Open Mike: Uh-oh

I copied the title of this post from Ken Rockwell. Speaking of Ken: you might not have him to kick around for much longer.

So let me just ask you: do you think you don't have to pay sales tax on mail-order purchases you make from other states? If so, you're not alone. But it's not true. Actually, the difference is that you—the buyer—are personally responsible for remitting the sales tax on items you buy that way—the seller is not responsible for collecting it from you. The reason nobody actually pays it is because states have no feasible way to track what you owe them and no jurisdiction to punish you if you don't pony up.

And therein lies the rub. A battle is brewing. (Actually it's been brewing for a while now.) California is making a second attempt to force giant internet suppliers like Amazon to collect state sales taxes. Amazon, and other mail-order discounters, are relying on a 1992 Supreme Court decision which held that retailers do not have to collect sales taxes in States where they have no physical presence—stores, warehouses, offices, that sort of thing.

This frustrates California lawmakers, who want the "e-tailers" to collect the state's taxes anyway. So they're trying an end-around: they're saying that the presence of affiliate websites in the state amount to a "physical presence." That means people like Ken, who lives in California...and, over here in Wisconsin, me. Ken puts a link to an Amazon product on his website, a reader of his buys it, and he gets a "commission." The commissions are small, but they add up. That's how websites like his (and mine) provide us with a living, or part of one. It's a nice system for us. And for you, because only sites that attract lots of readers are able to generate appreciable income. So, by definition, it's only the popular sites—the sites lots of readers like—that become effective affiliates.

I don't have any problem with people paying taxes. The problem is how Amazon and other "e-tailers" are intending to fight the battle. If the California legislature passes a law saying affiliates amount to a physical presence in the state, then Amazon is just going to cancel its contracts with all its affiliates in California. No more affiliates, no more "physical presence" under the new law, and Californians can keep ordering from Amazon without Amazon having to collect sales taxes from them. The new law is neutralized.

Trouble is, California affiliate sites would then become "collateral damage." People who previously cracked their personal nut with affiliate income would be out of business. Lots of Californians who have painstakingly built up internet businesses would be suddenly out of work. Bye-bye KenRockwell.com. And, if Wisconsin follows suit and is similarly cut off by Amazon—or if Amazon just decides to stop its affiliate program nationally because of headaches with conforming to a patchwork of state laws—bye-bye TOP. 

I'd have to go get a real job. Wouldn't be the worst thing in the world. I'd survive; people survive worse things every day. (To quote Yitta Schwartz, from this rather astonishing article, "When there are so many problems in life, I should put myself on the scale?") The main thing that would make me sad is that I feel I'm kinda good at this job, and probably wouldn't be contributing as much to other peoples' happiness if I were spending forty hours a week selling shoes or used cars. (Not that there's anything wrong with that. I've worked worse jobs.)

Let's just say I'll be watching developments with...interest. Gulp.

Mike
(Thanks to Lynn Burdekin)

P.S. Oh, all right—you can consider this post my once-monthly plea and plug to buy your B&H Photo and Amazon purchases through our links. And, as ever, thanks!

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Featured Comment by Hudson: "Part of the problem is that there are 11,000+- sales taxes in this country. Okay Mike I just bought a thingy from you, I live in State, County, City, School District, Mass Transit District, Billionaire Sports Owner Stadium District, Development District how much sales tax do you collect? In my state we have to only keep track of about 4 sales tax rates, and they do not match up with zip codes (idiots). If there is going to be a tax on internet sales, it needs to be one tax for the whole country, if I had to keep track of 11,000 tax rates, I would just give up and go out of business."

Featured Comment by Patrick Henry: "This push is actually coming from Wal-Mart. Wal-Mart is lobbying heavily for this. You can imagine why. The Wal-Mart lobbying is subtly mentioned here. Yet another reason not to shop at Wal-Mart."

