Colorado Democrats strangle Internet entrepreneurs
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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.shtmlAri 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.
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Gov. Ritter: Dear Monica, stop your whining! You’re making money and that isn’t fair!
Michelle – your blockquote is open.
Colorado will soon become a mimi Kalifornia or NY if residents continue to elect Democrats. The party is no longer that of their grandparents.
The same law is in front of the California legislature as well; Democrats are pinheads.
If anyone can explain why the State government deserves a cut of internet sales to people in that State, I’d love to hear it.
I feel conflicted in this argument. I don’t like govt looking for new forms of revenue, but I think the current exemption gives online retailers an unfair advantage against local stores.
Anyone, anywhere with anything of value, is a sitting duck from not only conventional thieves, but also from local, state and federal government. All the buzz is global government formation to add to the mix.
Thieves…every one.
What else can be said.She covered everything sensible.The Colorado leadership knows better.They will show her.
The “local store” can have a website too.
Democrat (and not a few Republican) legislators believe the citizenry exists to shovel money their way. Democrat voters (and not a few dim-bulbed Republican ones) believe legislators exists to shovel money their way. What can go wrong?
Hello underground economy. We are becoming the USSR.
It’s not that much of an advantage since it’s offset by having to pay shipping & handling. Not to mention that if I buy something locally instead of online, I get my hands on it immediately. I don’t have to wait for it to arrive and I don’t have to worry about what condition it will be in when it gets here and if I need to return something I can just take it down to the store and return it instead of having to box it up and ship it back to the online retailer.
I’ve never decided to buy anything online simply because I won’t have to pay sales tax. I buy online because it’s convenient, because the selection is larger, and because I don’t have to deal with crowds of people in the store. Not paying sales tax is just a bonus.
But then they have to collect state sales tax, so they are not exempt.
However, since there is no point in saying it in my own words which would be the exact same thing…
It’s actually decently balanced at this time in my view due these reasons.
Governor Bill Ritter to Monica.
So, what’s your point?
I once had an internet business based in Illinois. I rarely ever had an IL customer because of the 8% (back then) sales tax I was required to collect.
I believe Nebraska or Kansas tried to require internet vendors to collect county sales tax to in-state customers.
It is the nature of internet business to attract cross border buyers, often for the sales tax savings, as well as convenience.
Ohhhh MICHELLE, you just watch this spiral up, up and away… As the states get more and more A**HOLE deep in debt, they all will try to figure out ways to tap ON-LINE COMMERCE for additional funds in their coffers…My only shock, that it has taken soooo long for any states to start their assault on the INTERNET for funding…
I think that’s a valid point, but the business models tend to cater to different audiences.
Local stores are also strapped with a myriad of other overhead expenses, like occupational licenses and property taxes, so the comparison isn’t apples-to-apples in any context except the very basic premise of selling books.
Rip Ford, much better argument than mine. Thanks.
This is what really scares me about Ritter. Now that he is not running for re-election God knows what crap is going to pass. The new state budget is to be “unveiled” next week I believe. The Kalifornication of Colorado started a long time ago, unfortunately.
This is exactly what happened in North Carolina. They started taxing, Amazon sent out an email saying North Carolina bloggers could no longer be part of the program, and turned our seller accounts off. So, now no one gets revenue. State doesn’t get it, and I do not get it. It was only about $200 a month, but, heck, that was lunch money for the month.
Marco – Additionally, what is the purpose of a State collecting a portion/percentage of retail sales? My understanding of the rationale is that it is for providing community services associated with the physical presence of the store – police patrols for crime prevention/response, roads, traffic control, utility service installation, etc. An internet store creates none of these costs, so it shouldn’t have to pay for them.
Colorado is trying to collect these sale taxes from website owners that reside in the state of Colorado …
At the same time there are other states that expect sales taxes to be collected and forwarded to them regardless of where the website business physically resides but rather because of the consumers resident state …
One more reason so many businesses are moving out of the USA even though they do most of their business here …
I also know of website owners that use “IP Blocking Systems” to stop access to their sites by users from certain states in order to prevent their site from accepting orders from residents in those tax collecting states so they don’t have to deal with the problems it creates for them …
Welcome to the real world.
