Federal Court Strikes Down Amazon Tax

Apr 092012

I’m super happy about this news: Federal court tosses 2010 Colorado Amazon tax law:

A federal court has thrown out a 2010 Colorado law meant to spur online retailers like Amazon to collect state sales tax.

The law had already been temporarily blocked in federal court last year, but U.S. District Judge Robert Blackburn’s ruling Friday permanently handcuffs it. “I conclude that the veil provided by the words of the act and the regulations is too thin to support the conclusion that the act and the regulations regulate in-state and out-of-state retailers even-handedly,” Blackburn wrote in his opinion. The law and the rules to carry it out “impose an undue burden on interstate commerce” and are unconstitutional, the judge wrote.

It’s not clear whether the State of Colorado will appeal this ruling… but I hope not! Amazon hasn’t yet instituted its affiliate program in Colorado. When Ari Armstrong inquired with them, they said:

Thank you for contacting us regarding rejoining the Associates program. At this point, we’re evaluating the decision from the United States District Court for the District of Colorado. We’d welcome the opportunity to re-open our Associates Program to Colorado residents. We’ll contact you if we are able to re-open the program in the future.

As Ari says in his post, “Hopefully, the Associates program will again become available. Now will the legislature kindly leave us the hell alone to earn money?”

Logo and Flyers for Repeal the Amazon Tax

Apr 122010

On Sunday, I updated the Repeal the Amazon Tax web site with a fantastic new logo, courtesy of Jennifer Armstrong:

Jennifer also made up flyers — one in color and another in gray. I posted some new articles about the “Amazon Tax” too.

If you’re going to be at one of the Tax Day Rallies in Colorado, please print out and hand out some of those flyers! They’re two per page, and you can easily distribute about 500 flyers in 30 minutes. I’m going to be doing that down in Colorado Springs, and I’d love others to be doing the same in other cities.

Thoughts on Tax Reform

Mar 262010

In the a March 18th Wall Street Journal article on Colorado’s Amazon Tax that I blogged earlier, Geoffrey Fowler discusses Amazon’s proposal for taxation of inter-state sales:

Mary Osako, a spokeswoman for Amazon.com Inc., the largest online retailer by revenue, said state-by-state laws are creating a “very complex sales tax regime,” and that the company would only support a “simplified system, fairly applied to all business models.” Amazon is in favor a national streamlined sale-tax effort that would mandate sales tax collection by out-of-state retailers in 23 states that have voluntarily signed on to the program. “We aren’t opposed to collecting sales tax within a constitutionally permissible system applied even-handedly,” Ms. Osako said.

While such a system would be infinitely preferable to a nightmare patchwork of fifty state tax schemes for online retailers, I cannot endorse that proposal.

Our tax system is a complete mess: it desperately needs reform. I say that, even though I regard all compulsory taxation as a violation of rights. Why? Tax system do not merely differ in the ultimate amount of taxes paid. They also differ in whether they’re more or less even-handed between persons and groups, more or less complex to implement, more or less burdensome to comply with, more or less clear on reading, more or less draconian in penalties, and so on. If we have compulsory taxes — and at this point, that’s a given — then those taxes should be minimally invasive of our property and contract rights, even if they should be abolished ultimately. They should follow the principles of objective law as much as possible.

At present, however, taxes in America are hugely unfair, hopelessly convoluted, terribly burdensome, and utterly opaque. Adding more such taxes — as with Colorado’s Amazon Tax — is not the solution. Nor is any grand scheme for some new simplified income or sales tax: today’s legislatures could not help but make a greater mess of that by adding layers of complexity to it. Instead, federal, state, and local politicians should start simplifying, clarifying, and repealing the worst parts of the existing tax code — reducing the tax burden in the process. Doing that could free up a whole lot of productive energy in America for economic growth!

For more information on this issue, please visit Repeal the Amazon Tax.