Comments

[Richard P]

Being in Australia, we thankfully survived the worst of the financial crises relatively unscathed, but even from here have seen the Californian economy hit an iceberg and by now, be at a point where it's splitting in two and sorta bobbing up and down before finally going under. Representatives understandably want to raise revenue anyway possible, but this sort of useless legislation where the intended purpose is negated, is nothing but a waste of good paper, and looking at the Californian balance sheets, they need every penny they can get.

[Paul C]

Not any sort of a tax expert or lawyer, but it occurs to me that web site operators might be able to create an LLC based in Vermont, since they allowe the incorporation of "virtual" companies. You just need an agent in the state to file the paperwork. At that point, you're no longer a California affiliate, right?

Honestly, this stuff needs to get dealt with nationally. Doing it state-by-state is nuts.

[Mike Johnston]

"Doing it state-by-state is nuts."

Paul,
True, and ditto for a lot of other things too.

Mike

[Janne]

My sincere sympathies. It sucks to get caught in some big battle where you're not even noticed.

I have to say, the problem mostly lies in having such a tax loophole to begin with. It doesn't really make sense that a business has to pay sales tax on its sales when it has a store-front, but can avoid that payment when it does not. If I were a brick-and-mortar merchant I'd be pretty steamed about such an inequality.

Any argument that they can't handle collection and payment for their customers is also moot, as the big merchants already do so for their European customers. If Amazon can handle the rates and regulations in various European countries, then it can certainly do so for a bunch of states within one country.

[James Bullard]

Copying titles is okay. Under copyright law titles aren't included in the copyright so Ken can't sue you. Not that he would.

[Chad Thompson]

Here in San Diego most of the camera retailers tell the client that they're responsible for the taxes anyway as part of their standard "shop local" sales pitch. And since they price match B&H I just buy here. Photo books, on the other hand, I either use your links or ride my bike to the MOPA in Balboa Park.

Though I wonder how third party ad services (commission Junction comes to mind) will deal with ABX8 8 if it passes. As an aside, I've already sent my email to Marty Block.

Next, on to Net Neutrality...

[Rana]

If Amazon can handle the rates and regulations in various European countries, then it can certainly do so for a bunch of states within one country.

Yup. If I, as a lowly and occasional seller of stuff on the internet can figure out how to collect taxes when selling to people in my state (heck, eBay will auto-calculate it for you, if you put in the zip codes), a company as large and technically sophisticated as Amazon can pull it off.

They just don't want to.

[scott]

I always pay the tax when I buy from an out-of-state seller. Every state with a sales tax has a form on its Web site that you can fill out and mail in with a check. Failing to remit the tax is illegal.

Further, when you file your state tax return each year you are thereby swearing, under penalty of perjury, that you paid all taxes on all out-of-state purchases. This adds another violation for those who don't pay.

The sensible thing to do is just mail in the check, unless you live in one of the four (?) states with no sales tax, such as Oregon.

[Martin Doonan]

As I've been shipping stuff internationally for years, which is much the same as interstate in the US for this purpose, I can think of so many better ways to deal with this. You could have Amazom merely inform the states' tax authorities notice of purchase and they have to go chase the purchaser. Or you could have the shippers clear tax in transit and charge it to the customer on delivery (the way international is done).
Of course the California approach looks good to a federal legislator, too - there's any easy dodge and total commerce is hardly affected. My methods, which would actually raise revenue, might also see sales drop. Not so good in a consumer driven economy.

[Robert]

The problem lies with politicians who run their state economies into the ground. The same thing is now happening nationally. So, naturally, they are doing a money grab to make up for lost revenue.

But it won't raise an additional dime...

Ken can always move out of California or incorporate in another state, if this is passed and Amazon cancels his contract.

Which is to say, he'd just be joining the other people who are doing their own personal exodus from the state.

