March 14, 2011
Illinois, Hurting for Cash, Looks to Amazon
Posted by Christine Hurt

The local paper here last week mentioned in a fairly small article that Amazon had terminated its relationship with Illinois vendors who previously had earned commissions by referring internet customers to Amazon.  (Some bloggers earn commissions from Amazon by referring purchasing customers through their websites; the Glom does not.)  Why the big "You're Fired"?  Well, last week the governor of Illinois, Pat Quinn, signed into law a new tax law that would require Amazon to pay local sales tax on that purchase.  Amazon apparently did not think that was a good deal.  The state of Illinois has promised to find these abandoned Illinois vendors new commission-earning relationships with other Amazon-like retailers, presumably ones that have physical locations and already collect tax like Sears, Wal-Mart and Best Buy.  Some Illinois ex-affiliates are opting instead to take up business in another state, rather than wait for that help to come.

But, apparently, Illinois is not the only state looking for revenue cash left on the table (or under the sofa cushions) by passing an "Amazon tax."  (NYT article today here.)  And, apparently, Amazon is not that happy at being the biggest undertaxed cash cow in sight.  Amazon takes the position that it is required only to collect tax on sales to states where it has a presence, not mere internet affiliates or even warehouses (as in Texas).  Though the states are arguing that Amazon should be treated just like any other retailer that has to collect sales tax on its products, Amazon argues that it should be treated just like any other retailer without a brick and mortar presence in that state.  Here is a recent SSRN paper by Edward Zelinsky on why Amazon taxes violate federal law, citing a Colorado controversy.

Given the financial straits of many states, I bet this isn't the last we hear of this topic.

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