Thread: Amazon.com bans Rhode Island Affiliates

Really, if I were an American citizen I'd just move elsewhere in the world...

Amazon.com cuts R.I. partners over tax - PBN.com - Providence Business News

It sucks that they ban a hole country, or in this case a whole island. Why do they have to punish ALL people...

But I understand that if there needs to be too much hassle they stop providing it for a country. It's not a big loss probably as other countries would give probably more..

In the USA we have has a long standing issue with where sales taxes can be charged for Internet and mail order purchases. The US Supreme Court has ruled that taxes do not have to be charged unless a company has a physical presence in a state, which is called nexus. That has always meant a building, office or an employee living in the state.

Due to the greedy nature of politicians, several states have illegally changed the meaning of nexus to include affiliates, even though affiliates are not employees--they are independent contractors. Independent contractors are not part of a nexus. This started with the state of New York, which already charges the highest tax rates in the country. Amazon has been battling them in court for some time.

This is a big issue for Amazon and all Internet companies. It is not just a sales tax issue. If a state can legally force a company to collect sales tax for sales in that state, the state also has the right to audit the seller's books at any time they desire. That could cripple most companies if they must give 50 states access to their bookkeeping at any time that a state demands it.

Sales taxes in the USA are charged very erratically. A state, city and county can each charge a tax. If an online retailer had to keep track of all of the appropriate taxes to charge, the retailer would have to manage over 25,000 different tax jurisdictions. At a simplified level, a retailer would have to keep track of and make payments to about 5,000 tax jurisdictions.

If Amazon loses their legal case with the state of New York, the consequences are serous for everyone who sells products online in the USA. If that happens, the Congress would have an excuse to change the law so that online retailers could charge a flat tax (same rate for any purchase), which would be paid to the Federal government and they would dole it out to the states.

The lame excuse that I hear from politicians is that local business must collect sales tax, but online stores in another state do not. They claim that this puts the local stores at a competitive disadvantage, but they fail to take into account that online retailers have to pay for shipping costs, which sometimes can exceed the sales tax. Charging sales tax on top of shipping costs will put online stores at a disadvantage.

What online store pays for shipping? I'd be willing to bet 90%+ pass 100% or more of shipping charges on to consumers unless there is a promotion going on.

Originally Posted by Sundance

What online store pays for shipping? I'd be willing to bet 90%+ pass 100% or more of shipping charges on to consumers unless there is a promotion going on.

There are a lot of popular online stores that do offer free shipping for orders over a certain total (Amazon, Chefs, MooseJaw, etc), but that is not the real point.

If the consumer looks at their total cost and it includes a shipping fee AND sales tax, the total price may not be competitive with the price at their local brick-and-mortar stores.

When politicians claim that they are "leveling the playing field" by forcing online stores to charge tax for out-of-state sales, they are really just giving an advantage to local stores that do charge sales tax, but have no shipping fees to charge to the consumer. That assures that the state will collect the tax.

People shop on the web for both bargains and convenience. In the USA, many people shop on the web to avoid paying sales tax, which can be 6% to 9% of the order. In many states the tax is also charged on the shipping costs.

Its a money grab by the state and its an unfair tax. amazon has every right to cut ties with those affiliates.

I agree its just to earn the state more money, and I don't see why thats a problem. Thats the whole reason everyone is in business is to earn money.

Welcome to capitalism, the RI residents will appreciate it, while those who aren't in RI won't. But the senate/congressmen of RI only have to answer to their residents so they don't care about everyone elses thoughts of it.

Rhode Island's greedy grab for more taxpayer dollars will result in an overall reduction in their tax revenue. Their citizens will make less money, so they will pay less in taxes.

New York has a similar problem. They raised income tax on their subjects, err... citizens, and those people simply moved (officially) to Florida.

This should be a lesson for governments all over the world. The U.S. government will have ample opportunity to learn this lesson over the next few years.

It isn't just New York and Rhode Island. There is a list of states that have recently implemented similar changes in their tax laws.

Amazon has dropped North Carolina affiliates

It looks like California and Minnesota just removed similar legislation from their new tax laws.

Affiliates are being dropped in Connecticut, Hawaii and Maryland due to changes in tax laws. Many other merchants are dropping their affiliate programs in these states (Overstock, Fingerhut, Cafe Press, Cabelas, etc).

If Amazon loses their battle with New York, you will see almost every state try to grab more taxes by doing this. When it comes down to it, the real question is how the courts will rule on the issue of nexus. An independent contractor has never been considered part of nexus, but the first battle is being fought in a New York court.

The long term solution may be a flat tax on all Internet sales anywhere in the USA. A 5% number has been proposed. The merchant would then have to pay the tax to the Feds and submit a list of sales percentages for each state. The Feds would then pay the money to the states. Anything more complicated than this will kill most small Internet merchants. I could live with this, as long as I didn't have to write checks to 50 states each month (or possibly 5,000+ tax jurisdictions) and am not subjected to random audits from 50 states.

I don't remember the last time I actually made any money from Amazon.