Amazon threatens to cut off NC associates if state tax bill passes
June 19th, 2009

RALEIGH, NC – Amazon.com says that if a new North Carolina tax bill on “click-through� transactions becomes law, it will cut off its associates in the state.

Amazon associates receive up to 15 percent commissions on sales made via click-throughs on their sites.

In a June 17 letter to its NC associates, Amazon wrote:

“We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates.�

Like many states, North Carolina is struggling with a declining tax base and budget shortfalls due to the recession. It is considering a number of new taxes to help meet the shortfall.

In its letter, Amazon said that because the law is drafted to go into effect as soon as it is enacted, which could be in as little as two weeks, the company would terminate its associates in the state before or on the same day as it goes into effect.

Amazon wrote:

“The unfortunate consequences of this legislation on North Carolina residents like you were explained in detail to key senators and representatives in Raleigh, including the leadership of the Senate, House, and both chambers’ finance committees.

“Other states, including Maryland, Minnesota, and Tennessee, considered nearly identical schemes, but rejected these proposals largely because of the adverse impact on their states’ residents.�

North Carolina General Assembly web site:

http://www.ncleg.net/

Enormous online retailer Amazon.com reacted to news that it would now be required to voluntarily report Colorado state sales taxes by canceling its relationship with affiliate web sites here– that is, with sites that earn a small fee for each websurfer they send to Amazon through links and ads. In a letter sent over the weekend to its Colorado affiliates, Amazon announced it will continue to do business with residents in Colorado and didn’t elaborate on how canceling the affiliate relationships balances against the new tax.

The mystery has led analysts and lawmakers to speculate that the move was done strictly to send a political message. Others suggest the move is part of a larger corporate legal strategy to combat laws already on the books in Colorado, Rhode Island and North Carolina, as well as any future state sales tax laws that might pass around the country.

The Honorable Arnold Schwarzenegger
Governor, State of California
State Capitol Building
Sacramento, CA 95814

The Honorable Darrell Steinberg
The Honorable Dennis Hollingsworth
The Honorable Karen Bass
The Honorable Sam Blakeslee

Re: Opposition to the New Tax Collection Scheme of AB 178 (Skinner)

Dear Governor Schwarzenegger, Senate President pro Tempore Steinberg, Speaker Bass, Minority Leader Hollingsworth, and Minority Leader Blakeslee:

Amazon.com respectfully opposes the new tax collection scheme of AB 178 (Skinner) and similar nexus legislation because it is unconstitutional and would not be an effective source of revenue.

The U.S. Supreme Court`s Quill decision prohibits a state from requiring sales tax collection by sellers that lack physical presence in the state. The approach of AB 178 is unconstitutional because it ultimately would require sellers with no physical presence in California to collect sales tax merely on the basis of contracts with California advertisers.

If this new tax collection scheme were enacted, Amazon would have little choice but to end its advertising relationships with California-based participants in the Amazon Associates Program. (Participants in the Associates Program place Amazon advertisements on their websites, and then are compensated by Amazon for purchases made by visitors whom they refer to Amazon`s website.)

Anticipating imminent enactment of similar legislation in North Carolina, Amazon already has taken steps to close the accounts of North Carolina-based Amazon Associates, and we will no longer pay referral fees after this closure nor will we accept new applications for the Associates program from North Carolina residents.

Thus, this provision would provide no new tax revenue collected by Amazon or others who sever their relationships with California-based advertisers, and any revenue estimates should take this into account. And, unfortunately, the approach of AB 178 would deny California-based organizations the advertising fees they currently receive from out-of-state retailers.

California instead could heed the direction of the Supreme Court, which said that out-of-state sellers may be required to collect only if states simplify and harmonize their sales tax laws. The well-established multistate Streamlined Sales Tax Project (SSTP) is the legally-permissible path for states to follow. The approach of AB 178 would undermine the purposes and viability of the streamlining effort and, thus, is opposed by the National Conference of State Legislatures (NCSL), the Council on State Taxation (COST), and the Business Advisory Council to the SSTP, all of which support SSTP instead.

In sum, Amazon.com respectfully asks that you oppose the new tax collection scheme of AB 178 and similar nexus legislation. Please let me know if you have any questions. I can be reached at {contact info}

Sincerely yours,
Paul Misener
Vice President for Global Public Policy

cc The Honorable Nancy Skinner; Members of the California State Senate; Members of the California State Assembly

I believe that this is a really short sighted moves by the relevant states. If you reduce the income of your residents, you get less tax. Not bright!

Amazon Re-opens Associates Program to California Residents

California Governor Jerry Brown recently signed legislation repealing the law that had forced us to close the program to California residents. We are pleased to invite all California Associates whose accounts were closed due to the prior legislation to re-enroll in the Program.

The Revenue Department is revising some income-tax forms, asking individuals to report tax owed on purchases made outside the state. Anyone buying items across state lines is supposed to report and pay the “use tax� — equivalent to the 6 percent sales tax — to the Revenue Department. Few actually do so.