Our new report on Amazon tax laws has received wide coverage, including from the Associated Press, CNet, CBS, Instapundit, TaxProf, TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Analysts, the Denver Post, Daily Finance, Affiliate Marketing Blog, CPA Trendlines, the Performance Marketing Association, Tertium Quids, Lux Et Umbra, Chris Steffen. The reports been viewed 2,700 times.
A question I've received this week is about Colorado's newly passed Amazon tax law. It is different than the laws passed in the three other states with Amazon taxes, and as I was writing the report I had discussions about whether it should count or not. Here's how I've answered about why it's an Amazon tax:
If the Colorado law required Amazon to notify its customers of potential use tax obligations, and perhaps even if it required providing customers with a total amount of purchases each year (which one can get on their website), that's one thing.
But the law went far beyond this, requiring analysis of the base and computation of the rate in each taxing district (8,000+ nationwide, many local ones in Colorado), can't be sent with the shipment, must be sent by U.S. mail, and all purchases must be disclosed to the Dept. of Revenue. It's a regulatory scheme so complicated and burdensome that its purpose is to force Amazon to just collect the tax itself. That's why I'm comfortable calling their law an Amazon tax.
I think it's shameful that the affiliates are caught in the middle on this, and there's certainly politics in it all. I think it's unfortunately the case that these Amazon taxes essentially paint a target on anyone that does business with affiliates.
The compliance burden has been contrived to be so burdensome that it's not much different from a sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. compliance obligation.
Coincidentally, on the day we released the report, Amazon.com announced that it was ending its affiliate program in Colorado, where a slighly different Amazon tax had just taken effect. They blamed the state for passing the law, while some, such as the left-wing Colorado Fiscal Policy Institute, blamed Amazon:
The law did not depend on local affiliates at all; they were taken out of the equation long ago. […]
Obeying the law is not overly burdensome for Amazon. Target.com already collects tax; in fact Amazon makes the online checkout software for Target.com.
Amazon said that it did not intend to follow this new Colorado law. Instead of simply trying to reverse the law in courts, Amazon went a step further and needlessly fired all of its Colorado affiliates, apparently out of spite. Amazon took out its anger on Colorado affiliates to make a political point.
Hedges overstates her case. It's comparing apples and oranges to say that designing a system to calculate one tax rate and one tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. in one location is the same as a system that keeps track of 8,000+ sales taxes, each with different rates and bases, not aligned to even 9-digit zip codes, and ever-changing.
It is true that Amazon can challenge the law in courts, and that the law applies to them whether or not they have an affiliate program. That may be what does this law in as even more unconstitutional than other Amazon tax laws. The purpose of this whole law has been to target Amazon and companies like it for tax collection obligations, primarily because states have designed protectionist use taxes that are unenforceable. Colorado targeted Amazon, so Amazon targeted Colorado.
When a state puts an odious compliance burden on an individual or business, it takes a lot of self-contentment to claim that the only proper option is to submit instead of to consider leaving. Sometimes, and I wonder whether Ms. Hedges will concede this, the costs to people and businesses of government taxation, regulation, and micromanagement outweigh their benefits.
The correct object of anger is Colorado, which is exceeding its state powers with an unwise and unconstitutional law.
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