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Rhode Island Affiliates Banned From Amazon.com Sales 532

Posted by timothy
from the oh-just-wait-for-the-feds-to-tax-it-instead dept.
Rand Huck writes "Amazon.com has now added Rhode Island to its blacklist of affiliates in response to its proposed budget changes to enforce a tax on Internet sales, which includes commissions on their affiliate program by content providers based in Rhode Island. The first state to be blacklisted was North Carolina, for the same reason. If you go to a Rhode Island-based or North Carolina-based website that advertises Amazon.com goods as an affiliate, that website will no longer have the goods available because otherwise Amazon.com would be forced to pay sales tax to the State of Rhode Island and Providence Plantations or the State of North Carolina. The state's rationale is, if someone clicks to buy a good from Amazon.com via a site based in Rhode Island, it's equivalent to buying a good from a brick and mortar chain store located in Rhode Island."
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Rhode Island Affiliates Banned From Amazon.com Sales

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  • by Anonymous Coward

    ...the only Amazon.com affiliates left will be in The Amazon.

    • Re: (Score:3, Insightful)

      by cayenne8 (626475)
      "...the only Amazon.com affiliates left will be in The Amazon."

      That's really no big deal for me. I pretty much ONLY buy stuff that Amazon sells itself, so I can get the 'free shipping' with orders over $25..and of course, no sales tax.

      I generally trust Amazon more than I do the small fry sites they 'affiliate' with.

      • Re: (Score:3, Informative)

        by DrEldarion (114072)

        You're thinking of the Amazon marketplace stores.

        Amazon affiliates are entities who link to Amazon's site with a referral code and then get a commission based on that purchase. They're basically advertisers.

      • by geobeck (924637) on Tuesday June 30, 2009 @12:41PM (#28530365) Homepage

        I generally trust Amazon more than I do the small fry sites they 'affiliate' with.

        What exactly do you mean? When someone clicks on one of the recommended books on my Amazon affiliate page*, they are taken to Amazon.ca where they can buy the book directly from Amazon. I don't handle any of their transactions, or ship any books; all my affiliate page does is give me a commission on any book that a visitor to my site may purchase if they access Amazon.ca through the links on my site. There's no additional 'trust' needed.

        *which I am not going to link here, because that would be affiliate link spam. My site is in my sig if anyone wants more information on responsible products.

      • Re: (Score:3, Informative)

        by Machtyn (759119)
        Unfortunately, the "no sales tax" only works for those who don't live in a state that houses an Amazon warehouse. Fortunately, for me, the Amazon orders arrive very quickly without having to pay the premium shipping costs.
        • Re: (Score:3, Informative)

          by cayenne8 (626475)
          "Fortunately, for me, the Amazon orders arrive very quickly without having to pay the premium shipping costs."

          I always get the free shipping thing myself...and deliveries don't take all 'that' long for me. I don't live in an Amazon occupied state.

      • by Gallamine (610774) <william @ r o b o t g e e k s.com> on Tuesday June 30, 2009 @02:41PM (#28532719) Homepage
        >generally trust Amazon more than I do the small fry sites they 'affiliate' with.

        I think you're a bit misguided here. The "small fry sites" you're referring to are sites, like mine [gorobotics.net], that link to Amazon products in exchange for a cut from Amazon. It's huge marketing for Amazon, and a tidy revenue for me and others. But not now. I'm in NC and I got screwed. Amazon hasn't killed people *selling* products, they've just cut off people that are doing free advertising for them.
      • Re: (Score:3, Informative)

        >>I generally trust Amazon more than I do the small fry sites they 'affiliate' with.

        I agree. I remember the first time I unwittingly ordered 5 things from 5 different vendors. I sat there for over two weeks wondering why one package showed up two days after my order while another took 15 days. And the quick package did me no good because all the things were for one project.

        Nowadays I either order everything from Amazon proper, or I go directly to the affiliate's storefront since they probably speciali

      • Re: (Score:3, Informative)

        MOD PARENT DOWN. God, how the hell did this get so high? Read all the other replies, this is about Affiliates and not the Market place.

    • by 0100010001010011 (652467) on Tuesday June 30, 2009 @12:28PM (#28530063)

      Hawaii is close...

      It's not passed yet (but this is the best time to catch it).

