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Amazon Drops California Associates to Avoid Sales Tax
PCM2 writes "Residents of California who participate in the Amazon Associates Program received an email warning them that the program will be terminated as soon as a new California law goes into effect. The law, which CA governor Jerry Brown signed, would require online retailers to collect sales tax on purchases. According to Amazon's statement, 'We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors.'"
Come on, even Stallman and the FSF called off their Amazon boycott years ago after being satisfied that the accumulation of patents was for defensive purposes only.
Good one, Governor Moonbeam! You just killed the revenue stream of roughly 25k Amazon affiliates. So instead of just being content with the revenue collected from the income tax of those affiliates, you decide to double-dip and tax not only the income earned by the affiliate but the transaction as well. Instead of allowing you to double-dip, Amazon pulls the plug on their affiliate program in CA and your projected $200+M tax revenue increase goes up in smoke. CA is a turd circling the drain. They might as well give up and become part of Mexico already.
I just want to know why it is that when times are tough everyone except the government is expected to make due with less. Why don't politicians have to share in the hardship? Why don't liberals seem to understand that imposing a tax has a net effect of reducing economic activity? Why would you want to reduce economic activity when we're still in the midst of the worst recession in 2 generations?
"Gee, I can buy it for $50 at the store today, or $50 on Amazon and have it Monday, but I'll get free shipping ..." - most people will just buy it locally.
> 'We oppose this bill because it is unconstitutional and counterproductive.'
Is your point how ridiculous the statement is?
If Amazon really believed it was unconstitutional, they would keep their associates and fight it in court. Even mid-priced lawyers would win if it were that simple and obvious, so the transaction cost of the lawsuit shouldn't preclude them from doing so. They figure there's a decent chance that it is not unconstitutional, which is why they are pulling out. (i.e. the downside risk of being ordered to pay sales tax.)
Also, if B&N is smart, they'll snap up a whole lot of business in Cali today.
-- IANAL, this isn't legal advice, and definitely isn't legal advice for you. Also, Squee!
Because of the closing of many neighbourhood book and CD shops, and the shrinking selection at those locations that remain open, you often can't "buy it at the store today" and online is the only way to go anyway.
Yeah that 20-25% in defense spending is really out of control compared to the >50% (and growing) in entitlement spending, watch out!
The "entitlement spending" as you put it at least goes back into the US economy. "Defence" spending goes to chew up the top 10cm of Afghanistan.
http://michaelsmith.id.au
This has nothing to do with the tax then does it? If you can't buy it at X then how much tax Y charges doesn't really matter anymore.
Also, might the unfair tax advantage of amazon have made it impossible for the local shops to compete? So if Amazon did NOT have its unfair tax advantage, you would still have a choice. But no, you saved a penny or two and now you got no choice.
Free market, I see you do work, I just don't like your results.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
Keep in mind that you're still supposed to pay the equivalent "use tax", so any savings were a lot less, unless you're a tax cheat. The vast majority of people, given the opportunity, proved to be tax cheats, which was no surprise.
All California is doing is saying "if you want to compete, compete on an even footing, and don't enable tax cheats." Is it a cash grab? Look around - state governments everywhere need the cash. Which is better - that Amazon be forced to compete fairly, or that you pay for a state bail-out?
Because things get insanely hairy. For instance, what is the tax rate for an affiliate in California? There isn't a single rate for the state, it varies by location. Besides the state tax you've got county and/or city taxes plus the occasional special tax district. And no you can't go just by ZIP code, because we've got plenty of ZIP codes that span multiple tax jurisdictions with different tax rates. And the state doesn't provide Amazon with any way to get an authoritative (as in "If you charge the rate we give you, you can't be legally touched if it turns out it was the wrong rate.") answer to the question of what the tax rate is for a given affiliate address.
And that's just California taxes. What happens when the affiliate is in California, the buyer is in Texas where Amazon has a warehouse and thus a physical presence, and both states claim sales tax is due? Does Amazon charge taxes for both states on the same sale? Or if Amazon only charges taxes for one state, what happens when the other sues for failure to collect taxes due under it's laws?
