Do politicians never learn? California, like many other states, just passed a law mandating online companies (like Amazon.com) collect state sales tax if their “presence” in the state includes affiliate marketers.
The Supreme Court has already ruled that a state can’t mandate collection of sales tax unless a company is physically within its boundaries. So, whenever a state passes some silly law that says an online affiliate constitutes a corporation’s physical presence, Amazon tells all those poor affiliates that they can’t be affiliates anymore.
So what happens to the state? NO MORE INCOME TAXES FROM THE REVENUE ON AFFILIATE SALES!
California, which has about the worst budget deficit in the country, just shut down 25,000 sources of income tax. Why do you think so many companies are leaving California? Why have California and other liberal states lost population over the last few decades?
Because you can’t do business in California without the government as an unwanted partner. An overbearing, micromanaging, ignorant partner to boot. (A State Board of Equalization? Really? I’m just saying.)
I’ve written about this often, but the stupidity of politicians is truly mind-boggling.
It’s like when the federal government passed a special 10% surtax on any recreational boats over $100,000. What happened? The boat manufacturing business lost 20,000 jobs. With that loss of income tax, the government ended up losing money.
When a government gets too greedy, the economy goes underground. Look at Greece. 30% of its economy is “off the books”. When taxes get too high people find some way around them or just move somewhere else.
So why do governments do it? Because of the way government does accounting. Say that in your state 10 million cartons of cigarettes are sold per month. If you raise taxes by $1.00 a carton, the state gets an extra $10 million a month, right? WRONG!
People quit smoking. The politicians even say that’s why they’re doing it, to make people quit smoking (for their own good, of course, that’s why they’re called sin taxes). Or people start smoking pipes, or buy their cigarettes in the next state, or on the black market. The government KNOWS that will happen.
If that’s the case, why do they figure on collecting $10 million/month? It’s called “static accounting”. They don’t take human nature into account.
As a small business person, you know if you triple your prices you’re NOT going to triple your revenue. Why? Because people quit buying if the price is too high. If you start counting on that income you are going to be in for a rude awakening. It’s called the law of diminishing returns.
It’s the same thing with taxes only politicians are just too damn stupid to figure it out. They all just pat each other on the back and start spending the money they think they’re going to get.
This week President Obama stated that businesses don’t like added regulations “because it eats into their profits”. Well, duh! How does the government think it makes money? Through JOBS. Through BUSINESS. And the government is doing everything it can to ruin both while complaining of those ‘greedy businessmen” and companies “hoarding” cash.
Let me ask you something, would you go to Las Vegas and gamble your money if the pit boss changed the rules every 10 minutes? I don’t think so.
I don’t know about you, but I am so tired of hearing about greedy businessmen during the last 2 years. How about a few news stories on greedy governments?
Further reading:
The silly California law (PDF)
Amazon ends deal with 25,000 California websites
[Update Oct. 7, 2011]
Amazon has worked out a deal with the California legislature to hold off for a year while Amazon tries to prod the federal government to come up with a nationwide solution regarding online sales taxes (yeah, good luck with that). Amazon then sent emails to former California affiliates asking them to re-up..
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Connecticut is not quite there yet, but they’re considering it. They’re the latest in a growing number of states attempting to force Amazon.com and other large Internet retailers to collect state sales tax due to a “nexus” in their states composed of affiliate marketers.
Connecticut, like several other states, is trying to find its way around a 1992 U.S. Supreme Court decision that held a state cannot force businesses to collect sales taxes unless they have a physical presence within that state.
So, the poor Connectcuttian(?) sitting in his home office that puts an affiliate link on his web site means that Amazon has a physical presence in their state? Continue reading .
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Who knew affiliate marketers had a lobbying firm?
I’m not sure they’re registered Lobbyists in Congress yet, but the Performance Marketing Alliance has weighed in on the ‘Amazon.com v. New York’ Appeals Court by filing an amicus brief on the side of Amazon.
If you’re no sure what’s going on I’ll give you a little background. In early July I posted about Amazon terminating affiliates in certain states.
New York State had passed a law saying that an “affiliate” in New York (some poor guy like you with an affiliate product link on his web site) of Amazon.com, Overstock.com, etc. constituted a “physical presence” in their state and was subject to New York State sales taxes that the companies had to collect and pay.
Incredibly, Amazon lost the court case against this in New York. While waiting for the Appeals Court, several other states jumped in with the same kind of laws, causing Amazon to simply terminate affiliates in those states.
Who loses? The affiliates. Also, the states no longer collect income taxes from the profits of those affiliate sales. And of course, the online retailers lose marketers who drive their sales.
Who wins? No one.
Which brings me back to the Performance Marketing Alliance. It’s a not-for-profit trade association that attempts “to connect, inform and advocate” on behalf of affiliate marketers, which they estimate at about 200,000 people.
If you are an affiliate marketer take a look at the Performance Marketing Alliance site. They’re just getting off the ground, but have some basic information and a fall special on memberships..
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Amazon has terminated affiliates in North Carolina and Rhode Island and is threatening to do the same in California, Connecticut and Hawaii (Fox Business News reported that Hawaii is already on the banned list).
States are getting desperate for money and are looking to Internet sales to provide it. Most states require their residents to keep track of online purchases and remit sales taxes on all out of state purchases. Right. You pay your sales taxes every year, don’t you?
Heck, I remember a few years back Florida started going through all of the Customs declarations from residents that had been on cruise ships, looking to collect state sales tax on T-shirts and bottles of rum brought back into the country.
Continue reading .
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