      If you're in Hawaii get on the phone lines to your state senator and harass them about this.

      http://www.starbulletin.com/business/20090627_Amazon_poised_to_cut_affiliate_program_in_Hawaii.html [starbulletin.com]

  • by edwardd (127355) on Tuesday June 30, 2009 @11:49AM (#28529317) Journal

    These are not the only states to impose this type of tax. NY requires collection of sales tax, but Amazon isn't shutting out those affiliates. If they want to make a stand, they should at least be consistent about it.

    • Re: (Score:2, Insightful)

      by bytethese (1372715)
      Probably because NY is a bigger state and threatening moves such as this will have a financial impact on those smaller states thereby giving Amazon a perceived upper hand on what they want?
    • by Andy Dodd (701)

      Yeah, this was my first reaction as an NYS resident.

      If given a choice between collecting tax and booting all affiliates within a given state, why has Amazon chosen "boot affiliates" in NC and RI, but "collect tax" in NY?

      For some purchases it's actually cheaper for me to ship to my parents' in NJ and then drive down there.

      • Re: (Score:3, Interesting)

        by alen (225700)

        NY's AG started this whole thing and I think it's still being litigated. If Amazon stops doing business with NY affiliates then it may be seen as evidence of admission of guilt or whatever and NY's AG wins. If they continue to litigate and win they can then go back and start up their other affiliates

    • by Cidolfas (1358603) on Tuesday June 30, 2009 @12:20PM (#28529931)
      I thought they were being consistent. The NY law, which doesn't get your affiliates kicked out, taxes purchases made by residents of NY. The new laws that are getting affiliates banned tax purchases made from affiliates registered in those states.

      So if you lived in NY and you wanted to buy something from an online affiliate located in RI, you would have to pay tax in both NY and RI.

      And that's the problem with it. The Commerce Clause was put in the constitution to prevent things like this double-taxing for interstate commerce. If it's not as popular in some states to tax purchases made by residents, then they're going to try to get tax money from outside the state. It shouldn't hold up to constitutional standards on the issue, but that doesn't mean it will be overturned if challenged.
  • These states don't realize that anyone doing major affiliate sales will either get around their taxes, or the bans that affiliate programs place on a state. There is always an overseas country willing to take a bunch of rich technologically educated people.
    • by sopssa (1498795)

      Yep, and you dont even need to do that. afaik (I'm not from usa) you can just set up company in another state or country and work thru it with amazon.

  • Catalogs (Score:5, Insightful)

    by Hadlock (143607) on Tuesday June 30, 2009 @11:52AM (#28529377) Homepage Journal

    This is difficult, because an internet retailer is a lot like a catalog retailer, who might have 80% of their business out of state and isn't set up to take 50 states' differing tax rates and does not have the accounting muscle to pay 50 different state taxes each quarter. I think that's the main problem. And then you have the issue of ship to in one state (NC for example) and bill to (non-taxable like Oregon) etc etc. It creates a lot of headaches. Catalogs typically only pay/charge sales taxes for the state their accounting division is in. Multiply this by millions and millions of customers and you can see why Amazon would oppose this merely on the accounting issue. Most accounting software simply isn't set up for taxation in all 50 states, especially automatically.

    • Re:Catalogs (Score:4, Insightful)

      by tomhudson (43916) <barbara...hudson@@@barbara-hudson...com> on Tuesday June 30, 2009 @11:58AM (#28529491) Journal

      and does not have the accounting muscle to pay 50 different state taxes each quarter. I think that's the main problem

      Doesn't have the accounting muscle? Why can't they use their cloud computing cluster?

      The "acounting muscle" argument is pure BS - they have enough accounting and computing horsepower to run the rest of their business ... and they do a lot of calculations for every shaopping cart on every page refresh. Since they CAN cut off specific states, and they also calculate shipping by state, they can certainly do sales tax by state. They're just doing this to get their affiliates to lobby for them.

      • Re:Catalogs (Score:5, Informative)

        by ptbarnett (159784) on Tuesday June 30, 2009 @12:30PM (#28530093)

        Since they CAN cut off specific states, and they also calculate shipping by state, they can certainly do sales tax by state.

        It's not that simple.

        You can't just assess sales tax according to the destination state. In many states, there are local taxes as well, and it varies based on the locality. A merchant calculates sales tax based on the MERCHANT's location, and the various taxing authorities make sure he/she knows what should be collected.