The states want to have these taxes collected, but they don't want to answer the hard questions about the actual implementation: what are the rules for which jurisdiction applies, and how is the merchant told what rates apply to any given transaction? Until the states are willing to address those questions, IMO actions like California's are simply unfair.
Yeah that 20-25% in defense spending is really out of control compared to the >50% (and growing) in entitlement spending, watch out!
The only difference between military spending and entitlement spending is that you have to blow things up to get your free medical, free food, free housing, and free childcare.
This is all a game between companies and the government (state and federal). CA has no money because they are stupid and elect individuals who spend it faster than it can be earned. The idea CA has is to tap revenue from outside the state, which is of course illegal since CA is not our central government.
The federal government is playing the same games since they are out of money (which is funny when you think that they are the ones with a printing press), but that's why you see Obama saying bad things about ATMs and Jets my guess being that ATMs and jets don't pay taxes.
All of this comes down to one thing, spending. Assuming you are not checking your bank account to see if your SS check was direct deposited into your checking account, the US will be at 200% GDP vs debt in our lifetime. That means that if every single American got a second full time job and paid all money from both jobs to the government then we could pay for our spending. As it stand now if we took all the money, 100%, from the top earners in the US FOREVER we still would never pay our debt off at the rate our spending is increasing.
Spending. Spending. Spending. Until we realize spending is the problem, the problems will continue.
"In God We Trust, All Others Pay Cash"
Even if you are in the right, going to court is not easy and cheap.
You're also not guaranteed to win.
Competition between out-of-state retailers and local business is not some new thing that arose with the internet. The Sears catalogue did the same thing in the 19th century and local businesses still survived. That there shall not be tariffs on commerce between states is a cornerstone of our nation. Do you want to junk it?
In Europe there are sales taxes in all countries and Amazon's local operations are able to work within the system. This is just a side effect of the US states not working together as one entity. It's very short termist and selfish on both sides.
The Supreme Court already made their stance on the exact Affiliate issue known: http://en.wikipedia.org/wiki/Quill_Corp._v._North_Dakota
"Quill Corp. v. North Dakota, 504 U.S. 298 (1992) is a Supreme Court ruling concerning use tax. Quill Corporation is an office supply retailer. Quill had no physical presence in North Dakota (neither a sales force, nor a retail outlet), however it did have a licensed computer software program that some of its North Dakota customers used to check Quill's current inventories and place orders directly. North Dakota attempted to impose a use tax on Quill, which was struck down by the Supreme Court."
Do you even read what you're typing? At least try and get the facts correct. Free medical has not been that for a long time, with the exception of the unmarried troop on active duty using a military treatment facility. Troops have to pay for family dental for example and once you leave active duty you have to pay for your medical care too. Prescriptions outside the basics genrally have to be ordered by mail for a copay. Free food and housing are not that. There are allowances for these things, but they are based on a standard of living from 40 years ago as to what size place yu might need and never covers all the bills. Child care has never been free.
Pretty weak cornerstone to base a nation on. Also, the tax is not on interstate commerce - the goods are free to travel through the state without accruing tax liability. It's only when they find their way into the hands of an end user that they are liable to the sales tax, or the equivalent state use tax. If you can show that sales taxes, levied by the state against the local individual, as opposed to being levied by the state against the vendor, are unconstitutional, you'd have a point.
Just as important, it's not interstate commerce when you have a business presence in-state. The affiliates ARE that presence - affiliates are, after all, affiliated with Amazon, that's why they're called affiliates, duh!!! They're paid by Amazon, not some 3rd party. They're no different than having a commission sales rep working the state, because that's what they are, commission sales reps.
I've said it before and I'll say it AGAIN:
Tax the shipping companies and you wouldn't have all these problems!!!
Tell you what, politicians are terrible at looking "outside the box" for solutions.
:T:R:A:N:S:
Except it won't be the same price at both locations because a B&M store still has to pay rent, utilities, pay their cashiers etc... Having a physical presence in a community costs more than a web site and drop shipping from a warehouse in BFE.
