
Amazon Terminates Illinois Affiliates - skitzzo
http://directmatchmedia.com/amazon-terminates-illinois-affiliates.php
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logic
I just received my termination email.

I believe I have a whopping $4 owed to me at this point, so I'm not upset
about losing a large amount of revenue; I just have a difficult time
understanding the rationale here.

I'm an affiliate: I direct traffic to Amazon, nothing more. Or put another
way, I'm a third-party marketing arm; I don't participate in purchases as
either buyer or seller. But apparently, I'm involved enough to constitute a
physical presence for Amazon in Illinois?

If I apply this same logic to out-of-state companies contracting with
marketing firms here in Illinois to promote their brand here and elsewhere, I
get even more confused about the message being sent.

Perhaps it's best if I don't think about it very hard.

~~~
Vivtek
Might be better yet to send a strongly worded letter to your statehouse rep.

~~~
glesica
Won't work, Wal-Mart probably already bought everyone in Springfield.

~~~
Vivtek
Ha. True. But _not_ writing a letter also won't work. Sooner or later we're
going to have to take the damn country back, you know.

~~~
smokeyj
You're writing letters and lobbies are writing checks. Who in this equation
carries weight?

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bambax
Amazon in France pays sales tax, just like everybody. Sales tax in France is
20% (19,6% to be precise). Is that a problem for Amazon in France? It doesn't
seem so.

I can't find a justification why online retailers should be exempt from sales
tax; the reason invoked by Amazon US is that sales tax are a local tax, at the
state level, and they happen to be located in a different state (they're
always in a different state).

This reasoning is preposterous; the sales happens where the customer is, and
that's where the tax is due. That's what will happen eventually; they are just
buying time -- and not very elegantly.

~~~
repiret
I disagree. Consider the following sequence of examples:

1\. I have a store in Oregon, a US state with no sales tax. You live in
France, and while on vacation here, you buy a trinket, and carry it home in
your luggage. Clearly, I don't have to pay French sales tax. You might owe
some import duty when you bring it home.

2\. Suppose instead that the trinket is big and heavy, so rather than putting
it in your luggage, you have me mail it to you. Its still pretty clear I
shouldn't have to pay French sales tax.

3\. When you get home, you like the trinket so much, you want a second one.
You know that your cousin will be visiting the area, so you give her money,
she gives it to me, and I mail you the second trinket. You probably still
agree I don't have to pay French sales tax.

4\. Suppose your cousin, and nobody you knew, was going to be near my store.
So instead you hire an agent to deliver me the money instead. Now perhaps its
starting to get a bit murky, but I don't see that the agent is morally
different from your cousin, and the use of an agent should not avail me to
French sales tax liability.

If that agent is named "the postoffice", then what we have is a typical mail-
order business. And I think you can make a good case that online business
should be treated a lot like mail-order business.

* * *

Now if we repeat those examples with my store in California and you in New
York, there are two differences. First, California has sales tax, so in the
first example, California sales tax would unquestionably be owed. Second, at
some point along the way to the last example, we became engaged in inter-state
commerce. The United States constitution forbids states from regulating inter-
state commerce. This has been construed to mean that mail-order business is
interstate commerce, and as such, neither the state of the seller nor the
state of the buyer have a right to impose sales tax. Online business has,
correctly I believe, been treated the same as mail-order. Most states have a
"use tax", which requires a tax be paid on new goods brought into the state
for use in the state. The problem is out of state sellers can't legally be
required to collect it, or even report enough details for the state to
reasonably enforce it.

Legal issues aside, allowing inter-state commerce to be used as a sales tax
evasion scheme doesn't seem like good public policy. But the obvious fix -
collecting sales tax for the locale of the buyer - is not logistically simple:
states, counties and cities can all impose their own sales tax, so across the
country there are thousands of different government authorities to which sales
tax must be remitted and thousands of different tax rates which are constantly
changing. Requiring every online seller to keep track of that - and exposing
them to audit liability from all these different authorities, would not be
beneficial to public policy either.

~~~
bambax
The vendor never has to "pay" any sales tax: they collect it (my initial
wording was wrong).

It's the buyer who has to pay sales tax. Being French, if I buy anything
anywhere in the world, I owe the French government 20% of the amount of that
purchase; if I'm able to hide my purchase in my suitcase, then I'm evading
taxes, but I'm certainly never exempt.