[Jeffrey Goggin]

Janne:

It isn't just the state sales taxes that Amazon would have to keep track of, but also county, city, and town sales taxes as well. I understand that this expansion increases the number of taxes they would have to keep track of from 50 to several thousand, which is quite a difference.

[Brian]

This happened to us last year in NC.. my affiliate login shuffled off into the ether as a result. One would think this approach on Amazon's part would eventually leave them with no affiliates..

[Larry]

A sales tax is such a regressive tax I hate to see it collected at all. Thankfully I live in one of the few states without one. I see a business in running an affiliate clearing house. I collect 2% and CA and NY have no jurisdiction to collect from the retailers.

[bobdales]

Wouldn't it be more productive for Amazon to create an affiliate sales corp domiciled in, say, Nevada which doesn't have sales tax? You may also need a Nevada ISP which could also be an Amazon entity. If the affiliate program was not economically beneficial to Amazon it wouldn't exist... they have lawyers for a reason.
Just speculating here but my first inclination is to find a way to game the system.
In the meantime go to Amazon via TOP.
bd

[John]

As someone who has been paying use tax since I first learned what it was...

The criminals here are those who don't pay their taxes. Don't like your state's tax laws? Then do something about it within the law, rather than skating by on the "everybody else dodges taxes" excuse.

Congrats, in your attempt to save a couple hundred bucks a year, in your efforts to not pay for your local pothole cleanup, you're now putting small businesses at risk. Hope selling your soul was worth it.

[David Long]

NJ's state income tax forms include a spot where you're supposed to write the value of all the items you've bought from outside of the state and on which you haven't paid taxes. I've only met one other person who fills in a nonzero value, so right now it's just a tax on honesty.

[Al Patterson]

Well, I live in Delaware where we don't have a sales tax, so I KNOW that I don't have to pay sales taxes or use taxes on anything I buy mail order.

And yeah, when I lived in New Jersey, I drove to Delaware to pay cash for items so that there was no trace of the purchases. Was it wrong? Sure, but everybody did it.

What I find wrong here is that the states could require the large retailers to supply them with the names and addresses of their residents who are failing to pay the taxes, alonmg with the dollar amounts of the offending purchases. The states could then bill the miscreants for the amount due.

Why do they insist that Ken Rockwell and Amazon do their job for them?

[swr]

This is tax farming.

State revenues are drying up and they're trying to squeeze out money anywhere they can find it.

I'm not a big fan of Ken Rockwell. In fact, I'd probably use his site as an example of the harm affiliate programs can do.

It's obvious that none of his reviews are "serious" reviews, that they're reviews posing as elaborate banner ads designed to get you to click on his affiliate links.

That's why he changes his opinions about photo gear every few weeks and why he goes off on bizarre crusades.

The D40 is not the greatest camera that ever existed. It's just the kind of cheap product that a lot of people will buy more readily on impulse than a D300. In ockwell's opinion the D90 made the D300 obsolete. All that means is that the D90 is a cheaper impulse buy and that it came out after the D300 and was, thus, a new product to sell.

Nevertheless, for every bad review site like Rockwell's there are a number of "good" sites that exist because affiliate programs allow their owners the time and liesure to maintain them.

By going into every little crevice of society in order to farm out tax revenue California is killing the goose (small business) that laid the golden egg (the California tech boom).

It's short sighted and predatory governance.

[Al Patterson]

A further update might be that those of us in states without sales taxes can host your sites here, rather than in your states for a modest fee. ;)

[Victor Bloomfield]

As far as your making a living from TOP goes, I'd certainly be willing to contribute $10 a month or so, and I suspect you've got lots of other viewers who would do the same. TOP is definitely worth it to me.

[Douglas Stocks]

It's about time we step up and start paying our fair share of retail sales taxes. For reasons that should be obvious; schools, libraries, police, fire, roads, etc.. The jump-starting of online retail through tax breaks must end. Our Nation's local infrastructure is crumbling. All other civilized countries benefit and we put this off at our peril.

