More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
The good news? The budget that Gov. Brown of California signed into law on Wednesday imposes no new taxes. The bad news? The good news isn't true.
The legislation requires online retailers to begin collecting sales taxes--and forking the dough over to Sacramento. The governor argues that he's merely enforcing the sales tax, not imposing new taxes. Amazon took only a few hours to disagree--announcing that the new taxes would cost jobs--instantly.
From the San Francisco Chronicle:
Amazon.com Inc. and much smaller Overstock.com Inc. are cutting off their advertising affiliates in California because of a new state rule forcing online retailers to collect sales tax there.
In an email Wednesday to California-based affiliates, Seattle-based Amazon said it would cut ties with affiliates who reside in the nation's most populous state if the law became effective. Gov. Jerry Brown signed the law Wednesday as part of a larger state budget package.
The new rule requires online retailers to collect California sales taxes if they have in-state affiliates. "Affiliate" is the term the online retailers use for individuals or companies who run websites that refer visitors to them and then get paid a commission on any resulting sales….
In its email, Amazon called California's new rule "unconstitutional" and "counterproductive." Amazon would not disclose how many affiliates it had in California, but in the email it said that for more than a decade it has worked with "thousands" of people in the state.
I leave it to Mssrs. Epstein and Yoo to decide whether the new law is indeed unconstitutional. But counterproductive? Obviously.
Not that they need the encouragement, but here's yet another reason for Texans to feel superior.
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May '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
Peter, I'm not so much upset that you said nice things about Jerry Brown, but that you cited the San Francisco Chronicle as a source. Blecch!
Jul '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
"Not that they need the encouragement, but here's yet another reason for Texans to feel superior."
Y'all will always have the weather...
Aug '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
This law is devastating to a lot of startups, bloggers, and other small internet concerns in California. It's crazy that California, which is the heart of computer industry and internet entrepreneurship, has been screwed so badly by short-sighted government.
This reminds me of the luxury tax - with Amazon and Overstock gone, California won't get any of that tax revenue anyway, but they run the risk of forcing more people into unemployment and ultimately costing the government more in benefits paid out than in new tax revenue collected, while at the same time further choking off the innovative spirit of Californians.
The California government never seems to learn.
Jan '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
And yet another reason for ex-Jesuits to lay low for awhile.
May '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
If 90% of the employeed people of California weren't underwater with their mortgage, there would be nobody left to pay a sales tax. The only thing keeping any business there is the dismal real estate market.
Mar '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
Let that be a lesson for you, Peter - never write good things about a Democrat.
Jun '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
I believe precedent may be on Amazon's side. In Quill Corp. v. North Dakota the SCOUTS ruled that a company must have a physical presence in the state in order to be taxed. Of course, the depth of Amazon's physical presence in California is what is in question here.
Aug '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
I heartily encourage California to pass as many of these online taxes as possible. The rest of the country will greatly enjoy its new tax base as startups and industries move out.
Apr '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
Here in Tennessee, Amazon is building 2 distribution centers and there are talks to build more. Part of the deal with the economic development folks is that Tennessee residents would not be charged sales tax on Amazon purchases, because the facilities will be drop ship centers, rather than retail outlets (legal term is nexus). The facilities, which are in and around Chattanooga, are scheduled to open in a few months. Some legislators, who are not from this part of the state, have tried to block this agreement and force Amazon to charge tax. Unfortunately the state AG ruled that these drop ship centers do constitute a "nexus," Governor is not happy and neither is anyone around here. This is further proof that Amazon will pull out in a heartbeat, taking away 1,400 potential jobs, up to 2,500 seasonally.
Apr '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
Unfortunately I see the Amazon tax as a symptom of the problem. It's the worldview that states a budget problem is one of income, not of expenditures. It's readily apparent from the Democrats attempts to increase taxes in various states to the President's press conference the other night. The problem to them is that we're just not giving them enough money.
Dec '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
I wonder how long it will take for the e-commerce giant to be granted a wavier from Sacramento?
Jul '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
The pretty good state of Arkansas, one of the few Democratic leftovers of the formerly Solid South, just passed a similar law. The people whose livelihood is government are insatiable. They will tax your right to live in time. You will be working for them by then.
Jun '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
Jimmy Carter: "Not that they need the encouragement, but here's yet another reason for Texans to feel superior."
Y'all will always have the weather... · Jul 1 at 1:04pm
Um, hate to point this out but Texas has already done the same thing:
A total of 119 people will lose their jobs when online retail giant Amazon.com closes a suburban Dallas distribution center amid a dispute with the state over millions in uncollected state sales taxes, according to a letter the company sent Friday to the Texas Workforce Commission.
