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Previous: Receivables-Based Credit: An Alternative Financing Option Posted by Fredric Paul Amazon.com has dropped affiliate relationships with small businesses in North Carolina and Rhode Island as the states prepare to implement new laws requiring the company to collect online sales tax. InformationWeek reports that Amazon has cut ties with "scores" of small companies that had been working as affiliates of the online shopping site. North Carolina, like other states, is working on a tax on "click-through" transactions, and Amazon is fighting back. Amazon has also threatened to quit doing business with affiliates in California and Hawaii, if those states try to force the company to collect online sales taxes. The impetus for all this is the idea that by having affiliates in a given state, a company can be seen as "doing business" in that state, which can obligate it to collect the taxes. Companies with a physical presence in a state already have to collect the taxes. New York has already adopted a similar law, and Amazon has kept its affiliates and is collecting tax there, though it is also challenging the law's constitutionality in court. (Overstock.com, meanwhile, canceled its New York affiliates.) Of course, online shoppers are already supposed to pay their local sales taxes on all online purchases, but in reality few do. Governments are trying to force online retailers to collect those taxes, just as local merchants do. But the situation is much more complicated online, where it's not always clear what taxes apply. A buyer's legal esidence may not match his billing or shipping addresses, for example. And what about downloads of songs or software? Where is the appropriate location to calculate taxes for that? Note that Maryland, Minnesota, and Tennessee have all rejected proposals for similar laws. And everyone is waiting for the Feds to weigh in. There was a bill a couple years ago that would force all online retailers with more than $5 million in sales to collect tax nationwide, but it has yet to pass. Bottom line? Expect this issue to continue to spread confusion for at least the next couple years. ITE (in this economy) states are stuck between trying to close big budget deficits and avoiding hurting local businesses. Follow Fredric Paul on Twitter @ http://twitter.com/TheFreditor Posted on July 7, 2009 at 10:28 AM| Comments (6) Comments Although bad for consumers such as myself. I think given the economic times we are in with local and state governments going bankrupt implementing taxes for online merchants is a good idea. Posted by: katy on July 22, 2009 at 9:16 AM The problem with taxing online sales is that the devil is in the details… and the way our sales taxes work now, each state has its own tax laws and in many states there are multiple sales tax jurisdictions and multiple sales tax rates. If all online business had to collect and remit sales taxes for all states that means they’d have to know and charge the appropriate tax rate in all the states and all the taxing jurisdictions in each state.That means they’d have to buy annual subscriptions to tax databases for each state (because tax rates change in various localities). They’d need to pay a programmer to update their shopping cart each time a new database was sent to them. They ‘d have to know which products and services are taxable in which state and which town or city (what’s taxable varies from location to location). They then would have to file sales tax returns for all states. If they have to do that quarterly, that means filing a total of 200 sales tax returns a year. All of that will take a lot of time and money for businesses to do. Time and money small businesses can’t afford to lose. If there were a single, easy and inexpensive way for businesses to collect and remit taxes - ie, one sales tax rate that applies to any online purchase in any state, and one single sales tax return to file, I don’t think you’d find many businesses fighting it. Posted by: Janet Attard Although bad for consumers such as myself. I think given the economic times we are in with local and state governments going bankrupt implementing taxes for online merchants is a good idea. Posted by: Ricky on August 16, 2009 at 10:30 PM All of that will take a lot of time and money for businesses to do. Time and money small businesses can’t afford to lose. Posted by: Ricky on August 16, 2009 at 10:35 PM I think The impetus for all this is the idea that by having affiliates in a given state, a company can be seen as “doing business” in that state, which can obligate it to collect the taxes Posted by: Tax liens on September 28, 2009 at 6:10 AM |
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Online Sales Tax Brouhaha Hits More Amazon Affiliates
It was just a matter of time before government (state or federal) began attempts to collect tax from online consumers. This will definitely be a complex and prolonged battle.
Posted by: Antwan Leonard on July 10, 2009 at 1:31 PM