Cheers,

Doug

[sporobolus]

Colorado is considering similar measures, and i say power to them because insofar as the sales tax revenue model is good one (and i think tax on onlines sales will tend to be less regressive than sales taxes in general), then it ought to be applied evenly

frankly, your revenue model is circumstantial to multiple non-level dimensions of the playing feild, and tenuous; capitalists who exploit quirky litte eddies in the economy must be prepared for the disappearance of same; the system doesn't inherently respect the value you create

so while i think you can probably come up with other quirky, opportunistic revenue streams (it's not like there is only one way to profit from giving things away for free), it's not like yours is the first quality online resource that has had to consider coming up with a more concrete business model

[MJFerron]

They can't kill Ken off. Where else am I going to get breaking news like "the digital era is over and all the camera makers are scrambling to build film cameras". No one else is reporting this stuff. :)

Ok I need to rant. What a surprise, greedy governments want more tax dollars to mismanage. No private corporation with the possible exception of the criminal investment firms bailed out with public $$ would ever operate with the financial insanity federal and state governments do. They don't care about balanced budgets they just hit the public up for more.

I spent a good piece of my life in the construction field. When a private company invests in a new structure everything possible is done to stay with the original plan and budget right down to the paint color. When working on a state hospital project one group of suits would order a tear out of completed work at the public's expense to implement "their" vision of how things should look. of course there's a good chance a bigger group of suits will order it back the way it was. Your money is their money to flush. I'm getting the urge to grow my hair and protest. LOL

Ok Mike I needed to vent. Sorry.

[Robert Noble]

I agree with Janne (above). Amazon has had a free ride for so many years that they're spoiled, but they can - and will - learn to play by the rules that local and in-state businesses do.

As the California legislator quoted in that linked article says, "Amazon has built an entire business model based on tax avoidance." One of the most devastating crushers of small local businesses in the U.S. since the birth of the Internet was that buyers had to pay sales tax when they bought from the mom-and-pop local store but could shop tax-free online. (The same loophole existed in pre-Internet "mail-order" days, but back then not enough people bought from out of state to jeopardize local businesses.)

I'm confident that cash-strapped state governments will increasingly put the screws on Amazon, that in response to that pressure Amazon will miraculously figure a fair way to charge taxes for all 50 states (see Janne's post above), and that TOP will continue to thrive.

Mike, we all want you to do well.

[Alec Myers]

I thought this was done in New York, a while back. Is California more significant?

http://www.theregister.co.uk/2009/01/12/amazon_tax_ruling/

[John Robison]

In Washington State there is no state income tax so the main source of revenue is sales tax. The states basic rate is 7.5% and counties add various additional amounts ie. our local rate is 8.6% however they don't charge it on non restaurant food items. I don't begrudge the state their taxes that provide for services, infrastructure, parks, police etc. provided for the benefit of all state residents. The big battle here is how efficiently and wisely the monies are spent and that is an open ended argument that seems to have no resolution. One thing is sure, if I walked into the Thurston county treasurer's office and offered to pay the sales tax on an out of state purchase I doubt they would have a system in place to accept the payment. The entire office would grind to a halt as they tried to figure out how to get rid of this weirdo who was mucking up the bureaucracy.

[Meg]

I'm in NY and we already have this law in place (passed last year I believe). It was/is a complete pain. The possibly good news for you guys though is that despite it's threats Amazon jumped through the hoops and still allows NY affiliates. They did cut off a couple other states that passed similar laws, I'm thinking maybe we slipped off due to volume. If that's the case maybe you'll luck out as well.

[Tom]

Ken Rockwell's solution might be to move his base of operations to Mars. Mike you might consider moving to Minnesta and then you can cheer for Brett Favre with no guilt.
On a more serious note, Paul is right.
Until a Federal policy is established there will be continued inequity, but then internet shopping is a fairly new deveolpmment isn't it? I live in NY, so everybody (or so it seems) already collects tax from me

[Danny]

Here in New York we have had to pay sales tax for Amazon purchases for over a year now.