"An unarmed man can only flee from evil, and evil is not overcome by fleeing from it." Col. Jeff Cooper
I don't know how long it's going to take, but I'm pretty positive that this will blow up in California's face. You can't fix a deficit that big by adding a new tax; you're just going to drive business and revenue out of the state. There was a moratorium on internet sales taxes for multiple reasons at the turn of the century, not the least of which was that it threatened business revenue. (Among the others were double taxation because multiple states might legally be able to tax any given order.) I guess states are getting desperate and stupid with the recession still going on...
The sharpest blade is no match for the sharpest mind.
Considering that the "local mom&pop" only has to worry about the one rate that they are responsible for, it's not surprising they can keep track of it.
Apples and orchards.
By the taping of my glasses, something geeky this way passes
I just want to know why it is that when times are tough everyone except the government is expected to make due with less. Why don't politicians have to share in the hardship?
If you think that social security is too large, say that you think that the poor should make due with less. If you think that military spending is too large, say that you think we should bring the troops home. If you think that we spend too much on public infrastructure, say that the government should spend less money building roads, etc... All of those are valid views. However, realize that in none of those cases it isn't the government whose life is affected as government isn't any single entity separate from the people, neither does the government have feelings or a soul.
There is no such thing as attacking "government spending" even though certain people would like to make government appear as a faceless opponent that takes money away from the hard working people and burns it. When you say that government should do with less, you should specify which of the services that the government provides for people should be cut. When you speak about government as it would be a separate entity with goals, motivations, feelings, ability to make sacrifices, etc. I get the same feeling I get when I hear a paranoid person talking about "them". It doesn't make any sense as there isn't such a creature called "government" any more than there is "them". There is just a list of services that the democratic society has decided to provide to the people, the employees needed to provide them and the taxes that have democratically been set in order to provide those services. That being the case, attack the services, not the government.
This is true for Canada as well. Sales tax for the appropriate province is applied at checkout, and everything seems to work out fine. And it still ends up being way cheaper to order from Amazon (and I say this from a province with a 13% sales tax).
I'd recommend reading the debates around the writing of the Constitution (Signet Classics has published many of the relevant texts). Free commerce between states is vital for keeping the nation unified.
Use taxes are a fairly recent innovation that seeks to get around the longstanding tradition of no taxes on out-of-state purchases. They are a perversion of the law.
I don't dispute that. But usually when the question of Amazon and taxes comes up, some on Slashdot post as if, regardless of presence, Amazon is doing wrong. They are doing nothing different from the long, accepted mail order tradition.
Defending against patent trolling competition, yes.
which is totally what she said
This comment section shows why our government has so many problems: citizens who blindly believe political rhetoric as fact and then continue to spout it and vote along lines which further the goals of the spin-doctors.
Examples:
50% of the people in the US pay no taxes and it isn't the rich.
Defense spending is where all the money goes.
Neither of the above is anywhere near the truth.
Every political entity has its own agenda and in a case like this one, so do businesses.
Amazon and the e-tailers have one: continue sales without tax to maintain the margin advantage.
Big brick and mortar stores (Walmart and such) have an agenda as well: to reduce e-tailer advertising in Cali because they are well aware that collecting state specific taxes for an e-tailer is not feasible. (Far too many variations in tax laws in the US.)
Customers will not see any direct changes: brick and mortar prices will remain what they are and e-tailer prices- and taxes- will also not change. The only losers will be those California residents who earn a portion of their income from advertising. They will not be getting paid by companies like Amazon anymore.
This is what I believe will actually happen, not spin, not an agenda. I don't live in California and the case has no direct bearing on me.
Discussing defense spending or the Teabag Party idea that half of the people in the US are not citizens is just muddying the waters and allowing politicians free reign to continue to mislead the public and treat us as idiots.
This is about sales tax people, and the fact that the Federal government needs to reform sales tax as it applies to internet vendors.
The vendors can NOT afford to deal with each and every tax code in the country- it is far too complex at this time, and if they comply with one out of state code they will have to comply with all of them.
