Constitution, Schmonstitution: California On Amazon And Sales Tax
Amazon's Jeff Bezos explains why California's interference in interstate commerce is unconstitutional:
California is acting like we affiliates are sellers, but we are not. We're merely advertisers for sellers who may be in California -- or New York or Canada.
More on "nexus" from the OC Reg:
First, we agree with Amazon president Jeff Bezos that the law is unconstitutional. A 1992 U.S. Supreme Court ruling said a company must have a physical presence in a state, referred to as a "nexus," to be required to collect the state's sales tax. The Legislature, a bit too cleverly, seeks to expand the definition of nexus to include any in-state affiliate with a hyperlink to an out-of-state retailer....Meanwhile, online shoppers easily can avoid paying sales tax, which in California can exceed 9 percent, by finding sellers that don't have to collect it.
Third, attempts elsewhere to wrest more in online sales taxes have backfired, including in Rhode Island and North Carolina, where tax receipts declined.
...We hope a court can untangle this web of immediate impacts and unintended consequences yet to be seen or understood.
*We* do, too. And surely, dragging this through the legal system will take no time at all.
More on the unconstitutionality in this Rebecca Madigan piece in the OC Reg:
The Constitution's commerce clause protects interstate commerce and states if a business doesn't have a physical presence - a nexus - it doesn't have to collect sales tax for that state. Why? Because if a business isn't located in California, it has no electoral voice in California elections, and it gets no benefit from those collected tax dollars. The founders called this "taxation without representation."...Second, all California businesses and consumers are obligated to pay sales tax for online purchases where a sales tax was not collected. This is a "use tax," a type of levy in place more than 75 years. If use-tax collection is implemented correctly, it will garner California far more additional tax revenue than these baseless "virtual nexus" schemes. Currently the Board of Equalization is campaigning to educate and collect additional unpaid use taxes.
...In 2010, California affiliate marketers earned $1.9 billion and paid $151 million in state income taxes (plus business taxes, employment taxes, etc). Legislation such as AB153 and SB234 guarantees elimination of some or all of these tax payments. Affiliate marketers will see income drop 25 percent to 35 percent, which would translate into the layoff of thousands of people statewide and businesses closing or moving to other states.
Look there! -- I believe it's the Joads, heading back east to Delaware.
Amy, remember the magical number: 61T. You and Mr. Bezos are being extremely optimistic if you think a federal collection point will make these taxes low 'n comfy again. We can imagine glistening strings of spittle falling onto Barry's momjeans as he contemplates that revenue.
Nothin' against Bezos. I like him! But he has the posture of a man who knows that a precious market position has been withered by time, and perhaps by horse sense. His tone as he discusses this isn't just cautious, in the way of Silicon Valley types seeking to avoid antitrust investigation... It's incantation. It's prayer. His luck has run out... And it's the same reason that no other retailer can step up to do what Amazon did for you, as others suggested in the earlier comment stack.
Listen, of all the success stories on the internet, Amazon is the one I'd never have bet on. I grew up in a college town where access to books was never a problem. I couldn't believe that a continent of four-eyed people would want to buy them mail-order, and at none-too-deeply discounted prices. He was a right, I was wrong. Not a problem! He gets to keep the money.
But things are changing. Some of the brightest men in the world are challenging his market position. Some of his patents are proving dicey to enforce or easy to supersede by other approaches. And a whole array of market players, including regulators and taxpayers, has come to realize that there's no reason his venture or those that follow should get a cheap ride.
No matter how well he plays his hand in cloud computing, it's unlikely that the third decade for his company will be as spectacular as the first two.
Crid [CridComment at gmail] at July 3, 2011 3:36 AM
OK, horse sense doesn't wither things, but you know what I mean. Crunch time! Jig's up! Read 'em 'n weep! Etc!
Crid [CridComment at gmail] at July 3, 2011 3:39 AM
Internet pastimes to help one phase up for a shift of overnight work on a holiday:
1. Rambl'y blog comments!
2. Consider the ways that some men entertain, and perhaps groom, their children!
3. Twitter jokes!
Crid [CridComment at gmail] at July 3, 2011 3:45 AM
The issue is that California thinks it has a right to OPP. Same with the fed and many other states. The thing is it is my money, and yours, that is being stolen with the force of government behind it.
But the government is of the people. The people need to reel them in.
Jim P. at July 3, 2011 5:35 AM
I'm not sure I saw the answer, though I asked: does Amazon pay taxes in its home state?
If the answer is "yes", the the answer for California is actually to encourage Amazon - and, by example, other companies - to come to California.
Oh, gee, wonder why that's not happening?
Radwaste at July 3, 2011 8:07 AM
I believe the Joads fled the dustbowl, no?
ron at July 3, 2011 9:53 AM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2322811">comment from ronIt's a fiscal dustbowl here. Don't hold me too close to the actual story!
Amy Alkon at July 3, 2011 10:01 AM
The next step is that California is going to claim all those wires, routers, and servers based in California and allowing access to the Internet constitute a physical presence in the state for Internet retailers and make them subject to collecting and remitting California sales taxes.