Amazon Tax in Hawaii: Hope for Colorado

Mar 242010

Jason Crawford sent me the following two links about Amazon’s battle with Hawaii over sales tax from July of 2009. They’re reason for hope for those of us affected by Colorado’s Amazon Tax — and further evidence that Amazon was not motivated by spite in canceling the accounts of its Colorado Associates.

First, a report from the Wall Street Journal:

Amazon.com Inc. has informed its marketing affiliates in Hawaii that it is ending its business with them to avoid collecting sales tax in the state.

Lawmakers in Hawaii, following in the footsteps of North Carolina and Rhode Island, have passed legislation that would require companies to collect sales tax if they have marketing affiliates in the state. Affiliate marketers run blogs or Web sites and get a sales commission by featuring links to outside e-commerce sites.

Hawaii’s governor has until July 15 to potentially veto the legislation, but it has an effective date of July 1.

In an email sent to Hawaii affiliates on Tuesday, Amazon said it would end its accounts with them effective June 30. “We were forced to take this unfortunate action in anticipation of actual enactment because of the uncertainty and timing of a veto, and the possibility that a veto could be overridden,” Amazon wrote.

So what happened? Amazon’s response to the veto of the bill tells us:

Earlier this month, Governor Linda Lingle vetoed the unconstitutional tax collection scheme passed by the Hawaii legislature in HB 1405. Because the effective date of that bill preceded both her veto and the legislature’s veto override session, we had little choice but to end our advertising relationships with all Hawaii-based participants in the Amazon Associates Program. Now that the override session is over, and the legislature did not override Governor Lingle’s veto of HB 1405, we would like to invite all Hawaii Associates whose accounts were closed due to the pending legislation to re-enroll in the Associates Program.

Amazon likes its Associates! They’re a source of profit! Amazon likes profits! (DUH!) However, Amazon cannot maintain its Associates program at all costs. Based on its words and deeds, it’s not willing to do so at the cost of submitting to burdensome and unfair state and local taxes. It’s well within its moral and legal rights to do that.

Sadly, the lesson of Hawaii — and Rhode Island and North Carolina — was blithely ignored by Colorado Democrats. And it’s still being ignored by the other states considering an “Amazon Tax.”

For more information on this issue, please visit Repeal the Amazon Tax.

Two Letters Against the Amazon Tax

Mar 222010

I was pleased to see that the Denver Post published two good letters against Colorado’s Amazon Tax last week:

Re: “Amazon’s bully tactics,” March 13 guest commentary.

I read with amusement the guest commentary by state Sens. Jack Pommer and Mark Ferrandino, in which they accuse Amazon of bullying Colorado over House Bill 1193. I would like to ask them a question: If a big kid pushes a smaller kid around and the small kid runs away to avoid being pushed around, which one is the bully?

Tax laws have become major factors in business decisions. So if Amazon chooses to leave the state over a tax law business decision, how does that make them a bully? If Pommer and Ferrandino were in the California legislature, they would probably be labeling as bullies the companies leaving California for states with lower tax rates, such as Nevada, Oregon or Utah, or even Colorado!

Richard Postma, Littleton

I love that analogy! Here’s the second letter:

I think that most people are missing the real reason prompting Amazon’s recent actions. It is not their reluctance to collect sales tax; I believe it is the “Big Brother” requirements that would be imposed.

With purchases made from a Colorado brick-and-mortar store, the sales tax is collected and a lump sum is sent to the state. Except for items like homes, cars, etc., individual purchases, products and buying habits are not reported.

Although HB 1193 does not require Amazon to collect and send sales tax revenues to the state, it requires them to submit reports to the state identifying each purchaser with the dollar totals of their purchases.

This is a Big Brother intrusion that can only lead to future abuse.

Duane Thompson, Centennial

Such privacy concerns are certainly real, but I doubt that they are Amazon’s primary reason for canceling its Associates accounts. From what I’ve read, Amazon doesn’t want to submit to a crazy patchwork of state and local taxes, plus a costly mess of red tape and stiff penalties for non-compliance. They’re right: they shouldn’t submit to that!

