

CA Amazon Tax Signed Into Law - cmod
http://latimesblogs.latimes.com/california-politics/2011/06/jerry-brown-signs-laws-redevelopment-agencies-taxes-online-retailers.html

======
DanLivesHere
Amazon's doing the right thing here.

California has no way of charging them sales tax, nor should they, without a
nexus. Imagine if you, living in CA, ordered something from a brick-and-mortar
store in New York. If that store had to charge you sales tax and remit it to
California, they'd simply say "no thanks" to your business. It's just not
worth it for them to have to do all that work so you can get a $10 item (and
so California can get their 82.5 cents).

Amazon shouldn't be treated any differently simply because they do a lot of
business in the state. California knows this, so they come up with (well,
Illinois came up with it) the idea that if some third party runs ads on their
website for products on Amazon, that third party (an "affiliate") is actually
an agent of Amazon. That's preposterous.

Amazon doesn't really have a choice, though. If they sue and lose, the entire
affiliate program goes away. So they instead just drop the affiliates. They
have to -- they're paying affiliates 6% of all qualified sales _and_ paying
the state 8.25%. And they are then open to audits and other nonsense from the
state. It's just not worth the leads any more.

~~~
leot
You can't be serious. It's not really the affiliates that make the difference
here -- it's all of Amazon's operations in CA.

We're all futurists here except when that means losing affiliate revenue
and/or no longer having a tax dodge. It's just a matter of time before there's
uniformity between the online and brick and mortar worlds, and Amazon is
simply seeking delay. Per Sinclair "It is difficult to get a man to understand
something, when his salary depends upon his not understanding it!"

~~~
gergles
What operations in CA? (Almost) Everything I purchase from Amazon comes from
Nevada.

And no, Lab126/A9/their other affiliates don't count, as they are not the
company selling you the product.

~~~
leot
No, you're right, they're the shell companies designed to avoid asking
customers to pay CA sales tax. Virtual presence is fun until it means you have
to start competing on a level playing field.

The affiliate program might be the strongest legal argument for in-state
presence, but it's far from the only one. Apart from the subsidiaries, there's
also the more than $3 billion they get from CA residents.

I think everyone here should have to disclose competing interests on this
topic:

full disclosure: I work for a company (part time) that makes most of its money
from Amazon affiliate revenue (but I personally am not taking Amazon's threats
very seriously).

~~~
meow
They can't be compared to shell companies which in general are fully owned.
You can probably compare them to advertising agencies.

------
dkokelley
I wonder what authority CA claims over entities with no physical presence in
the state. What I mean by that is this: if Amazon wants to ignore this, and
still ships to CA residents, what recourse will the state have? If anything,
wouldn't this all fall under the interstate commerce powers of the Federal
government?

~~~
SoftwareMaven
It is likely interstate commerce, since the affiliates don't work for Amazon,
but it would also likely land Amazon in court in a large court battle. That
battle may eventually get to the US Supreme Court, but I don't think Amazon
wants the distraction.

I do wonder at what point loss of sales from affiliates will cost more than
collecting taxes. Apparently, Amazon thinks it's a long way out given how
readily they cut ties.

~~~
dangrossman
I have doubts that there is any point where loss of sales from affiliates
would cost more than taxes. The main reason for Amazon to have an affiliate
program is not awareness but SEO. The tens of thousands of people placing
links directly to Amazon product pages are what keep Amazon at the top of
search results for hundreds of thousands of product names, in turn driving
much of their search traffic.

------
phirephly
Damn. There goes my $300-$400 a month passive income... And I already report
my use-tax to begin with. Guess it's time to start calling up friends out-of-
state for their mailing address.

~~~
coin
And CA won't be collecting income tax on your $300-400 per month (since Amazon
has canceled affiliates in CA), so their tax income is actually less.

~~~
phirephly
And if I have to start filing tax returns with every state and county my small
business happens to do business with (~$1000 / year business), I'll probably
shut that down entirely for not being worth the bother as well.

~~~
petercooper
Almost sounds inspired by crazy European Union VAT laws! American companies
are technically required to register to collect EU VAT if their sales to any
EU territory are over a certain amount. Thankfully, most smaller ones don't.

