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I'm still kind of mystified as to how these laws keep getting passed. I think there is clearly room for debate about whether or not Amazon customers should pay

I'm still kind of mystified as to how these laws keep getting passed. I think there is clearly room for debate about whether or not Amazon customers should pay sales tax in their home jurisdictions. But, there is no reasonable debate about these laws. They have perfectly predictable results: law is passed, Amazon nukes affiliates, state loses income tax from affiliates, gains nothing as a result. I find it incredible that state lawmakers either think that it will be different in their state or that it's worth destroying the incomes of their taxpayers to just make a symbolic gesture. Does anyone have a reasonable justification for the lawmakers' actions or is it really just a mix of idiocy, vindictiveness, and appeasement of local donors?

fierarul 15y ago
Think of it as a signaling game: what happens when all the US states have similar laws. Will Amazon just give up on affiliates?
- gscott 15y ago
  With the widespread adoption of the Google Content network for advertising I am wondering if affiliate links are needed because they can just show up in the Google ad and the advertiser gets paid for clicks. The previous affiliate can still make a page about a product but let Google figure out the links to show.
- nostromo 15y ago
  Remember, there are five states that do not charge sales tax, so they have no incentive to fight Amazon. There are another five states where Amazon already collects sales tax. So, that's 10 states that have no reason to pass similar laws. And of course, affiliates that make a sizable amount of money will probably not move, but will instead simply incorporate in one of those states (one of which happens to be Delaware).
  - jonkelly 15y ago
    Exactly. There are plenty of choices of jurisdiction for the bigger affiliates that matter to Amazon. This is really just a "nuke the mom and pop blogger" effect.
  - _delirium 15y ago
    Can you really just change the place of incorporation? I thought to avoid a determination (under these laws) that Amazon itself has a physical presence in a state via its affiliates, Amazon was refusing to accept affiliates who had any physical presence in the states in question. As I read it, if your corporation is incorporated in Delaware but has its offices in Connecticut, you're no longer eligible for the affiliate program. Enforcement might be another matter; seems like there's a good chance that you won't get flagged if you give Amazon a Delaware mailing address, even if you're (as a company or individual) resident elsewhere. But you don't even need to incorporate to do that.
- chopsueyar 15y ago
  Think of what happens when all US states legalize medicinal marijuana? It is still illegal at the federal level. How much money can a state afford to spend on federal litigation against a team of Amazon's lawyers?
raganwald 15y ago
My guess would be that the "income" from affiliates is immaterial, but the states have a different problem: They do apply the tax to other companies with a "presence" in the state, and if they didn't attempt to collect from Amazon, they would face a challenge from companies that maintain a less tenuous presence in the state such as physical stores. INAL, but if CT didn't try to collect the tax from Amazon, I would expect Barnes and Noble to argue that bn.com sales should be tax exempt even though they have a brick and mortar store in Glastonbury, CT.
- chopsueyar 15y ago
  Except the whole argument comes down to physical presence. Now, if Barnes and Noble had a caravan of mobile RV bookstores registered in a different state that came into CT to sell books, B&N would have a better argument.
DanielBMarkham 15y ago
I'll play devil's advocate. First, governments consistently think of the economy as a static model. So you add up how many online sales you have, add in a percentage tax, and expect to make that money. Second, Amazon pulling out or not is simply a short-term obstacle. The long term strategy is to put a stake in the ground, then continue to lobby and work at the national level. This sets precedent, even if it doesn't work. Third, there's a lot of ignorance. You don't have to pass an economics test to become a legislator. I think sometimes in any group that deals with another group there's an "us versus them" mentality that takes over. In some folks' mind, if you're making money, they should get a share of it to spread around. Trying to adapt and configure your business model to optimize -- or simply just to survive -- is a sign of selfish, unethical behavior. Both sides of tax debates engage in a lot of emotional over the top rhetoric. It's easy to lose track of priorities and principles.
- chopsueyar 15y ago
  The part I have a hard time comprehending in these situations is that many legislators have legal backgrounds being attorneys, yet seem to completely forget about the constitution.
  - jbooth 15y ago
    Seems that the collateral damage to affiliates from this law is specifically because those legislators understand the commerce clause of the constitution.
    - OstiaAntica 15y ago
      The constitution explicitly prohibits states from interfering with interstate commerce, which is what Connecticut is doing (forcing regulation on a company outside their state), and is why Amazon is calling the law unconstitutional.
      - earl 15y ago
        Except it doesn't occur outside their state if an amazon affiliate is in CT. Hence amazon withdrawing.
InclinedPlane 15y ago
The justification for these actions is simple: every state has spent the last many years spending themselves into a great deal of debt, now they are desperately grasping for revenue and amazon has big pockets.
- jonkelly 15y ago
  But... it hasn't worked at all, producing not even one penny for any of the states that have tried it. Isn't that the proverbial definition of insanity?
- jbooth 15y ago
  Most states were actually doing great as of 2000, and have been cutting relative to their cost inflation for the last decade or so. 10-15% healthcare cost inflation has been spending states into debt.
  - InclinedPlane 15y ago
    Connecticut has increased its state spending by about 50-60% over the 2000-2010 period while its economy grew by only 15% in that time.
    - jbooth 15y ago
      And what % of that is healthcare costs? Check it out. I don't know conneticut that well but if you employ a lot of people, and they have healthcare, then it was a huge cost to roll them over these past 11 years.
petercooper 15y ago
It specifically imposes the collection of taxes from consumers on sales by online retailers [..] even if those retailers have no physical presence in the state. The wording of this implies that Amazon now has to charge sales tax to customers in CT. If so, isn't that a massive gain for the state? Or will Amazon just ignore the law?
etherael 15y ago
We hear you have money, we'd like it.