[ctein]

Dear Richard,

I think I can describe the situation here in a way that will not push anyone's partisan buttons.

The problem that needs to be solved is that the California budget is currently running a shortfall of around $1000 per taxpayer per year, and the law prohibits running a permanent deficit (creative bookkeeping will only get you so far). There are only two ways to solve that problem: raise taxes and/or cut programs. Here is where it becomes politically impossible.

If you try to raise general taxes in California by that amount (and the laws here make it very difficult to raise general taxes) you are guaranteed a voter revolt in the next election. It's not guaranteed political suicide, but it's Russian roulette with over half the chambers loaded.

So you look at door number two. Now it gets really bizarre. Take the 10 largest programs in the state budget (which account for more than 95% of the expenditures) and poll the voters on which ones they would keep intact and which ones they would cut. The least popular of the programs has 65% of the voters saying they want it kept intact. The most popular has 80%. Poll those same voters if they're willing to tolerate a $1000 (average) tax increase and 70% say no.

When the pollsters explain to the voters that these positions are, collectively, irreconcilable, the percentages change very little. Collectively, the voters are unwilling to see their taxes raised *or* any state programs cut. Either way, it's suicide for politicians to really fix the problem.

Understand that any given individual voter or politician can solve the problem... if they're made dictator for life. It's not that hard to figure out how to balance the budget with an appropriate combination of taxes and cuts. I could do it. You could do it. The most fervent libertarian... or communist... could do it. The only catch is that if that person is serving at the pleasure of the voters, anything they do will piss off 65% - 80% of them.

In a democracy, this is not an encouragement to direct action. Hence the fascination with "clever" end runs.

~ pax \ Ctein
[ Please excuse any word-salad. MacSpeech in training! ]
======================================
-- Ctein's Online Gallery http://ctein.com 
-- Digital Restorations http://photo-repair.com 
=====================================

[Jim]

Sure...let's all pay sales tax on out-of-state purchases so that state governments can continue to aide corporations with huge tax breaks for relocating their manufacturing and jobs to other countries.

Yeah, sign me up for that.

[Bryce Lee in Burlington, Ontario Canada]

Death and Taxes, neither is avoidable, avoiding
either can delayed. Here in Ontario we have a federal Goods and Services Tax of 5 percent plus a provincial eight percent sales tax. All products get whacked the federal goods and services tax, only some products get nicked the
provinciak tax. After July 1/10 the two taxes will be combined as one. So those that were exempt one tax or the other before the combined tax will now have to pay more tax under the combined/harmonized new system.
In short everthing sold, serviced or causes money to be passed will be taxed 13 percent.
Hotel accomodation is taxed at 18 percent.

If I purchase Amazon product from the USA
then I am taxed on the amount of postage or shipping costs for the package, plus the value of the goods in the package in Canadian dollars which may also have an additional tax (once called duty)which is also considered taxable at 13 percent plus either a $5.00 or $10.00 fee depending upon the value of the goods plus another round of combined 13 percent tax as the handling fee is considered a service and is therefore taxable.

Tax upon tax upon tax upon tax upon tax.
Aren't tax collectors wonderful?

[Martin Doonan]

And to (partially) defend Amazon against the "tax dodges killed mom & pop stores" I don't think that's it at all. Sheer scale & a "store" strategy with low unit cost means they can keep prices way down. As do other online warehouse sellers.
Living in Europe I found big outfits like this were cheaper even with shipping & tax & import duties than local stores.
Small stors can't compete merely because they're small.

Of course the fact that these outfits are IT-heavy in operation ought to mean they've got the nous to figure out a multi-tax system, too.

[Robert]

Jim, corps are going to other countries for the same reason that Ken Rockwell will move to Texas or someplace else...

TAXES.