~~~
travem
The level above which you have to register to collect the VAT is there
precisely to protect the smaller companies which make a few small sales to the
EU. If you are making enough sales to be over the threshold you should be able
to afford to abide by the law.

~~~
petercooper
Except it's a bizarre law because those US companies are not necessarily in
the EU themselves. It'd be like California demanding a business in Poland
should charge local California sales taxes for any exports to that state.

------
adebelov
this is very anti-entrepreneurial. all the small business, affiliates (large
and small) will now relocate to other states that are more friendly to their
business.

All that this is business is going to accomplish is that it will collect less
tax dollars, drive jobs and businesses out of state. Thank you to big box
retailers like Best Buy and Staples for driving to have this bill passed.

Too bad California :(

~~~
Steko
"this is very anti-entrepreneurial."

This is the end result of the "pro-business" crowd pushing society's tax
burden into regressive taxes like sales. Sooner or later those taxes have to
go where the money is.

"all the small business, affiliates (large and small) will now relocate to
other states that are more friendly to their business."

No, _all of them_ won't. Many have physical locations in their state which
they earn more from then they do from Amazon.

"Too bad California :("

Maybe you missed it but it's also too bad for Amazon. Affiliates add value,
40% of their sales. Now some will relocate and some will fold but the majority
will keep selling their stuff and trying to chip customers away from Amazon.

~~~
protomyth
No, this is the end result of a government spending more money than its
citizens are willing to pay for. California needs to seriously get its
spending under control including the unfunded liabilities (e.g. public
employee pensions).

Of course they will threaten to cut fire and police to force the issue, when
they have plenty of other budget expenses that can be cut first. Using fear to
keep their donors in cash seems to be the current state tactic.

At some point, states needs to their expense, assign use tax (e.g. gas tax) to
repair the infrastructure it is fixing and increase those taxes if they don't
cover the infrastructure (or quit raiding them if they have a surplus).

PS: Depending on what the sales tax is actually taxing - it is not that bad on
the poor. Going with that, "progressive" taxes aren't fair either.

PPS: I still want to know why sales tax doesn't apply from the state the item
is being sold from.

------
FilterJoe
Here is the law, marked up:

[http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/abx1_2...](http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/abx1_28_bill_20110615_amended_sen_v97.html)

I read parts of this and noticed the following exception for small retailers
(<$10,000 annually), which may or may not be applicable to Amazon Affiliates
(could be interpreted either way, because "retailer" includes "an entity
affiliated with a retailer within the meaning of Section 1504 of the Internal
Revenue Code."):

"This bill would include in the definition of a retailer engaged in business
in this state any retailer entering into agreements under which a person or
persons in this state, for a commission or other consideration, directly or
indirectly refer potential purchasers, whether by an Internet-based link or an
Internet Web site, or otherwise, to the retailer, provided the total
cumulative sales price from all sales by the retailer to purchasers in this
state that are referred pursuant to these agreements is in excess of $10,000
within the preceding 12 months, and provided further that the retailer has
cumulative sales of tangible personal property to purchasers in this state of
over $500,000, within the preceding 12 months, except as specified. This bill
would also provide that a retailer entering into specified agreements to
purchase advertising is not a retailer engaged in business in this state and
would define a retailer to include an entity affiliated with a retailer under
federal income tax law, as specified. This bill would further provide that
these provisions would not apply if the retailer can demonstrate that the
referrals wold not satisfy specified United States constitutional
requirements,as provided."

------
gojomo
The battle over similar issues in Texas has also been fun:

• Amazon has a distribution center in Irving, Texas but argued its clever
legal structure freed it from having to pay sales taxes.

• The Republican Comptroller Susan Combs insisted on payment of a past tax
bill, based on these operations.

• Amazon said it'd thus need to close the facility, and Republican Governor
Rick Perry announced his opposition to the Comptroller's decision.

• The Republican-dominated legislature then passed a bill, similar to this
California bill, further establishing Amazon's sales tax obligations, for not
just the distribution center but the affiliates.

• Perry vetoed it.

• Amazon's hometown newspaper, the Seattle Times, then editorialized that it
should stop dodging state sales taxes nationwide.

• The Texas legislature started working on a veto-proof way to obligate
Amazon, perhaps by attaching the obligation to a larger budget bill.

• Amazon offered the legislature a bigger new distribution center, with 5000
(and then 6000) new jobs, in return for a full legislative exemption from
sales taxes for the next few years.

The part-time legislature, which usually only meets every other year and (with
no state income tax) takes sales taxes very seriously, has so far declined
Amazon's offers.

Some of the coverage:

[http://www.techflash.com/seattle/2011/02/texas-governor-
back...](http://www.techflash.com/seattle/2011/02/texas-governor-backs-amazon-
seattle.html)

[http://www.statesman.com/news/texas-politics/amazon-
sweetens...](http://www.statesman.com/news/texas-politics/amazon-sweetens-job-
offer-texas-lawmakers-dont-bite-1558831.html)

