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Amazon cut ties with Ill. affiliates

March 12th, 2011 by · 6 Comments · Amazon, ebookstore news

Amazon ended partnerships with all Illinois affiliates this past week due to a new tax law.The Illinois state legislature, seeing the large sums their own residents aren’t paying in sales tax, wrote a new law targeting online retailers, and in particular any with an affiliate (or some other type of agent) inside the state.

So now Illinois joins Colorado, Rhode Island, and North Carolina where the affiliates got screwed because the state got stupid.

Here’s a couple details you might not know about Amazon and sales tax. They already collect it in 5 states: Kansas, Kentucky, New York, North Dakota, and Washington. Why those 5? Probably becuase that’s where they actually have operations.Also, they fought and lost a lawsuit against an “affiliates law” in NY, which is why they collect it there.

You might recall that Amazon fought Texas over collecting sales tax, which is a little strnage considering they already pay it elsewhere. One detail I didn’t know until a commenter told me was that in his professional opinion,  Amazon were right and Texas  Comptroller’s Office was wrong. Amazon were actually complying with the law as written. I don’t claim to know anything about tax law, but given that Amazon already collected taxes elsewhere while fighting Texas, I’d say he’s probably right.

I’m all for states collecting the taxes they’re due, but our system is a little screwy. As sales tax is currently set up, a buyer has to pay it but a retailer has to collect it. Now, if you buy something online, you’re required in most states to report the tax yourself. Unfortunately, there’s no system set up to enforce it. Until the internet, there really wasn’t much need.

P.S. If you’re wondering why Amazon didn’t drop their NY affiliates, it’s probably because the lost sales would hurt too much. New York might have had a high concentration of affiliates.

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6 Comments so far ↓

  • Moriah Jovan

    As sales tax is currently set up, a buyer has to pay it but a retailer has to collect it.

    Not necessarily true.

    In Missouri (and quite a few other states), the sales tax is for the BUSINESS to pay. Whether they collect it or not from the consumer is a whole ‘nother issue.

    It has evolved the way it has because the business doesn’t want to carry the tax burden, but similarly, they don’t want the consumer to blame them for raising prices when it’s actually a tax. So they collect it from the consumer and say, “This is what the state wants; it’s not me.”

    I was shocked a while back when I found out that one state (I *think* Arizona or Colorado; I can’t remember which) actually requires the business to collect it from the consumer.

    But as it was created and still stands, in Missouri, the business isn’t required to collect it. It’s only required to pay it.

    • Nate the great

      Interesting. I didn’t know that.

      But either way, a number of states require the buyer to pay a “use tax” whenever they aren’t paying the sales tax. I’d say it’s pretty much the same thing.

      • Moriah Jovan

        Yes and no. The buyer is on the hook for tax he didn’t pay to the merchant, yes. But the merchant isn’t on the hook for the tax he wasn’t obliged to collect.

        If you live on a state line, like I do, this used to be more important because you’re supposed to pay use tax on what you bought in the other state. Now, with the internet, you’re supposed to pay tax on anything you purchase out of state.

        But it’s not the same thing because it’s not enforced the same way. The state isn’t coming to my house to make me pay sales tax on stuff I buy from Amazon. They WILL come to my house to make sure I paid sales tax on retail items I sell.

        • Moriah Jovan

          But the merchant isn’t on the hook for the tax he wasn’t obliged to collect.

          Lemme clarify that.

          A merchant in Kansas is not obliged to pay/collect Missouri sales tax, so a Missouri resident purchasing something in Kansas is on the hook for Missouri use tax.

  • Rich Adin

    “So now Illinois joins Colorado, Rhode Island, and North Carolina where the affiliates got screwed because the state got stupid.”

    No, it isn’t the states that got stupid. It’s the greedy consumer and the greedy retailer who are the problem. (BTW, Amazon is threatening to close its physical distribution center in Texas as a result of the tax dispute — it prefers to put people out of work than to comply with the law. If Amazon thinks it is right, that is what the courts are for. As it discovered in New York, it isn’t right.

    And you are probably right as to why Amazon is collecting the sales tax in New York, which shows that its sole motivation is greed.

    As a New Yorker who doesn’t shop at Amazon, I applaud the court’s decision. Previously, my fellow New Yorkers would buy at Amazon to avoid the sales tax, which meant that the state had to make up for the lost revenue somehow, which it did by raising everyone’s taxes. No reason I should have to pay to subsidize Amazon.

    • Nate the great

      Actually, the Texas matter has been settled. I wrote about it a few weeks back (scroll up for the link). And if one commenter is correct, then Amazon already were complying with the law.

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