For more information on this issue, please visit Repeal the Amazon Tax.

Amazon Tax Spreads to Other States

Mar 192010

Unfortunately, many states are considering similar measures to Colorado’s Amazon Tax. In a March 18th article, Geoffrey Fowler writes:

The economic slump is helping rekindle a debate on whether online retailers should have to collect state sales taxes, a question that has pitted the new economy against the old.

A half dozen cash-strapped states are contemplating new laws that would require e-commerce sites to charge shoppers local sales tax on purchases.

On Wednesday, Maryland legislators heard testimony from local merchants and Web site operators on a bill that could compel Web sites that employ local marketing affiliates to collect sales tax in the state. That followed a hearing Monday in Connecticut over a similar proposal.

A 1992 Supreme Court ruling prohibits states from forcing retailers without a physical presence in the state to collect sales tax on their behalf. Many states technically require local residents to pay so-called use tax on such purchases, but most taxpayers ignore those rules.

As Ari Armstrong has argued, Amazon’s Associates Program seemed to give Amazon a “physical presence” in Colorado. Amazon cleared the legal waters of the muck created by a poorly-written law by terminating its Colorado Associates.

For more information on this issue, please visit Repeal the Amazon Tax.

Updates on the Amazon Tax

Mar 122010

I’ve just updated the web site RepealTheAmazonTax.com. In addition to updating the text, I’ve also added the following.

(1) A quick poll:

(Yes, please do take it!)

(2) Buttons for social sharing:

(Yes, please do click!)

(3) A Facebook cause page:

Join the Facebook cause
“Repeal the Amazon Tax”

(Yes, please do join!)

(4) A list of further reading:

You can best keep up-to-date on this issue by joining the low-volume e-mail list NoAmazonTax.

Thanks to everyone who has blogged, shared, tweeted, e-mailed, and otherwise helped spread the word!

Letter Published on the Amazon Tax

Mar 122010

The Denver Post published a slew of letters on the “Amazon Tax” today, including mine. Here’s mine:

Too many people seem eager to blame Amazon for the termination of its “Associates” program.

I’ve been an Amazon Associate for years. I learned that my account was closed in the wee hours of Sunday morning. At the time, I was hard at work on a new website — a labor of love that I hoped would earn me some money by links to relevant Amazon products.

I was horrified. In an instant, so much of my work was wasted and so many of my future plans were destroyed.

Yet I don’t blame Amazon. I blame our Colorado politicians for enacting an unjust law. They’ve made business through affiliates impossible in Colorado by imposing a mess of costly red tape and taxes. Amazon is not just a victim in this mess, but the primary victim.

Honest people do not blame business for the sins of government.

Repeal the “Amazon tax”!

Diana Hsieh, Sedalia

However, consider the lead letter:

I’ve heard Amazon.com’s talking points about how horrible Colorado is for taxing people who do business online but don’t pay sales or other taxes to the state where they derive their revenue. They say nexus legislation will cost us jobs. The reality is online predators such as Amazon.com don’t pay their fair share of taxes and suck dollars out of local communities that normally go to funding parks and park maintenance, police services, local jobs, and other programs that improve our quality of life.

The real issue is how international online retailers continue to get away with tax-dodging while our local businesses — companies that do pay local taxes, create local jobs, hire local people, and fund local services — can’t compete with these online giants. These predators have sold books and other products below wholesale cost to dominate a market while being subsidized by the U.S. government and states with outdated tax laws. Fair taxation helps level the playing field for independent business people and helps local communities survive.

Next time you hit a pothole your city can’t fix, thank Amazon.

Eric Grimm, Colorado Springs

Go read them all.

Colorado Screws Amazon and Its Affiliates

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 Amazon.com 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 RepealTheAmazonTax.com 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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