This isn't about Amazon paying California taxes. It's about Amazon (and other Internet retailers) being forced to collect and remit those taxes from its customers in California instead of relying on Californians to self-report their purchases and remit the appropriate taxes.
No reason the Joads can't pass Oklahoma on their way back and keep going all the way to Delaware.
Conan the Grammarian at July 3, 2011 11:25 AM
This is a fascinating issue, where technology is outstripping extant law.
I prefer consumption taxes to income taxes, so I don't get my panties in a snit over this one.
BOTU at July 3, 2011 12:14 PM
The problem isn't technology outstripping extant law, the problem is regulation outstripping extant decency.
And now, ɹǝʇʇıʍʇ.
Crid [CridComment at gmail] at July 3, 2011 12:28 PM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2323885">comment from Crid [CridComment at gmail]How the hell do you do that upside-down?
I think I just came up with a solution. One of my oldest and dearest friends in New York has a business that resells writers' work after it's been published once. Because he's already taking in money and sending out tax forms, etc., this wouldn't be a big burden on him, I don't think. Just sort of a little lucky money coming in by virtue of being my friend, somebody I can trust, and somebody with a biz structure in place that wouldn't make the accounting too difficult.
Any opinion on what percentage would be fair to give him? If this will work, I want to make him an offer for doing this. He's a good guy and a good businessman, so he'll have an idea, but I thought I'd send this up the flagpole.
Amy Alkon at July 3, 2011 12:39 PM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2323907">comment from Amy AlkonOh, drat -- I just remembered he lives in New York State!
Amy Alkon at July 3, 2011 12:42 PM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2323916">comment from Amy AlkonSomebody could make some money doing this.
Amy Alkon at July 3, 2011 12:43 PM
¡ɥɐɥ ɥɐɥ ¡noʎ llǝʇ ʇ,uoʍ ı
ɹǝʇʇıʍʇ
Also, one of the best ways to establish a price is to ask what someone will take for something. People hate doing that, but it can grease the exchange tremendously.
Crid [CridComment at gmail] at July 3, 2011 12:47 PM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2323989">comment from Crid [CridComment at gmail]This guy is a friend, and I want to be fair about the price, because he might offer to do it as a favor, and I think he should get compensated for it.
Again, because he lives in New York, this might be a problem. But, I realized (when I put Dr. Helen's Amazon link in a blog item I'll post tomorrow) that this is probably solvable. I just need to find somebody who already has the setup to deal with this. Not sure if my bookkeeper, who lives in Texas, would be comfortable with it, and I don't want to ask her something that she might be uncomfortable with but feel compelled to do to help me.
If somebody does this, it needs to be somebody I can trust and somebody who's paying contractors with 1099s so they can just take a percentage of the money that gets direct-deposited in their account from Amazon and write me a check for the rest.
Amy Alkon at July 3, 2011 12:54 PM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2324030">comment from Crid [CridComment at gmail]˙ǝןƃooƃ oʇ ssǝɔɔɐ ɟɟo ʇnɥs oʇ ʇǝʎ sɐɥ ɐıuɹoɟıןɐɔ 'ʎןǝpıus ˙ɹɯ 'ʎןıʞɔnן
Amy Alkon at July 3, 2011 12:58 PM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2324063">comment from Amy AlkonAnd thanks, Crid. Putting that in my next book, in a chapter I'm writing now. Perfect for hate email responses!
Amy Alkon at July 3, 2011 1:03 PM
Fuck.
Crid [CridComment at gmail] at July 3, 2011 1:41 PM
The Joads don't need to go all the way to Delaware. Nevada will do very nicely and has become a tax haven for corporations fleeding the west coast.
Also Radwaste, it is not Amazon who has to worry about paying state taxes in their state of corporate residence, it is the Amazon customers who buy stuff from them who are also located in that same state. Some states don't have a sales tax at all. They get their revenue through other sources.
Isabel1130 at July 3, 2011 2:44 PM
Give them time to figure out how to shut it off or tax it.
Conan the Grammarian at July 3, 2011 8:01 PM
Give them time to figure out how to shut it off or tax it.
California is already taxing Google. The question is how much Google provides that can actually be taxed?
Googling for "Google's California Tax Liability" is an exercise in futility. ;-)
Jim P. at July 4, 2011 6:57 AM
Great comment on YouTube:
"If our politicians paid a sales tax on the money they collected under the table for 'selling themselves' to special interest groups and lobbyists we could pay off the national debt."
Dwatney at July 4, 2011 5:49 PM
I'd say 5-10%, Amy, for NY friend. That seems standard around here, but Texas costs are lower then NY's.
momof4 at July 4, 2011 9:15 PM
Amy Alkon
http://www.advicegoddess.com/archives/2011/07/03/constitution_sc.html#comment-2327965">comment from momof4Thanks, momof4. Somebody emailed me to say they'd take 25 percent. A literary agent only takes 15 percent!
Amy Alkon at July 4, 2011 10:43 PM
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