However, local government does have the right to put their own codes in place- except where it conflicts with federal law.
A federal law that requires a common tax rate for the entire US, supercedes local code and applies to online vendors is needed.
As someone who purchases online as much as possible, I enjoy how often I am not taxed- but I recognize the need.
Now- discussing the issue at hand is what the founding fathers intended when this country began.
Dicussing other issues- defense spending, immigration, foreign wars- that is what the current political parties would prefer we do as a people. It keeps us from paying attention to what is really going on and lets them maintain the status quo.
Your choice folks.
Linux computers, watercooled, photography
You can always emigrate. Read Plato's Crito for a classical argument about recourse to the social contract (one the American founding fathers were well aware of).
Natural rights theory traditionally relies on a belief in a higher power who endows human beings with some rights regardless of what the community says. Theism isn't too popular these days, especially on Slashdot. Once you recognize there's no convincing proof of God for the people around you, the only defensible forms of political theory are the various brands of utilitarianism: you have these freedoms, because the community in general gets on better if you have them, not because they are somehow innate.
no, let's start with texas and then sweep through the south. It does not negate his point: Munitions are valuable good and they are created here with our scarce resources and end up as heaping piles of rubble over there. There is a massive opportunity cost of not using these resources for building ourselves up rather than tearing someone down. Creative destruction abroad is wasteful compared to domestic investment, unless your playing some Machiavellian game whereupon foreign aggression is actually indirectly benefiting the economy. In any event, any such plan would rely on pure conjecture and a healthy dose of negligence with regard to history.
Nonsense.
I use Amazon extensively and from my experience the savings far exceed the difference between taxed (7% in NE) and untaxed sales prices. Free shipping and rapid deliveries make home shopping nearly as convenient as local shopping, especially for 70+ people like myself. While many local stores disavow warranty or service problems (the stickers say "Don't bring this XXX back to the store. Contact the manufacturer"), Amazon makes returning merchandize free and easy, including printing RMAs from your online account. At tax time I total the amount of the sales for the previous year from emailed invoices and submit the sales tax on my State Income tax filing, in fulfillment of NE tax law. I have yet to see any local store offer the selection that Amazon does. As a Prime member my wife an I enjoy streaming movies to watch on our HD TV, and over 5,000 offerings are free, with the rest being offered at prices from 0.99 to 3.99 for 48 hours. Our most recent viewings include "True Grit (2010)" and "The King's Speech".
P.S. -- I don't work for Amazon.
Running with Linux for over 20 years!
In order to offer products at such a value Amazon must operate with the smallest profit margins possible. They don't make much on each product sold. It's the massive volume that enables them to make a profit. Cutting into their margin even a few percentage points will doom them. They can't just swallow the taxes and keep on going. The costs from CA's new law must be passed down-stream. Amazon's biz model can't bear the burden alone.
quit blaming Amazon and their "unfair" tax liability.
Did Amazon kill Blockbuster? No, technology did and a better competitor did. Same thing with local CD and book shops. Most locals don't go out of business with mail order companies, even those the size of Amazon. They go out of business because of other local competitors, their location became a hindrance, or their customers moved. Even companies like Wal-Mart didn't kill mom and pops, most mom and pops were killed by the first gen big box stores and more importantly they were killed by cars. Yeah, the widespread use of cars allowed people to not be trapped by local stores. Same goes for any other technology, now I can download my book. How is the local store supposed to compete with that? A kiosk can do it
What is amazing is you rant against Amazon and then notice the "use tax" side of the issue, which is, if your customers are not honest somehow its your fault. As in - Amazon is at fault for buyers through their website not adhering to the law.
No what California is saying, screw the law about interstate taxation and rulings related to it, we plan to intimidate companies into paying the tax - which isn't really what is going on here ... What is really going on is...
We are dumb asses who promised our supporters to the point we cannot pay up and damn if we don't need new tax revenue, would you please become the bogeyman and take the blame for collecting taxes our residents would never support if we did it directly.
