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Colorado Democrats strangle Internet entrepreneurs

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By Michelle Malkin  •  March 11, 2010 09:52 AM

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Reader Monica e-mails about how my governor, Colorado Democrat Bill Ritter, is squeezing folks who make money online through the Amazon affiliates program. Politicians don’t want to make tough spending cuts, so they’re targeting Internet commerce. First, some background:

The enduring skirmish in Colorado between Amazon.com and lawmakers over collecting online sales taxes has become the new front in a larger national war with billions of potential tax dollars at stake.

For years, it has pitted the anti-tax online giants, armed with a favorable 1992 U.S. Supreme Court decision, against public officials and brick- and-mortar retailers that say it is time for Amazon and others to pay their fair share.

Now, Colorado legislative leaders’ political scrap with Amazon is being watched across the country by lawmakers and online-industry experts who say it’s yet another example of how confusion still reigns nationally without strong intervention from Congress.

This week, Amazon fired thousands of affiliates in Colorado, saying it refused to be forced to collect taxes under a new state law. Those affiliates were online partners that routed sales to Amazon.

“Everyone should be playing by the same tax rules,” said Craig Shearman, government-affairs spokesman for the National Retail Foundation, who says economically devastated government budgets need a shot of revenue.

…Online retailers often cite a 1992 Supreme Court decision to bolster their case against taxation. It effectively barred states from requiring online merchants to collect sales tax on their behalf, except where they have a physical presence.

But the court also suggested that Congress could give that power to states if it wanted to.

Monica shares her story:

I think it is important to know what is going on.

I got the letter yesterday and had my affiliate account closed. While it wasn’t a lot of money, it was some income for my family.

I wrote to our state legislators and the Governor last night. Doesn’t make sense to me how cutting off money to the state in the form of people’s income is helping to stimulate the economy. And they are blaming Amazon, but they are just a business, doing what they need to do to stay in business. The legislators were warned this would happen and did it anyways. No cutting of spending, no balancing the budget…just trying to use those of us who work hard to do their work for them.

The Democrats are going after the little businesses now. Something to be aware of.

P.S. Below is the letter I sent to the Governor and a copy to my representative and my senator last night. I really doubt they care.

Dear Gov. Ritter,

Up until today, I have been an associate in Amazon.com’s affiliate program. Because of the recent actions of you and the state legislature, I no longer will receive any income from Amazon when visitors to my websites click on an Amazon link. I have lost this income. Therefore, I will not be paying state income tax on this income. I also will not have this income available to spend in the state. I fail to see how this is helping the state of Colorado or our economy. You can continue to blame Amazon.com for this; but, Governor, we are not stupid. We can see who is to blame for this. It is the decision of our legislators and you, who signed this bill. You were informed that this would occur and decided to sacrifice small business owners in the state in order to continue irresponsible spending and a lack of resolve in cutting the budget.

As long as you continue to hurt those of us who work hard and do contribute to the state’s coffers, you and the legislators who voted for this will continue to face a budget crisis and will face an election crisis come next election.

I ask that you work to rescind this damaging legislation as quickly as possible to mitigate the damage to thousands of small business owners in Colorado.

Sincerely,
Monica Mayhak

***

The fallout, via Complete Colorado:

A move by Amazon to sever all ties with affiliates in Colorado already has some Fort Collins companies looking to move their businesses to other states.

Monday, Luke Knowles, CEO of Kinoli Inc., a Fort Collins-based interactive design and development Web site that has thousands of affiliates, received an e-mail from Amazon indicating it would no longer pay him advertising fees because of a new state law aimed at collecting sales tax on online purchases.

The loss of Amazon, one of his top grossing merchants, will hurt his bottom line as other affiliates who rely on Amazon also are cutting ties with his company, Knowles said.

The end result is that he is strongly considering moving the company to Montana because it does not have a general sales tax.

Heckuva job, Gov. Ritter!

***

Update: Diana Hsieh e-mails about a new movement to repeal the Amazon tax. Go here! More info:

Colorado is killing its own businesses with unfair, onerous taxes… yet again.

The Colorado legislature and governor recently passed a terrible new tax law (HB 1193). The law saddles out-of-state online retailers and their customers with crazy patchwork of state and local taxes, plus a costly mess red tape and stiff penalties for non-compliance. However, Colorado can only tax out-of-state companies if those companies have some kind of presence in Colorado. To avoid this unfair tax burden, Amazon.com terminated the accounts of its Colorado “Associates,” i.e. the people who earn commissions by advertising Amazon products on their blogs and web sites.

Amazon warned the Colorado Democrats that this would happen… but they passed the law anyway.

Particularly in light of the sorry state of the economy, this economic blow to thousands of people across the state is simply repugnant. Personally, speaking as a long-time Colorado Amazon Affiliate, the new law meant that so much of my past work was wasted and so many future plans were derailed — all in an instant.

Right now, the left is frantically blaming Amazon. Yet Amazon is the primary victim of the law: they’ll lose more revenue than any single affiliate. Amazon did not act capriciously: it was forced to defend itself by the heedless tax-and-spend Colorado legislature and governor. Once again, the statists blame business for the sins of government.

I refuse to roll over in face of this latest abuse of government power. Ari Armstrong and I are working, along with others, to repeal this “Amazon Tax.” We want to put the pressure on now — and keep it on — so that its repeal will be first on the legislative agenda after the November election. If it’s not repealed, such measures will surely be tried in other states.

You can read more about the law and its effects in my blog post:
“Colorado Screws Amazon and Its Affiliates”: http://www.dianahsieh.com/blog/2010/03/colorado-screws-amazon-and-its.shtml

Ari Armstrong has a lengthy post here, including an excellent analysis of the law: “Stop the ‘Amazon Tax’!”: http://blog.ariarmstrong.com/2010/03/stop-amazon-tax.html

We’ve also put together a very rudimentary web site, to be expanded soon: Repeal the Amazon Tax: http://www.RepealTheAmazonTax.com/

If you want to help pressure the Colorado legislature to repeal this awful law, please join the low-volume e-mail list, NoAmazonTax: http://groups.google.com/group/noamazontax

Mostly though, I’d ask that you spread the word about this law and its effects on Colorado. Forward this message to free-market and pro-business groups, to family and friends, to co-workers. Blog about it; share it on FaceBook and Twitter.

Posted in: Democrats,Web 2.0

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