Well that certainly didn’t take long.
Less than a week after the Colorado legislature targeted out-of-state retailers with a bill that imposes sales taxes on online purchases, the measure has already claimed its first victims and reignited a fierce political debate in the Centennial State.
Amazon announced yesterday that it is cutting ties with all of its Colorado online affiliates in the aftermath of last week’s legislative action, a move that will affect more than 4,000 operations that formerly partnered with the online giant, most of them small and mid-sized businesses.
Amazon notified the affiliates via email, tersely calling the new tax regulation burdensome and unlike rules in other states. And that was that. Nothing else has been heard from them on the subject.
Many of the bill’s opponents argued that this is precisely the kind of thing that would happen if it passed, stating that big online retailers would simply pack up and leave the state altogether rather than stick around and fork over tax money. Colorado has more than 4,200 companies that worked as affiliates for Amazon, linking customers to its site through their own blogs and web portals. This industry of affiliates accounts for about 5,000 jobs in the state and while most of these companies aren’t completely reliant on their relationship with Amazon, others most definitely are.
Affiliate relationships have been a central issue in the overall online sales tax debate as more and more states have considered implementing such taxes to narrow budget deficits. Several states that have passed similar legislation on new online sales taxes have excluded affiliate provisions in their bills. Others, like Rhode Island and North Carolina, did not and Amazon high-tailed it out of both of those states as well, just as it’s doing in Colorado.
Colorado Gov. Bill Ritter and many Democratic state lawmakers are seething over Amazon’s swift action, calling it a case of a corporate bullying.
“They’ve done nothing here but spit in our face,” Senate Majority Leader John Morse said.
Meanwhile, state Republican lawmakers, who opposed the proposal and other tax hikes, criticized Democrats for pushing ahead with it and argued that no one should be surprised with Amazon’s move.
“It’s exactly what we said would happen. They’re going to put people out of work,” said House Minority Leader Mike May, “It’s a game of chicken with people and their jobs, and they lost.”
For now, the bill isn’t going to be repealed and its supporters promise that Amazon is still going to be on the hook for collecting sales tax revenues regardless of their decision to abandon the state. Still, it appears that one of the biggest downsides to taxing online purchases has in fact played itself out and should give lawmakers around the country who are considering similar action something to seriously think about.
Leave us your thoughts and comments below!
While filing late taxes is often associated with big fines and late fees, there’s much more to it than that!
“For now, the bill isn’t going to be repealed and its supporters promise that Amazon is still going to be on the hook for collecting sales tax revenues regardless of their decision to abandon the state.”
It’s not exactly true that retailers would be responsible for collecting sales tax for Colorado. Instead, they would be responsible for including a blurb on their invoice to Colorado customers that the *customer* is responsible for paying the Colorado use tax, with a $5 penalty to the retailer for each failure to include this language on the invoice. However, retailers with over $100,000 in sales to Colorado customers would be responsible for reporting those sales, along with customer information, to the state.
I do not see how this law is enforceable against out of state companies, but given that other states have concluded that having affiliates in a state gives a company “presence” in the state for purposes of collecting sales taxes, I can see how Amazon is hedging their bets here by ending their relationship with Colorado affiliates.