Needless to say, this is all based on the typical bogus math politicians use which always underestimate costs and overestimate revenues gained.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
And yet other online retailers handle this. Apple and Barnes and Noble both come to mind. Due to their extensive retail outlet infrastructure both have to collect sales tax in nearly every state. When you order something from either company an intelligent system determines where you live and charges the relevant taxes. I'd guess once a quarter the same intelligent system adds up how much it owes every state and locality in taxes and disburses funds. This isn't that difficult a problem. I'm a pretty poor programmer (I do more sys admin, and don't get to practice much) and I could code up a look up table and database system to handle it. It wouldn't be very scalable, but luckily Amazon can hire a few people way more skilled than I am for a short term contract (or use their own internal assets for a few weeks work) to take care of it.
I don't need a million points of light, just two points of multi-mode fiber and a 10 Gig-E router.
"Amazon Drops California Associates to Avoid Sales Tax"
Should read:
Amazon Drops California Associates to Avoid COLLECTING Sales Tax ON BEHALF OF A GREEDY STATE GOVERNMENT.
Option 1: Amazon should spend millions of dollars on programmers, accountants, tax compliance attorneys, and so forth so that they can continue paying commissions to 25,000 affiliates (many of whom do report their income and provide taxes to the state of CA).
Option 2: Find affiliates in states that are friendly and don't employ mob-style tactics. When will these pols get it? There is not an endless supply of OPM (other people's money).
Maybe they could license the systems walmart.com uses. It's pretty damned certain that Walmart has a physical presence in every state and they sell a wide variety of products online. You're right that I underestimated the complexity of selling such a variety of items, but it still doesn't make the problem that much more difficult. You could just use some extra tables in the main product database to figure out how an individual product is classified in an individual locale. Add an optional field for tax holidays. Have someone who's job it is to enter those as they get announced.
It's still not the overwhelming amount of work you seem to think it is, and I can think of more than a few retailers who most certainly must have figured out a way to handle it. Nearly all department stores and discounts stores have physical presences in many if not most states, and have online stores with a huge variety of items in them. I would not be surprised if there weren't one or more off the self products or services you get to handle this for you.
I don't need a million points of light, just two points of multi-mode fiber and a 10 Gig-E router.
How about eliminate the sales tax entirely and just focus on the income tax then? Local businesses will then be able to compete better with the internet and revenue will still increase without targeting those who need to spend a greater % of their earnings to survive.
More nonsense. Are you letting your political ideology control your reasoning? (You have a hammer and everything you see is a nail.)
"Funny how Amazon "can't figure this out" with all their resources, but the local mom and pop nails it with few problems. "
Before I retired I wrote software for the Dept of Revenue, State of Nebraska. Taxes and their collection isn't a funny matter for anyone, and it is not surprising at all that Amazon "can't figure this out". My state is one of the smallest, population-wise. We have less than 2 million people living in 93 counties. But, at the time I retired 3 years ago, there existed in the state over 4,700 different taxing entities. Resident zip codes do not determine which taxing district a citizen resides in, even if they limited their shopping just to one location. Citizens can get their mail in one zip code but live in another. Strange as it may seem to you, many residents do not know which taxing district they live in and would not be able to supply that information to Amazon. Or, strange as it may seem to you, they frequently put the wrong information in forms they fill out, even if they fill in online digital forms that do not have to be scanned and fed to an OCR engine, which is yet another can of worms. So, even for a small state like Nebraska, tracking sales by over 4,700 taxing entities that are NOT distinguished by a zip code or address can be, and often is, a nightmare. But, don't feel bad. You not alone. A LOT of elected representatives have unrealistic expectations of what a computer program "should be" able to do.
Nebraska's constitution requires a balanced budget and the legislature is forbidden to spend more than the tax revenues take in, so there isn't a any negative income or sales tax calculations using convoluted rules to benefit those who are more equal than others, like CA, Tx, NY, MA and other heavily indebted states have. To require Amazon to keep track of the taxing districts and policies of 50 states and the territories of the USA and do their tax collections would put a burden on Amazon that could, and probably would, drive it out of business. Add to that the legal costs that would most definitely arise because some political or selfish-interest groups would see Amazon as a Golden Goose that they could pluck in a political favorable court district, and you have the last nail in Amazon's coffin.
