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May 06, 2011 09:54 PM UTC

"Amazon Tax," Democrats, and Fiction

  • by: Colorado Pols

We’ve spent a considerable amount of time discussing the battle over last year’s so-called “Amazon Tax,” in truth a law, now mired in court proceedings, that would have required online merchants to notify Colorado customers of the use tax they owe (and have always owed) on purchases–and supply the state with monetary totals for verification. As the Durango Herald’s Joe Hanel reported yesterday, this law could be on a fast track to the circular file:

A repeal of last year’s “Amazon tax” on Internet sales gained bipartisan support Wednesday.

House Bill 1318 passed the House on an initial vote, with Republicans and most Democrats supporting it.

It tells Internet retailers like Amazon to include a link to the Department of Revenue website when they send receipts to customers. The receipt also has to tell customers that they owe taxes on their purchases.

The bill takes away the state’s power to subpoena sales records from companies…

“It was a good bill, but it’s turned out to be counterproductive. It’s a bust,” said Rep. Sue Schafer, D-Wheat Ridge, who voted for last year’s bill and is now sponsoring the repeal effort.

House Bill 1318 is contingent on online retailers withdrawing their lawsuit. The cost/benefit of fighting that suit, in relation to revenues that might be collected, makes support for this rollback by Democrats who supported the original legislation last year, well, technically justifiable. The new law still requires online retailers to notify Colorado customers about their tax liability.

But we were thoroughly appalled to learn that Democratic Rep. Sue Schafer, and others who should know better, regurgitated idiotic “thousands of jobs lost” talking points during debate, which we’ve lampooned in this space ever since the original bill came up last year (although who knows about Schafer, also a co-sponsor of the Payday Lending bill). To briefly recap, in March of 2010 Amazon terminated “online affiliate” agreements with Colorado websites who carried ads for Amazon products after this law was passed–pure political retaliation, as the law was carefully written to have no effect on these affiliates. Represented breathlessly as “thousands of jobs lost,” the truth is that these “jobs” in most cases paid out totally insignificant commissions on sales, on the order of pennies. Not a “job” by any stretch.

Bottom line: the misnamed “Amazon Tax” law has been plagued by purposeful disinformation, and exaggeration of its effects from the moment it was introduced. The battle over online merchants, and the effect of their tax-free sales in local communities and on local retailers, could be a much larger issue than anything Colorado has the power to change–a federal resolution to local tax on online purchases may be needed. Until then, it would be beneficial if Democrats, who should be taking a longer view of online merchants and revenue shortfalls, did not repeat a steaming pile of debunked corporate nonsense: even if they are choosing to fight another day.


13 thoughts on ““Amazon Tax,” Democrats, and Fiction

  1. Maybe these Democrats talked to their constituents, and discovered they like not paying tax online?

    Hold their feet to the fire, Pols! We’ll take their seats too next year.

  2. 1. The bill’s sponsors estimated tens of millions/year in additional revenue. What did we end up getting – around a million? There wasn’t much money there.

    2. The courts would likely strike this down for very good reason – it put a horrendously large burden on online businesses. Yes the big guys could handle it, but the medium and small ones would be driven to not sell in Colorado if it had held.

    3. This state has a sales tax system that is impossible for the online world. Yet political leaders keep waving their hands and saying of course this whole process can be computerized. No it can’t and plugging your ears and shouting “yes it can, yes it can” won’t make it so. Create a workable system, then computerize it.

    4. Building a system that works will require competent leadership at the Dept of Revenue. At present we have Roxy “do nothing” Huber and there’s no way we’ll have a system that works for online as long as you have ineffective management at DoR.

    So yes, it was a bunch of B.S. about the lost income for Amazon affiliates. But the other problems are very real. This was rammed through and the results show.

      1. there is no algorithm for determining what the tax is for any given person buying any given thing from any given company. Instead it’s all just invented on the spot by Roxy Huber while she twirls her mustache or something. It’s like the way pi is totally impossible to calculate since Archimedes just keeps making up new digits one at a time randomly.

      2. There’s a couple of issues:

        First, the tax rate is dependent on where the purchaser is located and there is software for this but it requires every online company nationwide to purchase and implement that software even if they only sell a couple of hundred dollars of goods into Colorado. So this part is doable but turns profit into loss.

        Second is the issue of what is taxable. The state now taxes some forms of candy. Most of the cities do not. So if you sell jelly beans online, you have to find out in which of the 89+ taxing jurisdictions do you collect tax. Again, for small volumes that more than eats up your profit.

        Next you have to report the sales and remit the payments to the appropriate jurisdictions. The overhead of this again is more than the profit for an online company that sells small volumes.

        Finally, for the case of digital goods, they don’t know if it is taxable in many cases. When this first went through I asked the state if we shoud collect for the 12 common cases we have for sales. For 8 of those cases their answer was they didn’t know. (note to SXP and others – I have kept the email correspondence of this.)

        For a brick and mortar store selling tangible goods the system is not much of a problem – you get what is taxable and who you report to for the state and the one city you are in. And that overhead is against all your sales. Works fine.

        But for a small or medium online store, many times it’s one sale into the smaller cities and maybe 10 – 20 into the larger cities. The overhead of determining if something is taxable and in what amount can be greater than the sales price.

        And then add to that the Dept of Revenue is incompetent so you can’t get answers from them in many cases regardless of time and expense invested.

        It’s not a workable system.

          1. Is to have a single statewide system. One tax rate and one set of rules for sales anywhere in the state. With that it’s workable, without that impossible.

            Second would be a department of revenue that gave clear reasonable answers to any question about what is taxable.

              1. If they can compel online retailers to mail a statement, then it’s a much smaller additional step to compel them to collect the tax.

                And what idiot wrote the bill to require a snail-mail statement instead of email? That again shows that the people behind the bill have no understanding of the online world. Snail-mail added a cost of $1.00/customer – not a biggie if you sell a lot to each customer, but killer if you’re say a used book store and your average customer buys 2 – 3 books.

                1. For a lot of reasons, including those you just listed.

                  But all the other stuff you’re bitching about doesn’t have anything to do with the Amazon bill, and I know for a fact you’re confusing a lot of Polsters by constantly conflating the two.

                  If Quill gets overturned or federal legislation preempts it, it won’t matter whether states have laws like the Amazon bill, and that’s what it will take for your foot in the door to be anything but a bogeyman.

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