        The shipping companies provide rate tables based on ZIP code, and it's a simple lookup. But, you can't even use ZIP codes to determine tax rates, because ZIP code boundaries don't necessary follow political boundaries.

    • Re:Catalogs (Score:5, Insightful)

      by sadler121 (735320) <msadler@gmail.com> on Tuesday June 30, 2009 @11:58AM (#28529495) Homepage

      This is where the Federal Government actually has the authority per the Constitution to step in and regulate interstate commerce. Congress needs to dictate ONE tax rate for all Internet purchases.

      • I think that would work out very well: Congress dictates ONE tax for the internet in terms of sales tax. It's ludicrous to force anyone (even if they do have the resources) to have to divert resources to figure out fifty different sales taxes. Also, there is the risk of being double-taxed at stake (Company A pays sales tax wherever its accounting division is located, and passes it on to customer, and then customer has to pay sales tax again of his/her home state).
        • by Hadlock (143607) on Tuesday June 30, 2009 @12:10PM (#28529735) Homepage Journal

          The State of South Dakota charges a different rate per city. PER CITY. Each city's rate ranges from 2-6% if I recall correctly. Also some states (NJ, Indiana in 2007) change their rate on occasion. And then dealing with non-profit (non-taxable) institutions? That means waiting for an official tax exemption certificate, of which every state has different rules. Schools and Non Profits buy a lot of junk. A Lot. You have no idea how much man power it takes to explain why, to Betty at Podunk Baptist Church, Rural, IL - she needs to find, fill out and fax/mail a tax exemption certificate before you can process her order. And then deal with her angry pastor three months later when their order never arrives because she didn't/forgot to/sent the wrong form. This is a huge, huge bitch to deal with for companies beyond Amazon.

          • by Fencepost (107992) on Tuesday June 30, 2009 @12:45PM (#28530453) Journal
            You can't calculate tax just by zip code - if you could, it'd be simple. You have to account for states, counties and municipalities, and zip codes don't line up completely with at least the last two. Zip+4 might, but that in itself is a nightmare (Zip+4 can be down to 10 or fewer individual addresses).

            A couple of examples: I live in a suburb of Chicago that gets much of its revenue from sales taxes on malls, etc. within the city limits. Its tax rate is different from the next municipality over, but my zip code overlaps that suburb. Another example: my office is in a town that straddles the border between Cook County, IL and Lake County, IL. The Zip code at my office (in Cook) and at the hospital where I have customers (in Lake) are the same, but the tax rates differ by 3% (Cook has among the highest sales taxes in the nation, if not the highest).
      • Re: (Score:3, Informative)

        by Thaelon (250687)

        And that tax rate should be 0.00%.

        Not just because I'm greedy either. Lower prices due to not having to maintain a brick and mortar store are the only things that allow online stores to compete against local stores. Because if you buy it locally you get the product instantly. And they have to be sufficiently lower including shipping costs to beat out brick and mortar stores. If you take away a huge portion of their tax advantage, they start to become tremendously less profitable, and thus less viable.

    • by EricWright (16803)

      Having worked on ERP accounting systems, I can say that sales tax should always be calculated based on the ship-to address. That said, smaller accounting packages may not be set up to support taxation for all 50 states.

      However, any large corporation should understand that using a system that IS capable of handling multiple tax jurisdictions is an expected cost of doing business.

    • by OzPeter (195038)
      Of course this could easily be fixed by the Federal Government setting a national sales tax :D
    • Re: (Score:3, Interesting)

      by teg (97890)
      For Amazon, this is certainly not about complexity. It's about the sales tax - it will no longer have a "discount" compared to local brick and mortar stores, by avoiding this extra cost that they have to pay. Thus, it will either lose some of its edge - or reduce its profits.
    • by fermion (181285)
      Then there is the issue of what is taxed and what is not. Like the federal tax, the complications come in when a the brother in law or sister in law of a high ranking government official wants special treatment for their unique situation. Of course, when the taxes become simple, then it become a simple matter to avoid the tax.

      These are not impediments to Amazon doing business, as they do enough business in all the states to pay for the software that would allow them to pay sales tax. If a vendor did hav

  • by Maxo-Texas (864189) on Tuesday June 30, 2009 @11:56AM (#28529435)

    I'm sure the gasoline and other annual taxes to deliver the products to the customer cover the wear and tear on the roads.

