

Amazon Associates to Terminate North Carolina Members - smakz
http://insight.makovision.com/amazon-com-north-carolina-tax/

======
ryanwaggoner
It sounds like North Carolina is trying to claim that they are owed sales tax
on any transactions that occur between Amazon and a customer if the referral
came from an Amazon Associate in NC, even if neither Amazon or the customer is
in NC. Why stop there? Why not tax all transactions where the person
originally heard about the product from someone in NC, or where the computer
they use to purchase was bought in NC. Give me a break.

This is bullshit and unconstitutional and will hopefully be struck down if
it's passed at all.

~~~
gojomo
"[O]riginally heard about" is a weak analogy. The issue with Associates is
that actual money is changing hands. It's almost like having a storefront
physically in NC, which would traditionally require a multi-state retailer to
collect sales tax in that state.

I am a very anti-tax individual overall but the cross-state-delivery sales-tax
loophole, which advantages distant sellers, has grown with the rise of
e-commerce and efficient long-distance shipping to now seriously distort
economic activity.

Why should a distant seller have an 8+% cost advantage over local sellers? Why
should extra fuel/pollution/time be expended because of that jurisdictional
anomaly?

Consider the similar case of NewEgg vs. Amazon for purchases by California
residents. Amazon has subsidiaries in California. Amazon employs people in
California. Amazon advertises in California. Amazon enters into long-term
business agreements with California residents and businesses, including
through the Associates program.

But because of some legal maneuvering, and keeping a few offices and
warehouses outside California, Amazon can avoid collecting sales tax, while
NewEgg must. Simply because NewEgg has more operations in California --
operations that are already subject to payroll, property, and income taxes --
it also faces an extra tax on each customer transaction.

(And as much as I would like to eliminate sales tax for all merchants, the
state's legitimate activities have to be financed somehow, and often the
alternatives to a broad consumption tax like a sales tax are even worse:
higher income or property taxes.)

The best constitutional solution would be for the federal Congress to equalize
the playing field somehow. (Note also that if the sales tax base is broadened,
the rate can go down.) But until that day, I don't blame states that see
large-scale retail, contractual, commission-paying, operational activity
happening inside their own borders and say: this counts as in-state commerce,
and should be treated the same as other retail activity.

~~~
ryanwaggoner
_It's almost like having a storefront physically in NC, which would
traditionally require a multi-state retailer to collect sales tax in that
state._

It's nothing like this. This isn't about NC wanting to collect sales taxes on
purchases made by buyers in NC. And while Associates are involved, they're not
involved in the purchase at all. They simply forward traffic to Amazon and if
the customer buys, they get a commission. This is completely different from a
retail store that's holding inventory from vendors and handling the actual
transactions with customers. This is quite literally just like hearing about
something from someone. If I live in NC and I send an affiliate link to a
friend who lives in NY for a book on Amazon and that friend purchases it, NC
is claiming they're owed sales tax on that sale. That makes zero sense.
They're taxing my income on the commission, which is enough.

~~~
gojomo
I think you are misinterpreting the law. As I understand it, the law is both
better and worse than your interpretation.

Better, in that your hypothesized shipment to NY won't be subject to NC sales
tax -- only the payment of the commission occurred in NC, not the sale.

Worse, in that _all_ shipments to NC residents will be subject to sales tax --
even if those sales _did not_ start with an in-state Associate referral.

In the view of the law, the presence of the in-state Associates means that
Amazon has a paid sales force operating inside the state borders. That, just
like having offices or warehouses or storefronts, makes Amazon liable to
collect sales tax on _all_ sales into NC.

They are paying people and facilities inside NC to help them sell. In some
cases -- and I imagine those cases that generate the most commissions -- the
in-state facilities display product names, pictures, descriptions, and prices.
Sounds enough like a 'storefront' to me that Amazon should pay the same taxes
as their in-state competitors.

~~~
netsp
It seems like reality has outgrown the individual states sales tax regime. The
current tax system sounds like it contains ridiculous levels of distortion.
Seems like time to rewrite.

------
kqr2
California has something called a _use_ tax. Turbo Tax will prompt you about
this.

In theory, you need to pay a use tax for things purchased outside of the state
from a vendor who did not collect sales tax (e.g. Amazon or other internet
retailer outside of California)

So, while it is true that California cannot levy taxes on out of state
vendors, they can levy a use tax on its residents.

<http://www.boe.ca.gov/sutax/usetaxreturn.htm>

<http://www.boe.ca.gov/sutax/faqusetax.htm>

 _Do I owe use tax?

You generally owe California use tax when you use, consume, give away or store
tangible personal property (i.e., products you can see, weigh, feel or touch,
such as clothing, books, computers, DVDs or CDs) in California that you
purchased from an out-of-state vendor. If the out-of-state vendor does not
collect the California tax on your purchase, you must pay the tax._

~~~
sachinag
I remember filing in New York State in 2000 or 2001 or thereabouts where the
state actually went after use tax. The form actually had a line - you could
calculate your use tax or just give up and give them 38 bucks, which was their
average estimated amount. I think everyone just gave up.

------
iends
Misleading headline because the email says "Please note that this is not an
immediate termination notice and you are still a valued participant in the
Associates Program". They are only going to terminate things if the
legislation is passed, which it has not yet.

This morning when I got the email I could not find out the specifics of the
bill. If anybody has more information, please post it.

