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Revenue Desperation Pushing States to Institute Amazon Tax

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Unintended consequences of online tax headed to Louisiana

BATON ROUGE, La. – Online merchants are under a cloud of increased taxation, as Louisiana leaders seek to expand to their taxing authority over the World Wide Web.

HB 641 – better known as the Amazon tax – is at its third reading in the House and would reclassify out-of-state companies as in-state if they receive commissioned referrals from in-state affiliates. Affiliates are partner sites that earn commissions by advertising or linking to an online retailer’s products, sending website traffic that way.

According to a 1992 Supreme Court ruling, a state can only compel companies to collect taxes if they have a physical presence in the state. The affiliates, however, may physically tie out-of-state companies like Amazon and Overstock.com to Louisiana.

HB 641’s objective is to open new revenue streams, close the budget deficit, and create a level playing field between brick-and-mortar and online retailers.

“A lot of people try not to [pay taxes], but it’s up to the state to make sure that there’s tax fairness,” says Texas Comptroller Susan Combs. And Betty Yee, a member of California’s Board of Equalization, claims “a groundswell of activity by other states [suggests] that the time is right.”

But similar bills have been adopted in New York, Texas, Rhode Island, and Illinois with little to no additional revenue.

For instance, Paul Dion, Rhode Island’s head of the revenue analysis office, claimed in December 2009 that the six-month old law had generated no revenue. Additionally, when Texas enacted their Amazon tax, the retail giant closed its Dallas distribution center as a result of the state’s “unfavorable regulatory climate.”

A report by the Tax Foundation released this week affirms that the significant expansion in state taxing power exceeds what is constitutionally permissible. States are using “the weak link” of an out-of-state retailer’s relationship with an in-state referrer to claim taxing authority.

 

Robert Ross is a researcher and social media strategist with the Pelican Institute for Public Policy. He can be contacted at rross@pelicaninstitute.org, and you can follow him on twitter.

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  • http://pulse.yahoo.com/_VQOR6L6L5N7DMZYRTSIKFMTUAM Gary ONeal

    ““A lot of people try not to [pay taxes]“”
    Yes thats right. There is one of them running the US Treasury. Quite a lot more are in the government, Fed, Sate and Local. Some of them are even stealing the tax money paid by the rest of us.

  • http://twitter.com/jbeuerman Jamison Beuerman

    haha well done Gary

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