    Amazon is not using sewer, electrical, police or road services locally as brick and morter store would.

  • Tax 'em! (Score:2, Interesting)

    by NineNine (235196)

    I run a brick and mortar store AND an online store. No more than 5 minutes ago I was talking to a customer in the store, and she was asking what the sales tax was to see if she could buy the product cheaper online. That's ridiculous. People are short sighted and selfish. If this continues, we will have very little retail anywhere in the country in a few years, because everybody will be trying to avoid the sales tax. The gov't needs to close this huge loophole. Amazon needs to compete on a level playin

    • by Shivetya (243324) on Tuesday June 30, 2009 @12:03PM (#28529585) Homepage Journal

      pay taxes?

      Are internet retailers using your sewer? You schools? Your police?

      Then why should people living in another state fund yours?

      Tax them where they reside.

      Whats next? Taxing people for giving gifts to people in higher tax states? Hell, lets tax people's medical benefits - oops.

      • Also, I want to tax the taxes that are being taxed on those goods running through my state.
      • by langelgjm (860756)

        Stop. Just stop. You're making too much sense.

        There was a bill introduced in the Maryland General Assembly this session that sought to charge title taxes on off-road vehicles - figure that one out!

        Really, though, we should all just realize that for the most part these kinds of taxes aren't supposed to make sense, they are just supposed to raise revenue.

    • add a bit of code to my web site to collect sales tax correctly all over the country

      Don't forget that quarterly, you'll have to file and submit all those pennies to 50 different locations.
      Then, what if the city and county steps in and says, "you know what, all these people are in our city are buying stuff outside our city, we want taxes for that." Do you think you would still be in business if you had the overhead to deal with taxes for 50 different locations, let alone how ever many cities/counties would start wanting taxes from you.

      There is already a solution for this. The taxes are th

    • Re:Tax 'em! (Score:5, Informative)

      by salesgeek (263995) on Tuesday June 30, 2009 @12:45PM (#28530461) Homepage

      People are short sighted and selfish. If this continues, we will have very little retail anywhere in the country in a few years, because everybody will be trying to avoid the sales tax.

      Mail order has *always been there* and always presented the option of letting people purchase out of state and duck paying sales tax. If your state has a confiscatory sales tax rate that makes mail order 7-10% less expensive, then move your business somewhere else or let your legislators know that sales tax is ruining your business.

      Oh, and it's not a loop hole. It's called the commerce clause of the US Constitution. It protects your business from being subject to the laws of all 50 US states as well as preventing states from creating tarriffs and anti-competitive laws to keep out of state competitors like you out of the market.

  • by Iphtashu Fitz (263795) on Tuesday June 30, 2009 @12:01PM (#28529541)

    I'm in Massachusetts. If I happen to visit the website of the Trinity Repertory Theater (www.trinityrep.com), a theater located in Providence, RI, then my internet traffic doesn't even pass through Rhode Island, much less end in Rhode Island. Their website is hosted by a low-cost provider out in California. The only tie to Rhode Island is that the website was created by an organization in Rhode Island. If I visit that website I don't "visit" Rhode Island. So why should Rhode Island have ANY claim on anything I might purchase from an affiliate program hosted on that site? I'm visiting a website hosted in California and if they were an Amazon affiliate then that would involve a company located in Washington. RI doesn't have any valid claim to tax such a transaction.

    By their own logic, I'm buying goods from a brick & mortar store in California (or more appropriately Seattle), NOT Rhode Island. If anything, the company in RI is simply acting as an advertising agency. They designed an advertisement (the website) that's on display in California for a company that actually does business in Washington.

  • by Maltese Falcon (11786) on Tuesday June 30, 2009 @12:03PM (#28529581)

    By the very same reasoning they use for Amazon, if anyone goes to a phone located in Rhode Island and makes a purchase of anything, it's the same as going to a brick and mortar of that shop in the state and is also subject to equivalent taxes. Even ordering by US mail out of a catalog would reason out to the same logic (providing the catalog and/or mailbox is physically located in R.I.). Amazon might even be able to use that to force R.I. to either include phone orders across the board or drop the bill/law.