When your income goes down, you cut spending. Is it really that hard to understand?
Liberals are really not capable of human thought, are they? This sort of short-sighted nonsense is similar to what has driven our manufacturers to relocate to China (they don’t have an EPA or OSHA).
I own a software company based in Colorado and provide divorce-related software via download (and CD). The download version allows anonymity in that it delivers a link to the purchaser (either for personal use or as a “gift” to a friend or loved one). I don’t collect address information and will have to modify my payment software, my price and my philosophy because of this law. The losers in this kind of legislation continue to be the public — they will pay the tax, not me as I will pass that little detail on to them. The cost to me will be in lower sales (extra $$ for tax may disuade purchases), software modification costs, and collection/payment expenses. If my sales suffer, Colorado will receive less in the form of income taxes of course. My fear is that other states will follow in Colorado’s footsteps and impose more pain on my business model.
proof: http://www.exnotes.com
As a sidenote, I saw that the internet is a nominee for the Nobel Peace Prize, this year. I wonder if Gore will, once again, claim he invented the internet to claim another prize….
You just aren’t very diligent at finding deals because the cost advantages of buying online can be significant. I won’t buy a suit or bananas online but most everything else is okay with me if it pencils out.
I think your average heroin addict can control their drug habits better than most politicians can control their spending habit.
Cut spending.Laffer Curve.Raise Taxes. – let’s go with this one!
Everyone seems to be missing the overall point: Taxation and entitlement are out of control. How much actual DIRECT value are you getting for your taxes?
If someone says they are going to kill you, are you going to debate whether a knife is more humane than a gun or stop the execution?
I can’t figure out how any business can be forced to collect and send sales taxes to any government entity…with no reimbursement for the time and accounting costs it takes to collect and forward those taxes. If it was a fishing or hunting license, at least gov’t shares the cost by allowing part of the fee to go to the business selling said license. Alternative is to provide gov’t with names and sale tax owed and let gov’t go collect their own sales tax…which would open customer files to gov’t bureacracy. The current complicated tax, both state and federal systems, need major overhaul.
Colorado has very powerful state employee unions. They get vastly inflated salaries and benefits and pensions. The State of Colorado, especially under Governor Ritter, does not negotiate with the unions. It surrenders to them. The motto of the lawyers and bureaucrats who negotiate for the State of Colorado should be “retreat then surrender”. There is an old song “No retreat, no surrender”. The folks who negotiate for Colorado, including some promiment Denver lawyers turned around the words of the song and left out the word “no”. These Denver lawyers receive huge legal fees for doing nothing more than meekly surrendering to state employee unions. Ritter is completely on the side of the state employeee unions. It is no surprise that Ritter’s popularity is at an all time high with state employees. They love the guy.
Bingo!
RTater, you get today’s Blue Ribbon.
And reading between the lines, you can see that the government wants the money not for the reasons stated, but for their pet programs to buy votes.
When CA passed Prop 13, the doomsayers all predicted closures of librarys, schools, etc. Didn’t happen. Then in SF (years ago), the mayor and his financial aide found a loophole in Prop 13 where they could raise property taxes under special circumstances. They held a press conference and announced how happy they were that they could now raise taxes! Everyone was smiling! Except the tax payers. Of course.
swmntman, I can see why your website business might want to create an aura of customer anonymity. If someone is considering a divorce tells their spouce about what they are doing, it will change the behavior of that spouse. Then your claims of how this software might help them will be less effective. Nevertheless, I don’t understand why when someone uses a credit card to purchase this program, that there would be any anonymity left. I imagine most of your clients use credit cards and therefore are readily identified anyway.
Worse than pinheads – dopeheads. Our money is their dope. Speaking of which, besides mulling over an internet tax, I believe, the CA legislature is seriously considering legalizing marijuana sales simply because they are desperate for the tax revenue they percieve can be derived from it.
They have become extemely inventive in new ways to tax us. If they could only use their brains to find inventive ways to cut spending.
Throw all the career politicians out!
Not for other states….If your local store is in Colorado and you sell over the Web to someone in Kansas, you don’t need to collect Kansas’ tax as well. (Just an example, maybe Kansas is trying this too.)