Corporate tax rates in the US are absurdly high. Corps are in business for a profit. If they can make more money moving offshore, that's what they are going to do.

Don't blame the corps, blame Congress.

[Bernd]

I'm really on the fence about this whole sales tax business. I live in California, and sales tax is outrageous, yet the state needs money. I try to buy all my important products from local dealers, preferably small, specialized stores instead of going out of state or with one of the big internet retailers. I appreciate the service I get from my local photo store and I love going there and trying out the products before I buy them. I do not want these local stores to go out of business because of some warehouse in the middle of nowhere that gets around collecting sales tax. In my opinion, sales tax should be standardized around the country, every retailer should collect it, then nobody would have to buy out of state, and every state could decide how they want to reward other tax benefits for their residents.

[Malcolm]

Prediction: Feds propose a nominal internet sales universal tax be collected by the feds (say 0.5 percent) to be distributed to the states based on their proportion of sales (easy to calculate). Most sellers like Amazon, simply include it in the price and don't show the "tax" on your bill. Sounds fair.
The republicans and and teabaggers go nuts and scream it is unfair taxation and socialism. So, nothing happens in the end and infrastructure continues to decay. We all go back to wringing out hands.

[Jason]

Same argument is going on in Colorado - while established folks like yourself would be impacted, others like myself (the equivalent of a startup) are even more impacted...because while you've enjoyed a certain amount of prosperity from the setup, those of us who have invested our blood, sweat, and tears into building up something even close to an online presence will never see any reward from our hard work. This tax, like most taxes, is a dis-incentive to work, and (again, like most taxes) are really regressive rather than the alleged progressive. Now, people will no longer monetize their sites, and the creative outlet we now know as the internet will decrease in its expressiveness.

Gone...

[Barbu]

I'm amazed at how many people (more than half here) try to come up with reasons that it's bad to NOT persist in a... sin, if I may say so. You know that you can't cheat death and taxes forever; you can do only so much to prolong the inevitable, but the IRS -with the tax commandments- will get you eventually.

And about mr. Rockwell: even when he's right (and he amazingly is right a lot of times) I can't help but shrug and dismiss his opinion; good read, I'll give him that, but only for the morning coffee. And if you watch SouthPark, you'll know what I'll say:
*OMG, they killed Kenny!

[Manolito]

You and Ken want a living just for writing one or two posts a day about something you already enjoy? Get a real job and keep the blog for what it is or should be: just a hobby, an entertainment.

[Nick]

I quess you best get cracking in the darkroom with those prints you mentioned a few posts ago Mike...
Best, Nick

[ObiJohn]

Whether or not you believe that people should pay their resident state sales tax on out-of-state purchases, the fact remains that the state of California has no jurisdiction over Amazon, a Washington state corporation. Washington state allows Amazon to forego sales tax on out-of-state sales as an incentive to do more business, thus hire more people, etc., so what hurts CA helps WA.

The real problem in CA is not that CA residents aren't paying enough sales tax. It's that CA's state budget is broken, and even if they could collect every dime owed by CA residents for out-of-state purchases it wouldn't change the fact that CA is bankrupt... and for one simple reason: the state spends more money than it collects now and would collect if every resident paid all of the sales tax that they owe.

So, when is CA and other state governments, and the federal government, going to admit that economic principles apply to them just as they apply to individuals, and that you can't continue to spend more than you make without consequences? My prediction is sometime after the system collapses. That will come sooner rather than later in CA, and at the rate we're spending money at the federal level it will come as soon as the Chinese decide to no longer buy T-bills. THAT looks to be a lot sooner than most people think.

[JLSF]

That could be "easily" fixed with a NATIONAL tax as the european VAT.