  • by bsandersen (835481) on Tuesday June 30, 2009 @12:07PM (#28529669) Homepage
    The problem with this story is that it isn't clear where the sale has taken place. I click a button in Massachusetts, paid for the object with money from a Connecticut bank, the company hosting the web site is in New York, the headquarters of the company is in Arkansas, the shipment is made from New Hampshire, my mom receive the materials in Illinois (I dropped shipped her a gift). Where was the sale? I don't know what the right answer is... but I'm certain that state legislatures rushing to get something passed will end up making a mess bigger than the one they find themselves in now. I don't blame Amazon for pushing back. If I were Amazon management I'd be doing the same thing.
  • by C_Kode (102755) on Tuesday June 30, 2009 @12:22PM (#28529955) Journal

    Amazon is basically screaming: "Taxation Without Representation" and taking a stand against what it believes is unconstitutional taxation. (ie being taxed by a foreign (different state) government) This is exactly what happen in the mid-late 1700s and the reason the US is it's own country rather than part of the United Kingdom.

    I completely agree with Amazon. I happen to have an Amazon shop (I'm not located in either of those states) I know it screws the webstore owner, but Amazon is doing the right thing and THEY need to stand up to their own state's goverment and let them know that they are hurting their own people by being greeding and trying to tax people that don't even live in their state.

    • by JPLemme (106723) on Tuesday June 30, 2009 @01:19PM (#28531265)
      For the zillionth time, RHODE ISLAND IS TRYING TO COLLECT TAX FROM RHODE ISLANDERS! It has nothing to do with out-of-state anything. RI is trying to force amazon to collect RI sales tax from RI residents (or at least people with RI shipping addresses) by claiming that amazon has affiliates based in RI, and thus has a physical presence just like Walmart or Target.
  • Sales tax for interstate domestic commerce should be based on location of business not the location of the consumer, the sale happens where the business is located.

      Amazon is incorporated in delaware, delaware has no state sales tax, hence the tax you owe is 0%

  • by Sir_Real (179104) on Tuesday June 30, 2009 @12:23PM (#28529979)

    So the store doesn't get a sale, doesn't pay the stakeholder, who was presumably going to spend money in the state on taxable goods and services. The state still loses. The original sale doesn't generate revenue and the seller won't be purchasing anything that generates tax revenue with the proceeds of the sale that didn't happen. Sorry states, there will always be at least one state that will take advantage of this and host amazon friendly affiliate websites. This is kinda like how you can incorporate an LLC in any state you have an "agent" in (100 bucks a year gets you agent representation in any state) but no one in their right minds incorporates an LLC outside of Nevada or Delaware because of the incredibly low taxes and business friendly body of case law they've produced. You still have to pay personal income tax in the state you perform work but you get a credit for taxes you pay to other states for your state of residence taxes.

  • by Tom (822) on Tuesday June 30, 2009 @01:05PM (#28530959) Homepage Journal

    It's not that they're being unreasonable, per se. It's that they're applying and old model to a new technology. It's a bit like trying to do rocket science with the math available to Aristotle.

    Physical location matters little on the Internet. But our countries and states are defined by physical location. So it's not a trivial problem, but applying solutions that simply don't fit will not solve anything.

  • by mapkinase (958129) on Tuesday June 30, 2009 @01:18PM (#28531229) Homepage Journal

    Every breath you take
    Every move you make
    Every click you make
    Every step you take
    I'll be taxing you

    Every single day
    Every word you say
    Every game you play
    Every night you stay
    I'll be taxing you

    Oh, cant you see
    You belong to me
    How my poor RIDT aches
    With every step you take

  • by Anonymous Coward on Tuesday June 30, 2009 @01:23PM (#28531341)

    It truly amazes me how few people understand even basic economics.

    Amazon does not have brick and mortar stores. So it's not the same. In fact, when the tax laws where written that apply to "mail-order" they understood this basic concept. Based on those laws you only have to pay sales tax if the company you're ordering from has stores(brick and mortar) in your county.

    Facts: Amazon pays taxes. They pay taxes on their employees, properties, income, purchases, etc. The shipping companies also pay taxes. In order to pay all of these taxes the price of their products and services get marked up.
    So, when you order an item from Amazon, a surprising amount of what you're really paying for is indirect tax. Including local taxes paid by the shipping company.

    The gross tax lean across the US is over 50%. It's insane. Anyone who agrees that there should be any new and/or more taxation is a complete and utter moron. More taxation increases the cost of living, which increases poverty, which increases crime rates, which has the end effect of idiot politicians stating that we need more tax. It's a corrupt cycle that killing this country and needs to end.

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