They proposed the same kind of law in Hawaii and Amazon dumped all their affiliates here too. I believe the proposed law was tabled but not sure if Amazon is having people sign up again. The really odd thing? Hawaii has NO sales tax. It’s an exise tax – money is collected on money collected, including exise tax money collected (yes, they tax the tax). If Amazon sells something here – they collect it in Seattle, not Hawaii. But I don’t think politicians here even understand, we do not have a sales tax…
TMT – Thanks ! I love blue ribbons. Unfortunately (or fortunately for me), they usually come after stating something that should be painfully obvious to everyone. The corruption of language and logic has allowed for politicians to present the convoluted irrational explanations as sensible.
Form an LLC in Nevada or Texas and put your downloads on a server farm there. Uh, check with a lawyer first though – I don’t even play one on TV. Where’s Chap when you need him?
I agree. Next up: eBay merchants.
If local stores have to collect and pay taxes, then so should online retailers. And as a BIG online purchaser, I know I’m shooting myself in the foot, particularly since we’re over 9% in my county.
Vinny -
You are correct – CC and Paypal have ID’s associated with them but don’t necessarily reflect the ultimate user of the product (can be purchased by family member, friend, etc.) — the delivery and install of the software itself has some anonymity associated with it if the customer so desires. I’m still studying the Colorado law to see what entity (purchaser or installer) determines who pays the tax. In the end, determining that a download is tangible (and ultimately who takes ownership of that tangible product – it is just some 1′s and 0′s afterall) is fuzzy — purchaser or installer.
Hi Aloha -
I checked into that and there are some limitations (in Nevada) that seem to outweigh the benefits for my buiness model (haven’t checked on Texas so thanks for that tip). Actually, the server (that houses my software) is not located in Colorado — I contract that out. I’m still studying the law to see how it applies to my situation.
In fact, I won’t hire employees (contract everything out) until healthcare and other revenue-confiscation schemes are settled — nice business friendly environment we are in, eh?
O/T The Texas school board dropped Thomas Jefferson from the curriculum and added Thomas Aquinas for the study of enlightenment.
For decades, politicians have been spending more and more money that they extracted from the public. They failed to be accountable for the irresponsible spending and now need to invent new ways to extract even more money from the public. We need to tell them no more taxes on anything for anything until this irresponsible behavior is eliminated along with funding for pension plans for public employees.
This is just not true.
Jefferson’s contributions are covered in the 8th grade TEKS: (US History to 1877)
(B) explain the roles played by significant individuals during the American Revolution, including…Thomas Jefferson
His contributions are also covered in the 10th grade TEKS: (World History)
(C) explain the impact of Enlightenment ideas from…Thomas Jefferson on political revolutions from 1750-present
Thomas Aquinas appears nowhere in the current TEKS recommendations. It’s also important to note that nothing is set in stone – yet. If you’d like to view the current recommendations, you may visit http://www.tea.state.tx.us/index2.aspx?id=3643.
Take a look at chron.com the Houston Chronicle
Sounds a lot like WA State. Here the Legislature is trying desperately to pass a $680 million dollar tax package that will hit everyone big time; yet they are also increasing spending while we have a $2-4 billion defeceit (and are facing an $8-9 billion defeceit next year as this years budget includes one time
stimulouswasteulous money).Seeing as they cannot pass the bill (even though they have a majority that the Dems in the US Congress would envy)and the session ends tonight at midngiht, the Dem’s are pushing to have a “special session” so they can continue to work on the taxes. Of course the “special session” will cost taxpayers $20,000 a day in operating costs (while we are facing a massive defeceit).
On line taxes will eventually just empower the public employee unions. Sales taxes and property taxes are their life blood for bribing state legislators and eventually controlling most of the legislation.
I Live in California and believe me this is what happens. In the local news we just did an audit of state jobs with a nurse working for the state making $250,000.00 in Overtime last year.
This is what happens with out of control taxes with public unions holding the taxpayers hostage to their ever increasing demands for more pay and benefits.
Increased taxes are the life blood of these leeches.
Somewhere in the back of my mind I keep thinking that if we demanded those in elected state and federal positions to submit a complete financial report to their constituents every year once elected to office we’d see a complete turnaround on taxation. Many come into office barely squeeking out a living, yet leave with millions in the bank. They appear genius when managing their own money and completely incompetent at managing ours? How do they do it?