The crux of the matter is whether Amazon is an "out of state seller": is it?
When an Illinois resident buys something from Amazon from the comfort of their
own home in Illinois, they are not importing something from another state.

Amazon contends they are, though; they may have a case but I very much believe
they will lose in the end.

~~~
repiret
In the United States, the vendor always pays the sales tax. Its customary for
the vendor to itemize it separately on their customer's bill and exclude it
from listed prices, but its the vendor who has to write a check to the
government, the vendor who has reporting obligations to the tax authorities,
and the vendor who gets in trouble if it isn't paid. I suspect its the same in
France, but I don't really know.

~~~
bambax
The vendor collects the sales tax from the customer, and then (a month later)
reports it to the government and pays the government back; but the only sales
taxes that a vendor owes are the ones it has collected (or, in case of a
dispute with the govt, the ones it is assumed to have collected).

If for example a customer buys but does not pay, then the sales tax associated
with that purchase is not owed.

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cypherpunks01
For a couple years now, New York State has gotten away with forcing Amazon to
charge sales tax via a similar state law regarding affiliates, does anyone
know why amazon implemented the sales tax instead of dropping affiliates in
that case?

~~~
cookiecaper
I don't, but a guess may be that Amazon has some physical facilities in New
York like a warehouse or office, meaning they can't say "they're making us pay
tax even though we don't exist in the state and just mail people stuff" like
they're saying in this case.

I don't know if Amazon has offices in New York or not, but that's my immediate
guess.

~~~
stevie_wilks
You are correct sir: <http://bit.ly/hFkxpK>

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raganwald
If an affiliate in Illinois constitutes a presence for Amazon in Illinois,
what happens when Amazon Adsense Ads appear on a web site hosted out of
Illinois but run by a blogger who is a resident of Illinois? By my reckoning,
Amazon is paying Google who in turn pay a resident of Illinois. How is this
different from an Amazon affiliate?

~~~
evgen
Amazon has no business relationship with the person running the ad, their
relationship is with Google. The two companies are distinct entities and
Amazon can easily claim to have no control over what Google does (this last
bit is important because when people try to be clever and create shell
companies to get around various regulations the government will try to "pierce
the corporate veil" and argue that the only purpose of the shell company is to
act as a hidden agent for the original company.) In the case of affiliates the
states are claiming that the affiliates are acting as agents on behalf of
Amazon and therefore Amazon has a physical presence in the state via those
agents.

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DianeKennedyCPA
The so-called 'Amazon law' is in 4 states now: New York, Rhode Island, North
Carolina and now Illinois.

There are a number of states considering it, though, including California.

~~~
MediaBehavior
I'm pretty sure you can add Colorado: This being the reason I am _not_
permitted by Amazon to become an affiliate.

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Encosia
Ethics aside, this seems extremely shortsighted on the part of the
legislature. Amazon might compete strongly with local big boxes ("Main
Street", my foot), but how much shipping business (and resulting jobs and tax
revenue) is ultimately created by Amazon's sales in IL?

~~~
A1kmm
If the shipping is paid for by Amazon out-of-state, I'd be surprised if they
see any sales tax from it.

Amazon hasn't stopped shipping to Illinois - they have simply stopped allowing
affiliates in Illinois, so the decision is unlikely to change the amount of
shipping. If they did manage to force Amazon to collect 10% sales tax, people
might spend at most 10% less, because collecting sales taxes reduces their
means, but all of that would be captured by the state immediately, rather than
more taxation through indirect mechanisms like increasing the number of
shipping employees, where they would capture far less of that 10%.

If they did force Amazon to collect the tax, they might also cause some people
to buy at retail stores instead of online, but shipping to homes is probably
more efficient in terms of labour than shipping to stores and having
salespeople employed to sell them - so more tax capture there. People might
instead buy from online stores in Illinois, now they no longer have a tax
advantage - that would also mean more tax capture because more of the supply
chain is in Illinois.

All in all, of all the possible outcomes, it seems very unlikely that tax
revenue will be decreased because of this. Amazon is trying to bully the state
of Illinois because it is one of many states; if other states follow suit,
Amazon will almost certainly have to back down or give up on having affiliates
altogether.

~~~
Encosia
The affiliate program must increase the number of sales that Amazon makes or
it wouldn't still exist. Of those additional sales generated by IL affiliates,
some portion of them would have been shipped to IL - probably a
disproportionate amount due to most IL-local sites being owned/maintained by
IL residents.