YOU are a responsible citizen, or should be. What's wrong with YOU keeping track of how much YOU buy at Amazon, and when tax time comes around YOU compute what sales tax YOU owe on YOUR purchases through Amazon, and submitting that tax to YOUR state when YOU pay your state income tax? That's how it is done in Nebraska, and that's how I did it six months ago, and I do my taxes on line.
Running with Linux for over 20 years!
Well, no. First, the $200M isn't just from Amazon, and the other affected e-tailers aren't all trying to take similar steps to eliminate their business nexus with California. Second, the revenue from Amazon would only be simply lost if the transactions still occur, and still go to Amazon: but that presupposes that the affiliate program had no value to Amazon whatsoever. That supposition is unreasonable.
So, considering the effect of the Amazon transactions, if we suppose instead that the affiliate program actually does drive business to Amazon that would otherwise not go to Amazon, then those transactions will either:
* Not happen, and the California residents who would have engaged in them will use the money for other purposes, some of which is likely to be subject at least to California sales tax (and some of which may be subject to other California taxes as well);
* Happen, but go to some other e-tailer, which may either already be subject to sales tax before the expansion (e.g., Barnes & Noble or any other e-tailer which also has a physical retail presence in the State) or may have a business nexus in the State that has not been severed (because, unlike Amazon, the e-tailer prefers to preserve sales even if it means paying tax on them.)
* Happen, but go to some brick-and-mortar retailer in the State, which is already subject to State sales tax.
The reason that intelligent policy works this way is that countercyclical government spending reduces the depth and severity of recessions, and the times when you need government doing more is when times are bad (when the private sector economy is doing well on its own, you want government doing less; when it isn't, you want government doing more.)
But, in any case that's not what is happening in California: while there are some revenue enhancements that are taking place in California, the budget gap has been closed largely by spending cuts (Gov. Brown's initial proposal was a half-cuts, half-revenue plan, but California requires a supermajority to pass tax increases or extensions and only a simple majority to pass a budget, so the actual budget passed has less, realistically, on the revenue side; in theory its about the same because instead of some of the tax extensions there are more favorable revenue forecasts on the revenue side, but those are probably overly optimistic and there are additional triggered spending cuts programmed mid-year if those revenue forecasts don't turn out to be right.)
Because, despite the fact that this is an article of faith among anti-tax Republicans, its not actually supported by facts. It is possible for a particular tax increase to be a net drain compared to a particular spending cut of the same magnitude, but whether or not it is depends on what the tax increase is and what the spending increase is. (For a government which can relatively freely borrow, a tax increase is probably usually a short-term economic drain compared to maintaining spending without increasing taxes, i.e. deficit spending, but both due to Constitutional requirements for a budget that is at least nominally balanced, and credit conditions resulting from California's fairly free borrowing during good economic conditions, Cali
As have corporations, and most corporations have the same motivation (profit) and ethics (see "motivation") as the mob. Indeed, corporations ARE our government in the U.S. At least the mob is up-front about its motives.
How many of those 25k affiliates "forgot" to include their affiliate income?
Substantially less than the new number of affiliates, 0, which will no longer have affiliate income to tax, nor will be spending affiliate generated income in California.
That's right, even if eery single affiliate were not reporting taxes, California STILL would have been better off with that affiliate income entering the state.
How many people getting by on affiliate income will be forced to leave the state or go on state assistance now I wonder? I'll bet THAT answer is > 0...
"There is more worth loving than we have strength to love." - Brian Jay Stanley
The law requires that they must collect taxes if they or a subsidiary are in California.
Amazon has two research labs in CA, the first does work on searches the second did the design work on the Kindle and is rumored to be working the new Kindle and the upcoming Android based tablet.
So Amazon may be willing to not fight for the associate program but will probably fight to kill the law to protect themselves and keep theses two subsidiaries.
