out-of-state retailers like Amazon to collect sales taxes on purchases that their California customers make online.”
In response, Amazon and Overstock.com plan to cease paying commissions to California Internet marketing affiliates for referrals.
“About 25,000 affiliates live in California, especially larger ones with dozens of employees, are likely to leave the state, said Rebecca Madigan, executive director of trade group Performance Marketing Assn. The affiliates combined paid $152 million in state income taxes last year, she pointed out.”
“California is the seventh and largest state in the country to pass a law to collect taxes on out-of-state Internet sales.
“Illinois, Arkansas and Connecticut passed laws earlier this year, North Carolina and Rhode Island passed them in 2009 and New York in 2008. (Amazon has sued to overturn the New York law losing in the lower courts. The company is paying sales taxes into an escrow account pending an appeal).”
Last fall, Texas officials sent Amazon a tax bill for $269 million, after determining that the retailer’s Dallas-area warehouse, owned by a subsidiary, qualified as a local address under state tax rules. Amazon had argued for years that without stores and offices in the state, it had no obligation to collect sales tax there. The dispute is to be decided in a coming administrative hearing.
In retaliation for Texas’s move, Amazon said last month that it would close the warehouse next month and cancel plans to build another.
Actually in each state that has passed a sales tax on online purchases, Amazon has cut off the affiliates, and threaten to or moved distribution centers out of states passing the sales tax measures.
But as states are literally starving for additional revenue more and more states are going to want to tax online sales.
So the issue seems to be is how long can Amazon and other online realtors continue to punish states that enact sales tax measures?
In a few years how many states will be left that haven’t enacted sales tax on online sales?
Looks like just maybe a handful with small populations.
A national sales tax is the answer Amazon is pushing for but current the US federal government doesn’t even have a federal sales tax. Federal government have valued added taxes and levies in many countries but a national sales tax seems just like another level of taxation as I doubt that any state will want to give up the revenue especially if they have already started to collect it.
Either way sales tax on online sales seems to be the next big issue for the Internet and its users.
and Amazon is going to run out of options when a state like Idaho becomes the only state not to require a sales tax to be collected on online sales