The state says that Amazon is responsible for the tax it has not collected on online sales made in Texas. The $269 million includes the taxes, plus penalties and interest, from 2005 to 2009.
The state is seeking money from Amazon because its distribution center is in Irving. Under a 1992 U.S. Supreme Court decision, that physical presence means Amazon potentially could be required to collect sales tax on transactions in Texas, according to legal experts.
The comptroller's office said last year that it has sent demands for payment to other online retailers similar to what it sent to Amazon.
May '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
In my home state of South Carolina our former governor negotiated a deal to exempt Amazon from the in state presence stipulation so that they could open a new distribution facility employing 1000 employees in Columbia. Nikki Haley tried to void that agreement due to pressure from Walmart and other so called Main Street Retailers but the tea party put the fear of the Lord, or at least the fear of the voters who elected her, into her and she let the exclusion become law.
Jul '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
Amazon should be forced to collect sales taxes (or not, depending on the state) just like every other business.
The entire argument in favor of exempting Amazon is no more than a corporatist, crony, kickback.
Oh, but Amazon's a really important employer, we just can't treat it like every other business in the state.
Hooey. That's right, hooey.
May '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
Palaeologus: Amazon should be forced to collect sales taxes (or not, depending on the state) just like every other business.
The entire argument in favor of exempting Amazon is no more than a corporatist, crony, kickback.
Perhaps but I would say that the power to tax commerce within a state is restricted to activities that occur within that state not to interstate commerce which is subject to federal taxation and regulation. Internet commerce has been a boon to personal freedom and should be cherished and defended. We are taxed enough already.
Jun '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
What everyone except Paleogolus is missing is that sales taxes are voted on by every individual taxpayer. They often times are specific to instituting and paying for local civic projects. If you don't want the projects, vote down the sales tax. But don't vote for the tax because you want the project, then go buy all your stuff online tax free. Everything you buy online is a thing not sold by a local merchant, be it Walmart or a small mom and pop. These are the companies that provide local jobs, many more jobs than an Amazon affiliate or distribution center. These brick and mortar companies, besides hiring local CPA's and cleaning crews and insurance companies and parking lot pavers, etc, are also charged with the fiduciary responsibility of collecting your local sales tax. By allowing Amazon or Overstock or any of the others to avoid charging sales tax, you put the local merchant at an immediate 8% on average disadvantage in a competitve marketplace. If you want to really kill jobs, allow the continued unfair disadvantage of sales tax avoidance by online merchants. Giving tax advantages to some and forcing others to pay is corporatism.
Feb '11
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
No ill will intended here-
So if I voted 'no' on the sales tax does that mean I can shop online with a clear conscience?
Not necessarily- why is the assumption that it a zero sum game? Maybe I wouldn't have made the purchase at all. Or maybe because of the savings I get via online purchases I have money to spend at different local businesses, such as restaurants and service providers. And since when is Bentonville, AR local?
So then shouldn't I only shop from local merchants that source from local manufacturers that only use local suppliers that only use 5th generation employees etc, etc?
Sep '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
If you were organizing the world wouldn't you say that brick and mortar retailers and online retailers should both collect the same sales taxes? Isn't that apparent?
I understood that the sales tax exemption for online retail was to allow internet business some time to solidify and then was going to go away. I am pretty sure that was the stated rationale back then.
Internet sales tax collection in that regard is a little like ethanol subsidies. They purportedly needed to be in place to get the business off the ground, but now that it is off the ground the subsidies can't be taken away because that would hurt the businesses who get them.
I don't care for Jerry Brown, but even a blind hog finds an acorn every once in a while.
Edited on Jul 2, 2011 at 12:04pmDec '10
Re: More California Madness, Or Taking Back the Nice Things I Just Wrote About Jerry
California consumers and businesses buying from out of state vendors who do not collect sales tax are required to file a use tax return and pay in the appropriate California sales tax on a Sales and Use tax return or their personnal tax return. As a CPA in California I find a few business clients who might pay some use tax but consumers as a whole do not voluntarily pay in use tax on out of state purchases.
This is not a question of whether tax is due but who is going to collect it. If Amazon collects it CA gets 100 percent of the tax with low collection cost. If CA has to police it and collect they might get some small percentage of it with high collection costs.
Amazon has a business decision to make. Withdraw all presence in CA including a couple of subsidiaries and sales staff here(over and above the affiliates problem) and give up some potential sales or collect sales tax and give up their 8 percent advantage and potentially lose sales. Either way Amazon loses.
BTW Just like airlines before them I suspect Amazon was looking for a reason to terminate paying affilliates.