~~~
impendia
Good for Texas.

Elsewhere on HN, I've read Amazon's claim that they would be happy to pay
sales taxes, but that dealing with all the local taxing authorities would be a
nightmare. If this is true, it makes me quite sympathetic to their position.

But if I understood you right, it looks like Amazon outright attempted to
bribe the legislature for special treatment which other retailers in the state
don't get. I realize this kind of shit happens all the time, but that doesn't
make it right.

And the Texas legislature refused to play ball. If I lived in Texas I would be
standing in line to re-elect these people.

~~~
unshift
why? i'd rather keep the money than give it to the state. why vote for people
who want to tax you more? i realize it's nice to believe in integrity but i
don't think this is an example of it

~~~
diogenescynic
Do you drive on a road? Does the USDA inspect your meat? Did you or any of
your kids attend a public school?

This demagoguing of taxes is getting a bit old. Reagan, Ike, and Nixon would
all be chased out of the party at this point. Taxes are the price we pay for
living in a society.

Edit for clarification: Obviously not _all_ taxes are good, similarly not all
taxes are bad. That is my point. Life is rarely black and white. I also think
tax laws should apply equally and Amazon shouldn't be given any breaks that
others aren't.

~~~
mudil
I, like most other working, educated people, pay every year more in taxes than
I pay for food, clothing, vacations, gas and entertainment-- all combined.
That's a big price to pay for driving on roads and inspecting my meat. You
know why? B/c gov doesn't give a crap about efficiency or saving my money.

------
consultutah
I'd be interested in buying anyone's amazon affiliate store. If you are
interested, contact me privately.

------
justinsb
Does anyone know why Amazon doesn't already have to charge sales tax, by
virtue of their California offices (e.g IMDB, A9 & Alexa)?

~~~
brown9-2
IIRC Amazon has a pretty complicated legal structure where each of those
companies - IMDB, A9, etc - are wholly owned subsidiaries of Amazon (or some
other legal entity) and not considered the same entity as Amazon.com.

------
bennesvig
This sucks for a lot of people who support their podcasts through Amazon's
affiliate program.

------
eftpotrm
The core problem, from an outsiders' perspective, appears to be jurisdictional
fragmentation. Amazon, not unreasonably, want to be able to regard the USA as
a single market, yet this gives them 50 different sets of legislation and 50
tax codes under which to operate.

However politically unpopular this idea might be (it's certainly not popular
in Britain with the EU, which itself started as a common market and
legislation / regulation area) the most business friendly idea seems to be
centralisation. Remove competency for this sort of issue from the individual
states, create common legal frameworks, allow a one-size-fits-all management
model rather than having to individually cater for the requirements of
Wyoming, Vermont, Alaska, North and South Dakota, Delaware and Montana. Seven
jurisdictions, seven legal codes, seven sets of tax law. Yet only one has
enough population that it would even qualify for the top ten _cities_ by
population and even combined they would only be twenty-second in population
ranking. They're not major markets and a legal framework designed like this is
unduly expensive.

~~~
Symmetry
Way more than 50 different tax codes (Amazon could probably deal with that),
many counties and municipalities have their own laws regarding sales tax too.

~~~
camiller
On top of that how would Amazon identify if I live inside Omaha 7%
(state+local) sales tax, or just outside Omaha 5.5% (state only) sales tax?
Nothing changed about my address between when I lived in an un-annexed suburb
and after I was annexed.

