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.
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.