Amazon Tax Passes House, Moves to the Senate

Featured, Pelican Site Featured, Taxes — By on June 13, 2011 6:17 pm
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Lawsuits and other unintended consequences on the way

BATON ROUGE, La. – An expansion of state taxing powers – HB 641 – better known as the Amazon tax, passed the House today with a vote of 78 to 14.

HB 641, sponsored by Rep. Rosalind Jones, would reclassify out-of-state companies as in-state if they receive commissioned referrals from in-state affiliates. The intent is to open new revenue streams for the state and create a “level playing field” between brick-and-mortar and online retailers.

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.com and Overstock.com to Louisiana.

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

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://www.facebook.com/profile.php?id=43807192 Anonymous

    That is horrible news! Will it pass the Senate?

  • http://www.facebook.com/profile.php?id=1495001599 Steve Farber

    As someone who would be directly impacted by this, I am totally against it. 

  • Anonymous

    Destroying the Goose that lays the Golden Eggs. Fools.

  • http://pulse.yahoo.com/_4AWTHTF2NUP6DBXGZMARFKXAAI Laura

    Well, now the “physical” entity that they “were” using is going to be shut down.  Ms. Jones needs to look farther down her nose than the end of it.

  • http://pulse.yahoo.com/_4AWTHTF2NUP6DBXGZMARFKXAAI Laura

    Ms, Jones needs to look a little further down her nose since any company with ties to Amazon, or other, will simply disconnect them from their online model.  Perhaps the ole gal might investigate the financial consequences of her actions, before she puts the proverbial foot in her mouth….

    Just sayin

  • Anonymous

    There’s a number of points in your article with which need correcting:

    1) “Advertisers” don’t earn commissions. Sales people do. Sales people
    constitute nexus in a state according to the Quill vs. North Dakota
    Supreme Court decision. Online affiliates promote products to sell said
    products and earn a commission for the sale of said product. By any
    dictionary definition that is a sales person.

    2) The only state that I know of to officially release revenue data
    regarding its affiliate nexus laws is New York State. The state
    collected about $70 million for the fiscal year 2009 – 2010. Illinois
    hasn’t released fiscal information yet, as the law doesn’t go into
    effect until July 1.

    3) Amazon.com never did close its Texas facility. They bluffed in an
    attempt into intimidating legislators and then never went through with
    it.

    4) The Tax Foundation has no decision on which to base their belief that
    the law is unconstitutional. In fact, the NY State appellate court
    ruled that the law is constitutional and that online affiliates are
    INDEED sales agents. Amazon has thus far lost/ twice/ in NY State court.

    HB 641 creates a more level playing-field between local businesses —
    like my independent New Orleans bookstore, Octavia Books — that
    diligently work to collect sales tax while re-circulating most of our
    proceeds back into the community and online retailers like Amazon.com
    and Half Price book who unfairly compete against us without charging any
    sales tax even though they clearly have established nexus in Louisiana.
     While we’ve collected millions in taxes, they haven’t contributed a
    single penny – and they are using this loophole to hurt us and our
    state.

    Without HB 641, these big online retailers will continue to draw capital
    away from Louisiana on a one-way super highway.   And the rest of us
    will be left with the tax burden.  Does it really make sense to continue
    a policy at public expense that rewards spending capital out of state
    and that undermines local business that are struggling to survive? It is
    not only unfair; it is extremely harmful to Louisiana and everyone who
    lives here.

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  • Anonymous

    The sooner people realize that CORPORATIONS do NOT pay taxes but only COLLECT taxes and pass the money on to government, the sooner we will get state and federal finances in order.
     Again ONLY PEOPLE pay taxes, not corporations.
    CC

  • Anonymous

    The sooner people realize that CORPORATIONS do NOT pay taxes but only COLLECT taxes and pass the money on to government, the sooner we will get state and federal finances in order.
     Again ONLY PEOPLE pay taxes, not corporations.
    CC

  • Anonymous

    ONLY people pay taxes, corporations do NOT.
    Corps COLLECT taxes from people and pass  it on to governments.