“Amazon Tax”: Not a Money Maker

March 11, 2010

On CNBC's "Closing Bell" yesterday, Ann Holley of KPMG discusses how so-called "Amazon tax" laws — which force online retailers such as Amazon.com to collect sales taxes — could affect state budget deficits. She cites the Tax Foundation's recent report on Amazon taxes, which notes that rather than increasing revenue, these taxes can lead to a revenue drop:

Sponsors have promised that a revenue windfall would follow enactment of an Amazon tax, but no windfalls have been forthcoming so far. This is often because online companies respond to Amazon tax law enactments by ending their affiliate programs. Rhode Island revenue-analysis office head Paul Dion stated in December 2009 that the six-month-old law had collected no revenue. An affiliate trade group believes that Rhode Island has seen less tax revenue come in, because the elimination of the affiliate program reduced income and thus income tax collections. State Treasurer Frank Caprio echoed this, saying, "The affiliate tax has hurt Rhode Island businesses and stifled their growth, as they've been shut out of some of the world's largest marketplaces, and should be repealed immediately."

See the video clip here:

Read Tax Foundation Special Report, No. 176, "'Amazon Tax' Laws Signal Business Unfriendliness and Will Worsen Short-Term Budget Problems."

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