I believe this is the article you’re referencing:
http://blogs.chron.com/believeitornot/2010/03/texas_thomas_aquinas_to_replac_1.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+houstonchronicle%2Fbelieveitornot+(Believe+It+or+Not)
Still, it’s not permanent. (yet) Even if it were, Jefferson’s political ideology is still covered in the 8th grade TEKS, which mean’s he’s not completely removed from the historical record.
Apparently, yes, it really is that hard to understand.
That Colorado had the gall to create an “internet tax” shows how out of ideas and how greedy the state is when it comes to revenue. Hurt the little guy to keep their privileged a$$es in power. Not only are the affiliates charged this tax but it’s passed on to the consumer and the consumer has to pay the tax as well. As a family that uses Amazon because it beats retail store prices in different categories of merchandise, my husband and I find this new revenue creator ill-thought out and ill-conceived. It will come back to bite Ritter (who’ll be gone from office soon) and the legislature.
Coloradans on this blog won’t like me for saying the following but it needs to be said. I was reluctant to come back to Colorado after my husband was reassigned to a local military installation in Colorado Springs. I found the state changed not only by the mismanagement of local, state, and federal politicians (both Dems and Repubs) but that the complexion of Colorado Springs had changed with the increased housing development sprawl. The lip service paid to military spouse employment still exists, which doesn’t serve spouses well in a bad economy or in the previously booming economic period.
The economy sucks in Colorado. If you’re a military spouse and want to work for one of the local military installations or contractors you need a basic clearance or someone who can sponsor it. There are not many people hiring unless you want to be another customer service representative drone in a call center.
While the environs of Colorado will always remind me of how beautiful the state is, the ugliness of greedy politicians and even businesses who want to tap the illegal alien underground market, and the increased population have made both my husband and I pause about plans for staying in this state after my husband retires from the military. The complexion of Colorado has changed from the influx of illegal aliens (I used to teach some of their kids I know they’re here), and migration of liberals from other Western states and from the East Coast. Lip service is paid when it comes to fiscal responsibility, immigration, military-civilian relations, and conservatism.
I don’t blame Colorado natives or conservatives for the current state of affairs. It also affects some of the other Western states like Arizona, Nevada, New Mexico, and Utah. What a shame. I hope Colorado gets its pioneering spirit back along with the independent spirit that used to make it a great place to live and thrive.
Folks I think we’re going to see Congress within the next 1-3 years (a) take that 1992 US Supreme Court decision to heart and require all “direct” sellers to collect and remit sales taxes of the States they ship merchandise to (b) possibly “to help small online retailers” have a single interstate rate where the merchants will pay the IRS which in turn will dole out the funds and/or (c) a Federal excise tax on electronic commerce sales.
We could even see a return of the Federal excise tax on “luxury” items which was imposed between ca. 1942-1970
Years ago in CA I had a merchant friend tell me they regularly shipped items to out of state second homes after the POS. As long as the customer had a valid address in another state they could ship it there and the customer didn’t pay CA sales tax – as long as they didn’t personally take possession of the merchandise when sold. Whether that’s true or not I’ve no idea. But, the shipment we discussed was a $30K fur coat! The merchant actually drove it to NV and turned it over to the buyer.
Ayn Rand was right again. They’re killing Colorado.
I will ALWAYS seek a “no tax” route if possible and legal. Anytime I can withhold my money from the long arms of gubmint I will happily do so. And that icludes the utter stupidity of giving them an interest free loan of my money, so I get a “tax refund.”
Nonsense. I buy a lot online because the prices – including shipping are mostly better, or the product I want is IN STOCK. I’m tired of wasting gas, fighting traffic and stupid people going to stores that advertise items and then claim they are “out of stock.” Really? I get to a store on the day a sale is supposed to start, before the store opens, and they are “out of stock”? Rubbish. Just one reason (among many others) I no longer shop at Wal-Mart.
Colorado took a giant step to becoming the France of the Rockies – socialism in America’s heartland.
Online purchasers usually have to pay postage, which offsets the sales tax.