There is currently an ongoing state-by-state battle over tax collection by state governments with regards to purchases made on affiliate websites. Recently Amazon warned thousands of affiliates that their revenue streams would be eliminated if a tax bill passes. A few short hours following the announcement, Governor Jerry Brown signed the bill into a law. This indicates there will be tough times ahead for online business owners.
Amazon Released California-based Affiliates
Immediately following the signing of the bill, Amazon dropped affiliates. On the other hand, the American Bookseller’s Association saw this as a victory against companies like Overstock.com and Amazon to ensure fairness across the Internet. This bill simply indicates that U.S. states are extending the bill to include areas of eCommerce that it did not previously address.
States Scrambling for Money
The bill was clearly enacted because states are scrambling for any extra cash they can acquire. As a result, brick-and-more websites that did not clutch the many affiliate opportunities Amazon created have less online competition than ever. Also recently, specific states have passed laws that expand the definition of physical presence which includes eCommerce websites with many affiliates such as Amazon as Affiliates.
Amazon Following the Rules
Amazon is not attempting to avoid paying sales tax. Amazon obeys the state laws that specifically require companies to collect sales tax in the states they have physical locations. The company has locations in Kansas, Kentucky, New York, North Dakota and Washington. Therefore, they collect sales tax from those states.
Fighting Irrational Laws
Amazon is fighting individual states who are attempting to enforce irrational legislation. For instance, in North Carolina the company fought in conjunction with the ACLU to keep customer records private when tax collectors demanded private client information.
Colorado Affiliate Legislation
In 2010, Colorado also passed a law that required online retailers such as Amazon to bill Colorado residents on the amount they owe in sales tax from web purchases. The company provided summaries of purchases to state financial offices. Like in California, Amazon eliminated Colorado affiliates.
Many eCommerce and online legal experts feel this law is unconstitutional and therefore should be resolved at the federal level. Amazon has stated that it would support a national sales tax system that is much more organized and can be enforced. The current system of state-by-state implementation is going to cripple major economic powerhouses like Amazon and other online retailers.