As a general rule, I find that conservatives and libertarians tend to cultivate unrealistic views of people they disagree with so it's easier to dismiss their ideas without addressing them.
Sorry, spending by the legislature is not CA's problem. Actually, there are many interrelated problems, many of which are a result of Prop 13.
1. Property taxes, which are a generally stable source of income are limited to the point of insignificance. This was sold as a way to protect grandma, but the real beneficiaries are big corps like chevron who are still sitting on the same land they were when it passed. Because property taxes cannot be touched, we have to rely on income and sales taxes, which are inherently unstable and obviously tank when you need them most.
2. Ballot box budgeting, has tied the hands of our legislature for quite some time. We keep passing laws specifying where and how much money must be spent, but without any regard to where the money comes from or to whether there is, in fact, any money to spend.
3. Prop 13 also raised the bar on tax increases to the point where it is virtually impossible to raise taxes at all. It used to be, if the budget stayed within 5% of the previous year's budget, it could be passed with a majority vote. If the budget grew or shrank too much, a super majority was needed. This seems quite logical and effective to me.
4. We pass stupid laws that dramatically increase our prison population without considering the financial impact of housing them.
There are many reasons why CA is in the shape that it is in. Raising taxes and cutting spending are only stop gap measures for what is really needed. The only way CA is going to get out of the shape it's in is to hold a Constitutional Convention. We need to gut and rewrite it in such a way as to be fair, effective and quite a bit more strict as to how it is modified.
Parent makes an important point. To push it a little further, this new law is not so much about paying sales taxes (which purchasers are already obligated to do), but a question about what a state government can force an out-of-state entity to do (here, collect sales taxes on its behalf). New York state has gotten into hot water over a related issue before, when it effectively forbade out-of-state companies from shipping alcohol into the state. The discussion on the current law shouldn't be whether the sales taxes are justified or not, but rather the limits to what a state can compel an out-of-state entity to do.
Note also that this isn't a private outsourcing issue. California, recognizing that it is difficult to collect taxes accurately, isn't trying to pay someone to collect taxes on its behalf. It is trying to compel an out-of-state entity to do it. Yes, it already compels in-state entities to do so, and these in-state entities ostensibly benefit from other California services. One way of looking at this question then might be, does out-of-state Amazon sufficiently benefit from California services to justify compelling it to perform a state revenue function?
Calculus
Still waiting on Serviscope_minor to wake up to fucking reality and realize that Jessica Price isn't going to fuck him.
establish a tax clearinghouse that any merchant can plug in to, and then anybody who collects money online can take advantage of their existing ecommerce infrastructure to both calculate and deliver the correct amount of tax to the clearinghouse, which then tags it with the EIN of the employer and sends it directly to the state and/or local government, each of which would pay a small percentage or else a flat fee based on their size to run the clearinghouse.
That's already in existence. The Streamlined Sales Tax Agreement set up the framework, and there are six "certified service providers" which connect up with shopping cart systems, take the address and commodity code, calculate the tax, bill the merchant, and pay out the correct amount to each jurisdiction. The problem is that only 24 states have enacted legislation to work with this system.
It's not getting retailers to comply that's hard. It's trying to get state legislatures to go along. Some states have tax exemptions for specific products, and legal decisions in different states have resulted in inconsistent definitions. Some states have "sales tax holidays". Federal legislation was introduced in 2007 to make this work nationally, but it didn't pass.
Considering the fact that California, despite the dire situation, still subsidizes some of the chest-thumping, mouth-foaming but revenue-devoid "red" states, I'd say that secession would improve this state's outlook.
The only people that support replacing all taxes with consumption taxes are wealthy members of the investor class who would have their tax burdens virtually eliminated by consumption only taxes and misinformed people who don't understand that they would be fucked by such a scheme.
Which category do you belong to?
I don't always use unix-like operating systems; but when I do, I prefer FreeBSD.
