Colorado Screws Amazon and Its Affiliates

 Posted by on 10 March 2010 at 3:00 pm  Activism, Amazon Tax
Mar 102010

Due to a horrible new law (HB 1193) recently passed in Colorado, Amazon terminated all of its “Amazon Associates” accounts in Colorado. (Amazon Associates is an affiliate program: members earn a small commission on Amazon sales via their links.) Much to my dismay, I found out about this change in the wee hours of Monday morning, while working on a new web site. I received the following e-mail from Amazon:

Dear Colorado-based Amazon Associate:

We are writing from the Amazon Associates Program to inform you that the Colorado government recently enacted a law to impose sales tax regulations on online retailers. The regulations are burdensome and no other state has similar rules. The new regulations do not require online retailers to collect sales tax. Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to “voluntarily” collect Colorado sales tax — a course we won’t take.

We and many others strongly opposed this legislation, known as HB 10-1193, but it was enacted anyway. Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado. We plan to continue to sell to Colorado residents, however, and will advertise through other channels, including through Associates based in other states.

There is a right way for Colorado to pursue its revenue goals, but this new law is a wrong way. As we repeatedly communicated to Colorado legislators, including those who sponsored and supported the new law, we are not opposed to collecting sales tax within a constitutionally-permissible system applied even-handedly. The US Supreme Court has defined what would be constitutional, and if Colorado would repeal the current law or follow the constitutional approach to collection, we would welcome the opportunity to reinstate Colorado-based Associates.

You may express your views of Colorado’s new law to members of the General Assembly and to Governor Ritter, who signed the bill.

Your Associates account has been closed as of March 8, 2010, and we will no longer pay advertising fees for customers you refer to after that date. Please be assured that all qualifying advertising fees earned prior to March 8, 2010, will be processed and paid in accordance with our regular payment schedule. Based on your account closure date of March 8, any final payments will be paid by May 31, 2010.

We have enjoyed working with you and other Colorado-based participants in the Amazon Associates Program, and wish you all the best in your future.

Best Regards,

The Amazon Associates Team

On reading that, I just wanted to cry. My new project is a labor of love — as you’ll see when it’s launched on Monday. But dammit, I was hoping to be compensated somewhat for my past and future hours of work by those small commissions from Amazon. The same applies to other projects of mine. In an instant, the new law meant that so much past work was wasted and so many future plans derailed.

As if that’s not bad enough, the media and the leftists in Colorado are blaming Amazon for closing the program, rather than Colorado Democrats for enacting the law. Consider the opening of Mike Litwin’s column: Amazon’s use of human shields evil:

I don’t like to say that Amazon is evil, because I’m not in the corporations-are-people legal camp.

But it turns out that Amazon is evil. And now that Amazon has fired all its Colorado affiliates — mostly mom-and-pop outfits, and who can resist an outfit with a mom or a pop? — I find I have no choice.

In a sales-tax war between Amazon and the Colorado legislature, Amazon has dropped the big one on the innocent affiliates, who have done absolutely nothing wrong except get caught in the crossfire.

No one seems sure exactly why Amazon fired its Colorado affiliates — people who, after all, send business Amazon’s way — unless it was simply to enjoy watching the ensuing chaos. Amazon has done something like this before. That’s why, before passing the new law, Colorado legislators specifically exempted affiliates from the battlefield.

The affiliates, numbering in the thousands, are angry — either at the legislators or at Amazon or, probably, both.

And here’s more from the odious Progress Now Colorado:

…in a move leaders from around the state have called ‘tyrannical’ and ‘pure duplicity,’ Amazon, with no warning, closed the accounts of Colorado website owners–many of whom are individual bloggers and nonprofit organizations–in protest of routine collection of state sales taxes. What they’ve done won’t allow them to evade the new law. All they have done is punish our neighbors in order to score cheap political points.

In fact, Amazon did not decide to terminate its Colorado affiliates on a lark or for revenge: they did so because the existence of those affiliates would have subject them to an onerous and expensive confusion of red tape, such that the program was no longer of value to them.

Ari Armstrong has the details in his post: Stop the ‘Amazon Tax’!.

Tax Law Is NOT About Equalizing Tax Standing

Democratic legislators have disingenuously claimed that the tax law is merely about equalizing the tax standing between local retailers and online retailers. Such claims stray far from the truth.

A local retailer is located within a particular set of tax zones (state and county, and possibly city and various special districts). Within that location, the percentage of the tax is exactly the same for each purchase. The retailer calculates the percentage, tacks on the fee to the sale, and the customer pays it. Then the retailer pays the various taxes to the various taxing entities at the alloted times.

That is most certainly NOT what the Amazon Tax requires of online retailers. Here’s what the final version of Bill 1193 actually says:

“Each retailer that does not collect Colorado sales tax shall notify Colorado purchasers that sales or use tax is due on certain purchases made from the retailer and that the state of Colorado requires the purchaser to file a sales or use tax return.”

Failure to do so results in a $5 fee per infraction. Retailers must also submit an annual tax report to customers, stating that they owe the Colorado taxes. “The notification specified… shall be sent separately to all Colorado purchasers by first-class mail and shall not be included with any other shipments.”

Furthermore: “Each retailer that does not collect Colorado sales tax shall file an annual statement for each purchaser to the Department of Revenue on such forms as are provided or approved by the Department…”

The bill is also quite vicious in its enforcement: “If any retailer that does not collect Colorado sales tax refuses voluntarily to furnish any of the information specified in [another part of] this section when requested by the executive director of the Department of Revenue [etc.], the executive director, by subpoena issued under the executive director’s hand, may require the attendance of the retailer” at a government hearing. Moreover, the director is authorized by the bill “to apply to any judge of the district court of the State of Colorado to enforce such subpoena by an appropriate order…”

Obviously, this scenario is nothing like what local retailers must endure. Consider: if Amazon makes a $10 sale to somebody in Colorado, under the law Amazon is required to send out tax documents to the customer (via first-class mail) as well as to the state, and the customer is required to pay the sales tax. The postage and time required to comply with this bureaucracy –for both Amazon and customers — could easily overwhelm any profit that Amazon makes from the sale, and it would add considerably to the total purchasing price (including the value of time spent complying with the controls).

As Amazon recognized in its letter to Associates, the obvious intent of the bill is to make doing business in Colorado living hell unless retailers “voluntarily” collect the sales taxes directly.

In other words, the bill is a vicious combination of blackmail and threat of physical force.

Go read Ari’s whole post for more details: Stop the ‘Amazon Tax’!

Ari Armstrong and I are frantically putting together a campaign on this issue. People need to recognize that Amazon is the victim — the primary victim — of very destructive legislation. The repeal of this awful law should be first on the agenda after the election in November, presuming that the Republicans gain control of the legislature again.

I’ll have a very basic web site up and running at later today. [Now done!] I’ve also created a low-volume, moderated e-mail list. To stay informed about the battle against the “Amazon Tax,” subscribe to NoAmazonTax @ GoogleGroups.

Honestly, I do not want to fight this fight. I’ve got a dozen other projects that I’m really desperate to develop. I’ve got career plans that I want to get underway. Instead of doing something positive, I’m battling some already-passed tax insanity. As if that’s not depressing enough, I’m seriously worried about burning myself out, given that I’m not yet fully recovered from hypothyroidism. However, I cannot afford not to fight this fight. So many of my future plans are derailed by this law that I cannot ignore it and hope for the best.

So… stay tuned.

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