Amazon, Colorado, sales tax and greed

Posted by & filed under Politics, Technology.

Oh greed, you rule all.
Politicians are especially susceptible to it, because usually when the budget falls through, they prefer to rip more money from someone else, rather than reduce expenses. I suppose it’s normal for people to get used to new life, and then look back in horror on how they lived 5-10 years ago on half the budget (and, surprisingly, seemed to enjoy the life). Plus, cutting the expenses involves a new round of flurry from lobbyists, calling the important person with tradicional “why don’t you like us any more” question, making redistribution of money a bit more difficult.

So, usually politicians seem to go the traditional “tax the sin!” or “let’s find new way to tax regular people” routes. This whole story of Amazon and Colorado is a perfect example of the latter one.

Amazon has no real presence there, so, there’s no sales tax charged on online purchases from that store. Customers supposed to voluntarily bring their money afterwards to local government in form of a “use tax” which exactly matches the sales tax. But people are not idiots. They found the way to save money by buying online, and they are not willing to give it back.
So… Colorado politicians decided to force Amazon to help them.

I suppose the question is not really in technical aspects of collecting the tax (though it certainly is no small feat — sales taxes are horribly and unnecessarily complicated from county to county for historical and lobbying reasons, and just a zip code is not enough to figure out if donuts are ready to eat food or grocery for tax purposes) but a question of principle. Why is it that Amazon needs to “voluntarily” collect money for Colorado (or any other state where it’s not really incorporated) or spy on its clients for the sake of Colorado’s taxation?

Well, the Supreme Court up to the point was quite clear — businesses outside of the taxation nexus shouldn’t be bothered with dealing with local weirdo-taxes, wasting money and time complying with demands of authorities, services of which they do not use. Those who live in the area at least get something from the sales tax.

Why not demand that, say, foreign satellite channels send payments to local tax agency for ads sales — after all, that satellite channel could be watched in Colorado, thus providing valuable eyeballs!
Why not demand that Amazon charges tips on food items they sellAfter all, those sales will rob poor local restaurants from potential profits, and local municipalities from taxes?

Arguments of Amazon being a big and wealthy company also don’t fly. Compared to citizens of poor countries Americans are quite wealthy. Should everyone be required to donate some amount to those in need?

Claiming that it’s just Amazon doesn’t want to share its wealth is extra hypocritical — politicians know perfectly well, if something costs on Amazon $20, and they manage to force sales tax on it somehow, then the item will simply cost $20+tax amount for people in Colorado. Have they ever seen a company absorb a charge/tax/surcharge? Look at the cell phone providers, taxes and fees (real and not) are up to a quarter of total! So by pushing so hard, Colorado politicians simply want help with prying out more money from their own citizens.

Claim of “fairness” also doesn’t fly. Amazon doesn’t use local roads — delivery company does (for which they are charged by the state, which is then passed on to Amazon in service charges). Amazon doesn’t need local water, or school or police. So how would that be fair, that remote company has to deal with local taxes while not getting anything back?

Right now lawmakers are complaining that they are “explicitly excluded affiliates from the bill” so that Amazon wouldn’t drop the affiliates, but I bet that in case of legal challenge, those affiliates would be immediately used to demonstrate “company ties to local community” and justify forcing Amazon to collect sales tax.

Here’s the link to the actual text of the bill: HB10-1193
Specifically, read the (II)(A) on page 4:

EACH RETAILER THAT DOES NOT COLLECT COLORADO SALES
TAX SHALL FILE AN ANNUAL STATEMENT FOR EACH PURCHASER TO THE
DEPARTMENT OF REVENUE ON SUCH FORMS AS ARE PROVIDED OR APPROVED
BY THE DEPARTMENT SHOWING THE TOTAL AMOUNT PAID FOR COLORADO
PURCHASES OF SUCH PURCHASERS DURING THE PRECEDING CALENDAR YEAR
OR ANY PORTION THEREOF, AND SUCH ANNUAL STATEMENT SHALL BE FILED
ON OR BEFORE MARCH 1 OF EACH YEAR.

So, either Amazon collects sales tax, or they are required to send a dossier on all purchases to the Colorado IRS, or get fined for every customer and have a threat of contempt of court when local tax authority gets no satisfaction. Lovely, isn’t it? Given such language, I am not surprised that Amazon dropped all affiliates in Colorado. I am surprised they didn’t just ban all customers from Colorado on the spot, because politicians continue to claim that even though there’s no presence, Amazon is “liable” to comply with such nonsense.

Wall Street Journal wrote that there were 4,200 Amazon affiliates in Colorado in 2008, that earned about $37.5 million in commission fees. Those were real money, spent in state, helping Colorado citizens. Now those money are gone. Perhaps that will send a message, about what happens when you dream up a new way to offload your financial trouble onto someone else.

Good luck, Amazon. Hope you will win this legal battle.

p.s. there’s already an attempt to “boycott Amazon” in CO — go right ahead. Don’t buy anything from them. Other people will.

3 Responses to “Amazon, Colorado, sales tax and greed”

  1. Laurie G

    Yours is the first article I’ve read to approach it from the same perspective I have. Why make things hard for one of the few online success stories, particularly during tough economic times? The idea of taxing a business that does not use services makes no sense to me either.

    Reply

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