[scott kirkpatrick]

My, my, poor Americans facing the possibility of seeing less than 10% sales tax applied to their monthly Amazon fix. Here in Old Yorp and surrounding countries we pay value-added-taxes which reach 25% in highly saving countries like Norway. There is some variation from country to country, so on cross border sales within the EU, the local VAT rate is applied. Shipping from the EU to, say, Israel, no VAT is collected at the source, but our ever-vigilant customs authorities impose it (along with hefty delivery fees paid to the carrier or to the post office), based on the stated customs value on the package.

What would make sense to me in the US is a fixed, modest (say, 5%) sales tax on all out of state shipments. Amazon collects it, turns it over to the IRS, who pays it out to states in proportion to the amounts shipped to each state. That gives the states some desperately needed revenus, and involves the fewest possible people.

just my 2c.

scott

[Jay]

I have not decided where I stand on the tax issue, but saying that it is difficult for Amazon to collect is nonsense. Costco does it. One big advantage of Costco is their easy return policy and the fact that can can return at my local store (no shipping hassles or cost). This is not an ad for Costco since their camera prices are often not very good.

[Mike Johnston]

I'd say the discussion here is wandering pretty far afield. I'm not really talking about taxes or even sales taxes, and I'm not registering an opinion one way or the other as to whether sales taxes ought to be collected for online sales (although anything that's good for Wal-Mart is probably bad for America). All I'm talking about is the fact that website operators could be caught in the crossfire and mowed down indiscriminately as the battle between the bigs plays out. I doubt the imposition of a sales tax would have much influence on my site or other sites like mine. But the revocation of my affiliate status sure would have a huge impact. It's possible I'd still soldier along, but maybe I couldn't. Sporobolus is essentially correct (although he takes a distinctly Masters-of-the-Universe viewpoint, or is that just me?), but that doesn't mean I'd be happy to be a pawn and be knocked off the board.

Mike

[Ray]

Amazon has played the tax system as it was laid out for a competitive advantage. It allows Amazon to be cheaper, even if their prices are the same. They didn't prevent anyone from reporting and paying the sales taxes on their purchases. Good for them.

One of the most devastating crushers of small local businesses in the U.S. since the birth of the Internet was that buyers had to pay sales tax when they bought from the mom-and-pop local store but could shop tax-free online. They can buy tax free from mom and pop if they get online. The Internet is possibly the most egalitarian technology ever invented, that lets virtually any business have an instant global presence. But by all means, let's hamper the ones that are already online, and raise the price of entry for those that want to be so that it's "fair". Now, how do you propose that we balance the advantage the local stores have of physical proximity? This is obviously unfair to all those hard working mom-and-pop websites. I demand that all websites be given physical stores, so that they can compete with the big evil local stores.

What's also extremely hypocritical that that a state like NY, that demands that taxes be collected by out of state businesses for sales to it's consumers, doesn't require the inverse, so I regularly buy tax free from B&H.

[Robert Roaldi]

A similar situation exists in Canada where sales taxes are different in different provinces. Alberta has none so I think their mail order business benefits, although with higher shipping costs and more aggro with returns, it's probably a wash for the consumer. In any case, a difference of a few percentage points doesn't amount to much. I ordered one camera from a place in Alberta once (I live in Ottawa), saved maybe $40, big deal. So now I just drive to my local store. I mean, I probably blow 2-3 times that much on take-out coffee every month.

It's odd that we have these inter-provincial and inter-state discrepancies. I guess people really like the illusion that they can control their own micro-destinies. As if their particular tribe (Delaware, Montana, Alberta, Ontario, etc.) is so much better run than the one next door.

The philosophical debates about different methods of taxation have covered the gamut over the years. Consumption taxes used to be considered regressive but now user-pay seems to be back in vogue, from what I read in the press. What's universal is that everyone hates paying taxes, but we all want good roads, fire and police services that show up when you call, our garbage picked up and sent, well, somewhere out of sight.

[Marc Rochkind]

I love TOP, but there's no logical reason why it should be supported by affiliate fees based on selling stuff. Especially as some of the attraction for buying online is avoidance of taxes owed. (I notice from time-to-time that one or another of us becomes newly sad over the demise of a local retailer. Wonder why.)

