When Colorado politicians pushed an affiliate tax designed to bolster their state's revenue on the back of out-of-state retailers, one thing was certain: the effort would backfire.
After all, we've known for years that states which have tried to find a way to collect sales tax on out-of-state internet sales fail to raise revenue.
Amazon wants your business this holiday shopping season. If you use its Price Check app while you're out shopping on December 9 or 10 in the US, the e-commerce giant will give you a 5% discount on up to three products you 'price check' - for up to $15 in total savings.
Understandably, brick-and-mortar retailers aren't exactly thrilled. In fact, the Retail Industry Leaders Association (RILA) appears downright angry.
Despite questions about the global economy and volatility in the
markets, 2011 proved that there's no place quite like the technology
industry, where innovative new services and products continued to win
adoption by both consumers and businesses.
With 2012 just around the corner, it's time to ask: what's around the corner?
Earlier this year, affiliate marketers and other groups successfully beat back legislation in Colorado that would have required etailers like Amazon.com to collect sales tax for purchases made by Colorado residents if the etailers had affiliates in Colorado.
But Colorado didn't simply give up on its effort to find new sources of revenue: it passed a bill, 10-1193, that went into effect in March. That bill requires out-of-state retailers with more than $100,000 in sales to Colorado residents to notify their Colorado customers that they must disclose their purchases to the state and pay the state any appropriate sales or use tax.
State-level bureaucrats in the United States have their eyes fixed on
Amazon and other online retailers. The reason: online shopping, in
theory, results in less tax revenue for their states because these
retailers don't collect sales tax in states in which they have no
Up until now, a number of states have sought to force Amazon and others
to collect sales tax through legislation that would use in-state
affiliates to create 'nexus'. With nexus established, online retailers
would be legally responsible for collecting sales tax.
Affiliates in the United States increasingly find themselves at the center of a battle pitting bankrupt state governments against major online retailers. The battle revolves around the thorny issue of state sales tax, and when online retailers are required to collect them.
Recently, affiliate marketers in Colorado were able to get language involving affiliates removed from a tax bill. Had the language not been removed, online retailers with Colorado affiliates would have been on the hook for collecting Colorado sales tax.
Last week, Amazon.com terminated all Amazon Associates in North Carolina because of pending legislation that would have required Amazon to collect and pay sales tax on sales to customers in North Carolina on the grounds that Amazon's relationship with affiliates in North Carolina gave it a presence in the state.
Amazon's pre-emptive measure sent a clear message: we're not messing around with states that want to implement tax collection laws that we believe to be unconstitutional.
Since the dawn of US ecommerce, the question has been "to sales tax, or not to sales tax?"
Consumers and online retailers are squarely in the don't-tax camp, while state governments, which stand to reap the tax dollars, are of a differing opinion. New York state has been trying to get out of state sellers, such as Amazon, to collect and pay state sales tax on transactions, which could reap hundreds of millions of dollars in annual revenue for the cash-strapped government (particular now that once-lucrative Wall Street revenues are fading fast).
The rule of thumb has long been that if the online seller has a bricks and mortar local presence in the state, e.g. Apple.com has local Apple stores, state tax is levied on online transactions. Amazon, as well as other online-only retailers such as Overstock.com, challenged New York's attempt to get them to pony up 8.25 percent on all New York state transactions.
Yesterday, a NY State judge dismissed Amazon's suit as groundless.