Theft Promotes Competition, Levels the Playing Field

Wednesday, October 19, 2011
Posted in category Tax Tyranny

Amazon.com vs the Taxman is still in the news. Numerous states are still trying to stick their paws into Amazon’s pot to grab some of the company’s dough by nailing it with their sales tax laws.

The state of Connecticut passed a new Internet tax law and contends that Amazon had a physical presence because it had affiliations with websites through its Amazon Associates program. Of course, Amazon dropped the Associates program in Connecticut to avoid having to collect the sales tax or fight that contention. In fact, the same scenario took place in California this year – so Amazon dropped its California Associates program to opt of that government scheme. The headhunting tax thieves from so many states are so focused on getting Amazon, this has come to be known as the “Amazon Tax.” Theft-seeking bureaucrats are fond of supporting their schemes as a logical move to combat an “unfair advantage” that they say online retailers have over brick-and-mortar retailers.

The Amazon Associates program allows website proprietors, bloggers, etc. make money by referring their readers to the Amazon site to make purchases. Some of the busier websites are able to cover a lot of their costs through this program. So now, a lot of folks who were able to benefit from their website traffic have lost out.

Note that the Connecticut Department of Revenue Services (DRS) claims that (1) it is owed at least a month of sales tax prior to the time that Amazon dropped the Associate program, and (2) Amazon is obligated to pay sales tax in “other ways” as well. The Connecticut law also forced Overstock.com to sever its ties with its associates in the state.

“By severing those ties, we effectively severed any sort of obligation,” said Mark Griffin, Overstock’s general counsel. “We don’t have boots on the ground in Connecticut and trying to say that we do because we advertise through Connecticut affiliates — in order to avoid that argument, we’ll simply terminate those opportunities in Connecticut.”

So, as always, the bureaucrats who are protecting their own long-term job security are claiming they are leveling the playing field by making the consumers pay more and/or lose revenue from associate relationships with online retailers. But, as our “public servants,” they do it for our benefit. The Connecticut DRS Commissioner is quoted this way: “All we have to do is get in the door. Once we get in the door, there are some more opportunities that come.” In other words, bureaucrats are looking at other connections Amazon has within the state that can be defined as physical presence. Other states that have passed the Amazon Tax laws have redefined physical presence in order to legally collect the sales taxes.

Just recently, a bill was reintroduced in the Senate that would “require all sellers not qualifying for the small seller exception to collect and remit sales and use taxes with respect to remote sales sourced to that Member State under the Agreement.” This bill is actually called, now get this – the Main Street Fairness Act. It is disturbing that Amazon is supporting this bill while eBay and many other companies oppose it. But then again, Amazon seems to be battling the administrative burden of sales tax collection – and it is onerous and costly for companies to comply – and the company seems willing to buckle if it gets what it wants (streamlined and simplified sales tax reporting) through federal laws.

But don’t blame Amazon or other companies that wheel and deal with these state and federal governments – they are just fighting for survival and profitability. Their political forays are a strategy to confront the political barriers and insure an optimum position within a regulatory environment they can’t mange. Sometimes, partial surrender is a coping strategy. So we should not blame the victims of political machinations. Instead, we should blame the government for all of the roadblocks and harassment that leads these companies to go to great lengths through political channels to optimize their business profitability and persevere in spite of the oppressive political environment in which they have to operate their business.

Here is an excellent post on the blog of a North Carolina artisan coffee roasting company that sheds some insight on the Main Street Fairness Act (that is painful to type) from the view of a small business owner with a brick-and-mortar and online presence.

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6 Responses to Theft Promotes Competition, Levels the Playing Field

  1. Jim P says:

    October 19th, 2011 at 10:53 pm

    Thanks for the link to my blog.

    I only take exception to one point in your article: you say that states want to get their hands on Amazon’s money (or other internet retailer). Technically, if a retailer collects sales tax, it’s not their money, it’s the state’s money. I object to the administrative burden of collecting other states’ taxes for them. But the purchaser is obligated to remit to their state. I just don’t want it to be my problem.

  2. Michael Paulus says:

    October 19th, 2011 at 11:23 pm

    If I were the mafia and all the people I “insure” started moving away I would try to find a way to make them pay anyway. Why not, I mean, I’m a crook so coming up with a way to coerce people is my job.

  3. Bob Wallace says:

    October 21st, 2011 at 2:55 pm

    Illinois pulled the same scam and Amazon pulled out from there, too.

  4. cousin lucky says:

    October 21st, 2011 at 10:07 pm

    Eventually Amazon, and other E-Commerce companies, will be forced to
    set up shop in another country!

  5. Karen De Coster says:

    October 22nd, 2011 at 6:49 am

    Jim P. – as a CPA, I do understand a wee wee bit about taxes. I used to work in the sales & use tax “world.” What I was pointing to was going after Amazon as a money machine, a massive revenue-generating machine ripe for the state’s grab. The states don’t care about or go after Joe Blow online widgets company that generates $500k of revenue/year – they want to get their dirty hands on the dough from huge sellers like Amazon and Overstock.com, etc. Maybe it could have been phrased better, but still, I think (thought) my point was obvious.

    Also, there is no “obligation” on the part of the purchaser. It is a law, yes, but the Nazis had laws that made a lot of stuff obligatory, too. The sales tax is just one more unconstitutional, totalitarian “obligation” rolled out in the form of “law” on the part of the slave masters. Imagine a group of people – an entity known as the state – passing a decree that states that a person owes the state $$$$ for transacting voluntarily with someone else? Only the state is enabled with a monopoly on force, so only the state can “legally” hold the gun to your head while it dishes out obligations in the form of “law.”

  6. Larry Calloway says:

    November 13th, 2011 at 6:57 pm

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