fierarul 15y ago

Think of it as a signaling game: what happens when all the US states have similar laws. Will Amazon just give up on affiliates?

gscott 15y ago
With the widespread adoption of the Google Content network for advertising I am wondering if affiliate links are needed because they can just show up in the Google ad and the advertiser gets paid for clicks. The previous affiliate can still make a page about a product but let Google figure out the links to show.
nostromo 15y ago
Remember, there are five states that do not charge sales tax, so they have no incentive to fight Amazon. There are another five states where Amazon already collects sales tax. So, that's 10 states that have no reason to pass similar laws. And of course, affiliates that make a sizable amount of money will probably not move, but will instead simply incorporate in one of those states (one of which happens to be Delaware).
- jonkelly 15y ago
  Exactly. There are plenty of choices of jurisdiction for the bigger affiliates that matter to Amazon. This is really just a "nuke the mom and pop blogger" effect.
- _delirium 15y ago
  Can you really just change the place of incorporation? I thought to avoid a determination (under these laws) that Amazon itself has a physical presence in a state via its affiliates, Amazon was refusing to accept affiliates who had any physical presence in the states in question. As I read it, if your corporation is incorporated in Delaware but has its offices in Connecticut, you're no longer eligible for the affiliate program. Enforcement might be another matter; seems like there's a good chance that you won't get flagged if you give Amazon a Delaware mailing address, even if you're (as a company or individual) resident elsewhere. But you don't even need to incorporate to do that.
chopsueyar 15y ago
Think of what happens when all US states legalize medicinal marijuana? It is still illegal at the federal level. How much money can a state afford to spend on federal litigation against a team of Amazon's lawyers?

raganwald 15y ago

My guess would be that the "income" from affiliates is immaterial, but the states have a different problem: They do apply the tax to other companies with a "presence" in the state, and if they didn't attempt to collect from Amazon, they would face a challenge from companies that maintain a less tenuous presence in the state such as physical stores. INAL, but if CT didn't try to collect the tax from Amazon, I would expect Barnes and Noble to argue that bn.com sales should be tax exempt even though they have a brick and mortar store in Glastonbury, CT.

chopsueyar 15y ago
Except the whole argument comes down to physical presence. Now, if Barnes and Noble had a caravan of mobile RV bookstores registered in a different state that came into CT to sell books, B&N would have a better argument.

DanielBMarkham 15y ago

I'll play devil's advocate. First, governments consistently think of the economy as a static model. So you add up how many online sales you have, add in a percentage tax, and expect to make that money. Second, Amazon pulling out or not is simply a short-term obstacle. The long term strategy is to put a stake in the ground, then continue to lobby and work at the national level. This sets precedent, even if it doesn't work. Third, there's a lot of ignorance. You don't have to pass an economics test to become a legislator. I think sometimes in any group that deals with another group there's an "us versus them" mentality that takes over. In some folks' mind, if you're making money, they should get a share of it to spread around. Trying to adapt and configure your business model to optimize -- or simply just to survive -- is a sign of selfish, unethical behavior. Both sides of tax debates engage in a lot of emotional over the top rhetoric. It's easy to lose track of priorities and principles.

chopsueyar 15y ago
The part I have a hard time comprehending in these situations is that many legislators have legal backgrounds being attorneys, yet seem to completely forget about the constitution.
- jbooth 15y ago
  Seems that the collateral damage to affiliates from this law is specifically because those legislators understand the commerce clause of the constitution.
  - OstiaAntica 15y ago
    The constitution explicitly prohibits states from interfering with interstate commerce, which is what Connecticut is doing (forcing regulation on a company outside their state), and is why Amazon is calling the law unconstitutional.
    - earl 15y ago
      Except it doesn't occur outside their state if an amazon affiliate is in CT. Hence amazon withdrawing.

InclinedPlane 15y ago

The justification for these actions is simple: every state has spent the last many years spending themselves into a great deal of debt, now they are desperately grasping for revenue and amazon has big pockets.

jonkelly 15y ago
But... it hasn't worked at all, producing not even one penny for any of the states that have tried it. Isn't that the proverbial definition of insanity?
jbooth 15y ago
Most states were actually doing great as of 2000, and have been cutting relative to their cost inflation for the last decade or so. 10-15% healthcare cost inflation has been spending states into debt.
- InclinedPlane 15y ago
  Connecticut has increased its state spending by about 50-60% over the 2000-2010 period while its economy grew by only 15% in that time.
  - jbooth 15y ago
    And what % of that is healthcare costs? Check it out. I don't know conneticut that well but if you employ a lot of people, and they have healthcare, then it was a huge cost to roll them over these past 11 years.

petercooper 15y ago

It specifically imposes the collection of taxes from consumers on sales by online retailers [..] even if those retailers have no physical presence in the state. The wording of this implies that Amazon now has to charge sales tax to customers in CT. If so, isn't that a massive gain for the state? Or will Amazon just ignore the law?

etherael 15y ago

We hear you have money, we'd like it.