It's worth noting that the Supreme Court's Quill decision in 1992, while upholding the Bella Hess (1967) physical presence test, did so not on the basis that physical presence was inherently Constitutionally mandatory (indeed, it took the unusual step of specifically noting that it was likely that, had the issue been one of first impression in 1992, the decision would have been different) but that the combination of the value of maintaining precedent and having a bright-line rule, in the circumstances actually present at the time, outweighed the benefits from adopting a more flexible approach to determining whether a sufficient nexus existed to allow a state to collect sales and use taxes on a transaction. Add to that that "on-line affiliates", the nexus used in many of the recent state taxes on online merchants, are not a kind of nexus that existed at the time of Bella Hess, or even Quill, and its quite easy to see the Court today not applying a strict physical presence test, and either applying alternate nexus criteria that would include on-line affiliates or simplying overruling the physical presence test altogether.
Oddly, this may be even more true given the heavily conservative makeup of the current Supreme Court, because the conservative justices on the Court tend both to favor state (as opposed to federal) power and to read the federal powers (including the negative ones at issue here) in the Commerce Clause narrowly.
Untrue. The reasons that California is in big trouble financially are fourfold:
As far as I'm concerned, income tax should be the only tax allowed by law. It's the only non-regressive tax scheme that exists. Every other tax disproportionately impacts the poor. The poor spend a larger percentage of their income on products and housing than the rich, which means that sales tax and property tax impact them more (either directly or through higher rent). Same goes for taxes on businesses, as those businesses pass on those higher taxes to customers.
Income tax, by contrast, taxes based on income, which means that it affects rich and poor equally. If we eliminated the capital gains tax and replaced it with ordinary income, we would immediately fix all of our budget problems, both at the state and national level. If we eliminated the social security tax cap, we would fix social security's budget problems. Basically, everything wrong with our state and federal budget can be neatly pinned on tax shelters for the wealthy. In short, we're not relying on income tax too much. We're not relying on it nearly enough.
Check out my sci-fi/humor trilogy at PatriotsBooks.
Other online retailers such as walmart manage to do the tax thing with no problems. Amazon's actions speak louder than words - they really DO want to dump their affiliates - 4% to 10% adds up, you know.
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California's got more tax-payers than any other state by a long shot and still can't afford to pay it's bills. CA needs the new biz model. Not Amazon.
After reading a few comments, most of the people here don't understand this law very well. What California did is redefine what being located in California means to:
If California were more creative, they should have tried defining a nexus as anyone who uses a shipping service with warehouses and vehicle depots in the state of California. Fedex or UPS could not have pulled out as easily under this condition.
So, Amazon fired the California contractors. Now they aren't located in California any more. Stupid law gets equally mind numbing response. Amazon pulls out, and their affiliates, some of which are very large web publishers, will have to forgo participating in Amazon's affiliate program or will have to move out of California to protect their income from their Amazon affiliate programs.
What California did is try to make an end run on the US Constitution and a recent supreme court decision that said requiring out of state merchants to pay sales tax was an attempt to regulate intrastate commerce, a power that is exclusively delegated to the Federal Governement. The basic reason for this is to prevent trade wars between the states over tariffs, duties and exclusionary laws. Fortunately, California has inadvertently aimed it's cannon at it's own foot and fired a round of grapeshot: By attempting to regulate Amazon, California affiliates now will have to leave the state to continue doing business.
A lot of people seem to think somehow Amazon was ducking an obligation to pay sales tax. This is simply wrong. The buyer pays sales tax. The seller only acts as an agent in collecting it (in most states, the seller actually gets to keep a cut of the sales tax). The only way for Amazon to duck sales tax is to not pay sales tax on their taxable purchases.
Some people think that affiliates are not reporting their taxes. Some less intelligent affiliates my not report their income, but most will because Amazon reports your Affiliate income to the IRS, so if you fail to report your affiliate income, you are likely to get into trouble.
A few people see the mail order sales tax issue as one of being fair to local merchants. As it sits, mail order merchants in California can sell to every other state and protectorate without having to collect sales tax on those sales, just like an Indiana retailer doesn't have to collect sales tax for a sale shipped to California. It's actually pretty fair to everyone except huge companies that do have actual locations in every state.
-- $G