The local ecosystem that Amazon indirectly supports is difficult to quantify,
but I think you're dismissing it too quickly. Everything from the affiliates'
state income tax to the tax on the fuel used to deliver the boxes needs to be
considered.

We don't tax grocery stores for putting the milk man out of business,
computers for eliminating type writer repairmen, nor email for the imminent
demise of the USPS. Why Amazon?

------
michaelpinto
How many states does it take Amazon to lose until they change their policies?
Yes I understand the legalities of it — but there is something very strange
about the fact that if I buy a 99 cent app from Apple they can collect the
extra sales tax but if I purchased a $99 physical item from Amazon that they
feel it's too hard.

As an affiliate here in NY I run a small side biz that generates a great deal
of revenue from Amazon and I hate where this thing is going (what kills me is
that it's a decent source of income — but not enough to pack up my bags and
get a new address).

~~~
Vivtek
The difference is that Apple presumably has a legitimate, taxable presence in
NY, whereas Amazon has none in Illinois.

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minouye
If you are interested in doing something about this, I'd recommend you check
out the Performance Marketing Association
(<http://www.performancemarketingassociation.com/>). One of their main focuses
is addressing affiliate nexus legislation and they have representation from
most major affiliate networks and several large merchants.

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chopsueyar
It is sort of alarming to see users here demanding more taxation at the state
and federal level.

Amazon has been around for awhile. Why is this a problem now?

------
ars
It's time for the Congress to get involved here.

Pass a law that each state can specify a single tax rate for any shipments
into that state. Then all retailers everywhere would have to collect that tax
and pass it on to the state.

If the state wants to distribute the money locally let them handle it themself
- the retailer sends a summary with the city names, and total amount, and the
state can figure out how to distribute it.

I'm a fan of taxing via sales tax instead of income tax.

~~~
true_religion
> Pass a law that each state can specify a single tax rate for any shipments
> into that state. Then all retailers everywhere would have to collect that
> tax and pass it on to the state.

At that point states would be able to set higher rates for shipping than for
in-state sales tax. That would create a protectionist economy for their in-
state businesses which is precisely what the founders feared would occur if
you allowed states to control inter-state commerce.

States have a bias to their own businesses because their business
owners/employees are also voters.

~~~
billpg
I imagine the federal sales tax would be set to the same level as the state
sales tax. States couldn't change one without changing the other.

(I've not really thought this through. The above is just a random thought. Be
nice.)

~~~
yummyfajitas
Then states will likely raise the in-state and out of state tax to high
levels, and provide rebates/subsidies to in-state businesses only.

Best not to go down that road.

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ylem
I think part of the nightmare for an internet company is dealing with the
myriad of tax laws--not at the state level, but at the county/city level.
Sometimes some cities for example declare tax holidays on certain goods. How
do you deal with that regularly? Perhaps a company of Amazon's size could, but
suppose you are just a small company? If you are local, then you're aware of
such things, if you're not...

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acangiano
As much as I'd hate to lose thousands of dollars every month, if Amazon were
to terminate their program in Ontario for the same reasons, I'd fully
understand them. I imagine that the extra income generated by affiliates would
pretty much be lost due to the sales tax, and Amazon is a business, not a
charity organization.

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sliverstorm
I wonder if the states realize that one of the possible outcomes involves
Amazon retreating to only a few states-

 _which then elect to allow the practice to keep the entirety of Amazon's
revenue flowing through their borders_

It's not necessarily inevitable that the states will be able to muscle Amazon
to their wishes.

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orblivion
I don't suppose having your LLC based out of state is going to save you here
is it?

~~~
acangiano
Actually that should do the trick. Your company earns the commissions, and
it's not based in Illinois. So you should be gold.

~~~
orblivion
It just worries me that the word "residents" was used. Maybe they assumed that
most people reading the notice wouldn't be businesses.

I also reckon that your primary physical business location/address matters.
Seems to matter for a lot of things, but I'm just learning about this stuff
now.

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davidk0101
I don't see the point in punishing the affiliates or how the tax law makes any
difference in how the affiliates get paid for generating sales.

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geuis
Are there many states left that Amazon _does_ allow affiliates from?

~~~
sorbus
Per the article, everywhere except Colorado, North Carolina, and now Illinois.