~~~
jerf
Here's a bit more: [http://www.news-
record.com/content/2009/06/17/article/amazon...](http://www.news-
record.com/content/2009/06/17/article/amazon_warns_nc_affiliates_about_tax_issue)

Maybe somebody else can find the law itself based on that.

~~~
iends
S202:

"TO PERMANENTLY IMPOSE THE STATE AND LOCAL SALES AND USE TAX ON SALES OF
DIGITAL PRODUCTS EFFECTIVE OCTOBER 1, 2009; TO PERMANENTLY REQUIRE A REMOTE
SELLER TO COLLECT SALES TAX WHEN THE SELLER ENTERS INTO AN AGREEMENT WITH ONE
OR MORE STATE RESIDENTS PROVIDING FOR A COMMISSION WHEN THE RESIDENT REFERS
CUSTOMERS TO THE SELLER AND THE SELLER HAS GROSS RECEIPTS OF AT LEAST TEN
THOUSAND DOLLARS ANNUALLY FROM SALES TO ALL CUSTOMERS REFERRED TO THE SELLER
BY ALL SUCH RESIDENTS, EFFECTIVE WHEN IT BECOMES LAW;"

Bill:
[http://www.ncleg.net/Sessions/2009/Bills/Senate/PDF/S202v6.p...](http://www.ncleg.net/Sessions/2009/Bills/Senate/PDF/S202v6.pdf)

------
zaidf
Not a proud moment for my state.

------
ghshephard
California had a similar "Amazon Tax": AB 178. It was killed:

"Current law, under Quill v. North Dakota, requires a business have a physical
presence or “nexus” in a state in order for the state to compel that business
to collect and remit sales taxes. AB 178 represented an attempt to circumvent
the federal interstate commerce law by presuming that a company has a physical
nexus if business is solicited through a third-party advertiser that is based
in California."

April 28th: "However, a bit of rare good news for California taxpayers came
out of Sacramento yesterday. Just as the bill was scheduled for consideration,
the Assembly Committee on Revenue & Taxation voted to remove AB 178 from the
docket, effectively taking this odious piece of legislation off the table, at
least for this year."

[http://www.atr.org/california-amazon-tax-bill-dies-
quick-a31...](http://www.atr.org/california-amazon-tax-bill-dies-quick-a3170)

------
asolove
I understand that this has an "adverse" affect on those who use these
programs, but any taxes have an adverse affect on any commerce. Is there a
reason why other transactions should be taxed and these shouldn't?

~~~
amalcon
Well, there's actually a legitimate dormant commerce clause argument to be
made here. The commerce clause is the most abused part of the U.S.
Constitution, but this is precisely the sort of thing it is supposed to apply
to.

~~~
ryanwaggoner
I'd really love to hear that argument.

~~~
amalcon
IANAL, but this is how it was explained to me:

    
    
      -The Constitution divides up powers, granting some to the federal
      government, and reserving others for the states or citizens.
      -The ability to regulate (that is, tax) interstate commerce is one
      granted to the federal government.
      -Therefore, the power to regulate interstate commerce is not the 
      domain of the states.
    

Now, the "dormant power" argument (the first part) is somewhat debatable, but
it is based on one of the very early SCOTUS decisions. It's also what prevents
different states from having incompatible vehicle compliance measures, which
is definitely a good thing.

This same reasoning has applied to mail-order catalogs (not to mention driving
to other states for purchases) for years. States generally try to get around
this by instituting a "use tax", but these are pretty well unenforceable in
the general case.

In any case, I think we can agree that this is an entirely different matter
than the typical uses of the commerce clause, to basically do whatever crazy
thing Congress wants to do.

~~~
fatdog789
The "dormant commerce clause" power is actually the last bit: B/C the power to
regulate interstate commerce is given to Congress, it is not within the domain
of the states to interfere with (i.e., by regulating) interstate commerce.

The dormant commerce clause power doesn't prevent states from having
incompatible vehicle compliance measures...the commerce clause does b/c
Congress has passed legislation on point. States are allowed to have
incompatible vehicle standards (Cali and NY/NJ can set their own emissions and
fuel efficiency standards) b/c the legislation allows them to seek waiver. If
the dormant commerce clause applied, they wouldn't be able to do this b/c
there wouldn't be any waivers available b/c Congress was silent on the issue.

IAALBYANPM.

~~~
rms
I am a lawyer but you are not Pac Man?

~~~
fatdog789
*pm = paying me

------
jhancock
"We regret to inform you that the North Carolina state legislature (the
General Assembly) appears ready to enact an unconstitutional tax collection
scheme that would leave Amazon.com little choice but to end its relationships
with North Carolina-based Associates. You are receiving this e-mail because
our records indicate that you are an Amazon Associate and resident of North
Carolina."

There are two factually false parts to this quote.

"enact an unconstitutional tax collection scheme"

Its fine to say it should be challenged in court, but its not at all clear its
patently unconstitutional.

"would leave Amazon.com little choice but to end its relationships with North
Carolina-based Associates"

I'm willing to bet if other states followed suit, Amazon would find the
"choice".

State taxes on internet sales are going to be sought after as states look for
ways to solve their revenue problems. I'm not arguing in favor of such taxes
but do see this as a sign of the times.

------
sutro
Time for TechCrunch to do another poll. What's more important: Amazon or North
Carolina?