------
zitterbewegung
Hrm if all the states start to outlaw this will we see a tax haven somewhere
being put up to absorb all of these retailers?

~~~
nostromo
Well 5 states have no sales tax -- including Oregon and Delaware. And another
5 states already collect sales tax from Amazon -- including New York and
Washington. So there's really no need to get fancy -- there are plenty of good
options for places to locate your company.

~~~
btilly
_And another 5 states already collect sales tax from Amazon -- including New
York and Washington._

[http://www.amazon.com/gp/help/customer/display.html?nodeId=4...](http://www.amazon.com/gp/help/customer/display.html?nodeId=468512#which)
verifies this. The other three are Kansas, Kentucky, and North Dakota.

~~~
starwed
Yup, I live in Kentucky and have to pay the sales tax.

On the plus side, my orders often ship from the very city I live in.

------
meow
I'm curious, how is Amazon selling things online different from software
companies offering software and services online ? Does this law pave way in
future to tax these kind of services too ? Or is it that software companies
already pay a sales tax for Software...

------
blahblahblah
Frankly, I wish Amazon would just give up the fight and go ahead and charge
sales tax for all 50 states. They're the only retailer that I do any business
with that doesn't charge sales tax and, because it's a PITA to remember to
save every single receipt from them for tax purposes I don't do so and,
therefore, I end up paying stupid use taxes which probably end up costing me
more than what it would've cost me if Amazon had just collected the sales tax
in the first place.

~~~
kin
How do you end up paying more in taxes? A majority of my spending this year
was made on Amazon and in my tax return I didn't enter a single one of those
purchases as "Out of State Untaxed Purchase" so I didn't get taxed, which I
think was illegal but apparently I'm not the only one who neglects to do this.
In any case, all Amazon receipts can be viewed in your account history.

~~~
blahblahblah
How do I end up paying more in taxes? Because I'm aware that I undoubtedly
bought _something_ from Amazon in the past fiscal year and, therefore, in
compliance with my state's laws, I check "yes" in the box and pay the flat fee
for use tax. That flat fee is set at a level that reflects what the state
thinks an average taxpayer owes for their "out of state untaxed" purchases,
but the "average" taxpayer in their model buys more stuff than what I would
ever actually buy and, thus, they charge me more in use taxes than what it
would have cost me if I had just been charged sales tax in the first place. I
guess it just plain never occurred to me to look up my account history and
compute an exact value instead.

~~~
cschmidt
That's what I do. Being the overly honest person that I am, I go through and
total up all my Amazon purchases for the year. They should really have a way
to compute the total automatically. It always takes me a while to do it by
hand. But at least that way, you're paying the right amount.

------
ajays
Amazon has it's search engine A9 based in Palo Alto, CA. Amazon refers to A9
as "our search engine" in its own documentation:
<http://www.amazon.com/gp/xs/sharethepi.html>

How can it then claim that it has no offices in California?

~~~
ardit33
it is a subsidiary. Ie. Amazon pays A9 for the technology, but A9 is a
separate legal entity.

I worked developing for the Kindle, which is designed/engineering in
Cupertino, by a company called Lab126, which is a subsidiary of Amazon.
(basically Amazon pays Lab126 for technology transfer on the books, but
really, internally amazon controls everything). The Parent company/legal
entity of the CA subsidiaries is called A2Z.

We were instructed not to travel around, we couldn't attract recruits by
saying we were working for Amazon, etc. etc. But internally Amazon was
controlling pretty much everything.

------
e40
Can someone explain the redevelopment issue?

~~~
gcb
apparently the state allowed you to spend property taxes owned into building
renewal if the building area qualified.

------
newchimedes
Why does legislation have to be some confusing. So I get that certain parts of
the law have been signed, but what about the affiliate tax? Is that now the
law. The article says

"Brown announced signing eight separate pieces of that package Wednesday,
though not the main spending plan itself.

The online sales tax law, AB 28 1x, would seek to force online retailers who
have no physical presence in California, such as Amazon.com, to collect the
same levies as bricks-and-mortar stores."

The use of "would seek to force" seems to suggest this part hasn't passed yet.
So the real question is did it pass or not?

------
AAABBB
It's amazing how 90% of the people here are so incredibly ignorant that they
don't know that states don't have jurisdiction over the activities of their
residents and non residents in other states. This community is not very smart.

------
sabat
That's pretty much the end of all affiliate programs for people in CA, no?

