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Amazon.com and Illinois affiliate websites

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Atouradmin

 
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Member: Dec-10-1996
Posts: 1,961

3. Reactions from Illinois affiliate websites

Mar-28-2011 at 00:23 AM (UTC+3 Nineveh, Assyria)

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Last edited on 03/28/2011 at 01:10 AM (UTC3 Assyria)
 

There seems to be so much confusion over this bill. This has nothing to do with fairness or online sales advantage. Plain and simple, if this bill passes, Amazon will terminate all affiliates in the state (they have already done it in CO, NC and RI. They aren't bluffing.) Then they will have no sales tax to collect. So it's a lose for IL all the way around - no sales tax and no state income tax from affiliates. How is this a good idea?

I run a blog. Amazon affiliate revenue is about 40% of my income, as it is for 1000s of small internet businesses in IL. This is not a scare tactic -- when Colorado passed a similar bill, Amazon simply dropped their affiliate program in CO, cutting off all of their affiliates' income. Here's the deal: Amazon drops IL affiliates, who no longer have that income, so don't pay their (75% higher than last year!) income tax on it. IL rakes in no new revenue cause, hey, Amazon dropped its affiliates so there are now no transactions to tax. How does this help anyone, exactly?

All of our customers will not be going to brick and mortar stores to buy their items... they will simply be going to other Amazon retailers to buy their items. Thus, less revenue coming into the state of Illinois. Shame on our legislators.

Amazon isn't worried about lost sales volume. They don't want to be penalized by a tax that's pretty much illegal.

Their affiliate system does not give them nexus with the state.

You're posting a link and referring people to Amazon, you're not employed by the company.

Amazon will 100% drop their affiliate program in Illinois and all the small businesses that depend on the revenue will close or move across state lines.

This tax has actually hurt other states who passed a similar law. It ended up being revenue neutral or they actually lost tax revenue. Illinois will have severely impacted their internet economy without even collecting anymore sales tax. As companies like Amazon WILL abandon their affiliate system in Illinois as they have done in other states.

Just because you only make $10 a month, doesn't mean there isn't a strong internet economy in Illinois that could cost us tens of millions in tax revenue.

This bill applies a tax to "referring entities".

It would be like taxing the Tribune for generating a sale from an advertisement in the Auto section. You couldn't apply the logic of this tax fairly across commerce even if you tried.

The tax would help no one and frankly, it is just really strange that someone would think otherwise.

Unfortunately, the bill would not "level the playing field" - if Amazon.com and Overstock.com and others terminate their affiliates in Illinois (as they have threatened to do, and as they have done elsewhere) then they would still not collect this tax, and hence would still keep the current advantage.

It would also, therefore, not result in added revenue for the state.

A dumb idea, poorly executed by the legislature.

Retailers out of state do not place regulatory burdens on the local economy and there's no reason to require them to have inspection or a business license. Likewise, they should not be burdened by the paperwork associated with collecting and filing sales tax for other states. Especially for micro affiliates making $10 per month.

Brick and mortar stores get 90% of local business. That's discrimination against online businesses. Should we tax brick and mortar more to help out the online businesses?

This tax you want to collect for your local economy is already due on the buyers. It the people of Park Forest not paying their use tax it isn't Amazon's duty to collect it. This is just lawmakers doing another tax grab instead of cutting spending. This is an attempt to use Amazon as a tool against people of this state.

Lets be clear. Amazon doesn't pay this tax. The buyer does. Amazon is being forced by bills like this to maintain records, file paperwork, collect and remit taxes on their sales. If they were willing to do so, for no legal reason, I'd be amazed. Extend this forward 5 years and you might see Amazon being obligated to file and track for 50 states. We have laws against interstate tarriffs for a reason. What's next? checkpoints at every Illinois border crossing? No, some states have actually sent bills to Amazon for back taxes. How is Amazon going to collect that tax if the states can't collect it themselves?

Here's what will happen: Amazon will cancel the affiliates in Illinois. Buyers, disgusted with local brick and mortar bookstore prices will shop elsewhere - online. Companies with significant sales in Illinois will either move across the border into a neighboring state, or start a Nevada corporation and re-apply to Amazon.

I work with Amazon affiliates, so I'll quote some numbers: Affiiaites make around 6% at Amazon. A small affiliate making $10/month is selling $167/month or $2000/year. A national affiliate would drive about 5% of his business to Illinois. Your account is probably significantly higher percentage to Illinois because of your local focus. But a national seller would also drive more sales yearly, so lets use $2000 for this example.

On $2000 yearly sales to Illinois customers, you earn 6% or $120. Illinois income tax is $4.80. Illinois can then collect sales tax if you spend that locally of up to $8.40. So Illinois gets $13.20. They also get a variable portion of income tax collected on the local businesses where you spent the money that amounts to pennies. The source of this money is buyers in Illinois (not Amazon). It's important that people understand they are volunteering to be taxed more when they support this bill.

When Amazon cancels all the affiliates, which I support, Illinois will get nothing. That's a loss of $13.20 a year on your account alone, for passing this bill.

It's also important to understand that this is not a tax on goods sold. As an affiliate, you don't handle goods or process orders. Those goods don't come into your store or warehouse. The brick and mortar portion of that business is located in another state, where it is taxed and regulated. It isn't a tax free operation.

Your relationship to Amazon is strictly an advertising relationship. This is no different than national TV advertising. Should anyone advertising in Illinois be required to collect and pay sales tax to shipments in Illinois? After all the TV stations are located here.

The law only applies to those affiliates above $10,000 in sales (not commission). So for every large affiliate affected, there are probably hundreds that aren't. That means people in Illinois are only taxed if they buy from certain online sites and not others. That's discriminatory.

And also be clear of this. This is not a scare tactic. Amazon will do what they say. They've already done so in several states. They aren't stopping sales to Illinois, they are eliminating the nexus interpretation that burdens them with paperwork.

This country should support online business fully, not attempt to tax them. Online business significantly reduces energy consumption by eliminating shipping expenses. Products shipped directly from distributors or manufacturers spend less time on the road before sale.

More politicians to add to the vote-out lists. Visit ilga.gov and search HB3659 for a list of names.

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 Amazon.com and Illinois affiliate websites [View All], Atouradmin, 11:56 PM, Mar-27-2011, (0)  

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