New Study: Amazon.com Taxes Come With Serious Problems
A bill targeting online retailers like Amazon.com is moving through the Illinois Senate.
As noted by the Illinois Taxpayers’ Federation, an “Amazon.com” sales tax nexus bill is moving through the Senate.
Some states, including New York, North Carolina, and Rhode Island, have passed laws that included online affiliate marketers—web sites that host banner ads for another company—as part of what constitutes physical presence for a company within a state. This has sales tax collection implications for retailers.
New York wanted Amazon.com and Overstock.com declared as having an in-state nexus (even though they had no in-state operations) because they place banner ads on web sites run by others from New York. The result was vendors like Amazon.com and Overstock.com dropped thousands of advertising relationships with in-state advertisers, hurting local operators’ revenue streams.
States see online retailers as a juicy target for bringing in more revenues. But what’s the actual impact of “Amazon” tax laws?
Here are the key findings from new Tax Foundation study:
- Frustrated by their inability to impose tax collection obligations on companies with no substantial connection to their state, several states are considering the adoption of “Amazon” tax laws. Such laws currently exist in New York, Rhode Island, North Carolina, and Colorado.
- An Amazon tax law requires retailers that have contracts with “affiliates”-independent persons within the state who post a link to an out-of-state business on their website and get a share of revenues from the out-of-state business-to collect the state’s sales and use tax.
- Amazon taxes are unlikely to produce revenue in the near term. New York continues to face a lengthy legal constitutional challenge. Rhode Island has even seen a drop in income tax collections due to the law.
- Amazon taxes do not level the playing field between brick-and-mortar and Internet-based businesses because they require Internet-based businesses to track thousands of sales tax bases and rates while brick-and-mortar businesses need to track only one.
- Unconstitutionally expansive nexus standards like the Amazon tax undermine legal certainty, burden interstate commerce, and harm economic growth.
Read the full study here.