We would be much better off if people would simply pay for what they want. This applies to "free" TV, good politicians (if more people donated, corporations and unions would matter less), and bloggers.

I pay monthly for TOP. If everyone else who reads it regularly did, too, Mike could keep going, have even more money to spend on medium-format film cameras or having his living room cleaned up (or whatever), and this affiliate stuff could quietly end.

--Marc

[Mike Johnston]

"there's no logical reason why it should be supported by affiliate fees based on selling stuff"

Marc,
Actually there's one logical reason--it's what works. It's all well and good to suggest people pay, but it just plain doesn't work.

Mike

[Peter Mellis]

As others have stated, New Yorkers have paid sales taxes to Amazon for at least a year. New York (not sure whether it was city or state) periodically sends people over to the big shopping malls in NJ to write down license plate numbers of NY cars. I once read that NY and CA have an arrangement with US Customs whereby they get info on duties paid at some (all?) entry points so that they can collect sales tax from their residents. NY and CA appear to be the two most aggressive states relative to sales tax; I wonder if it might be tied to the fact that both are poorly managed and desperate for money?

New York has a state government that runs like a two bit banana republic, but constantly searches for ways to tax it's residents. Some years back, they tried to grab bank/brokerage accounts that hadn't had any activity for some defined period so that they could get the use of the money.

[hugh crawford]

"The problem lies with politicians who run their state economies into the ground."

In California's case it's the voters, not the politicians.
California Proposition 13 in 1978 pretty much committed California to the fiscal death spiral it finds itself in. My home town is in the news this weekend for charging $300 to call 911.

[MM]

"You and Ken want a living just for writing one or two posts a day about something you already enjoy? Get a real job and keep the blog for what it is or should be: just a hobby, an entertainment."

I assume the person who wrote this was joking -- or merely naive about how much work is involved -- but I'll speak to the implication anyway.

It's like the story about the doctor who charged a patient $101 (or whatever) for pressing in just the right spot to alleviate a painful cramp. When the patient exclaimed, "Wow, that worked like nothing else, but you charge a hundred bucks just for a quick press of your fingers?" the doctor explained, "No, it was a dollar for the press, and $100 for knowing exactly where to press."

There are plenty of similar stories involving electricians or plumbers, the point always being that just because something looks easy doesn't mean "anybody can do it." If this site and Ken's were neither entertaining nor informed (the most successful sites tend to be one or both), they would not have risen above so many others.

I come here because TOP offers things that no other website does. But don't take my word for it: if it's so easy to run a website that attracts healthy traffic and erudite comments (including frequent drop-ins from heavyweights in the photography world) any grouser about the TOP model is welcome to start their own such site. Otherwise, sniping at the success of others' sites, whether Mike's or anyone else's, comes across as sour grapes.

[MarcW]

Incidentally, you're wrong about the "no jurisdiction to punish you" thing. At least here in Illinois, the state can audit anyone they can prove was making purchases out of state, and if they didn't pay the use tax, not only do they have to pony up, there are penalties and ongoing reporting requirements. If you're a corporate person, they don't even need evidence of failure to pay, they can audit you at random as a condition of your corporate citizenship. If they find you weren't paying, you'll have to file quarterly returns forever (even if you stop buying out of state.)

As for me, I've decided to start buying all my photography stuff at Calumet here in IL, both to support local stores and to avoid potential tax issues. (Other than de minimis purchases, I only buy online from sites like Apple and Best Buy that collect my local taxes.)

[jack]

Amazon is just throwing their weight around. There is no way they would stop selling to anyone in California. Many online merchants have already solved this problem and can calculate and collect things like sales tax and shipping based on location. It is pretty trivial compared to the rest of what Amazon does on the computing end.

As for small time vendors, I'd be pretty certain that shopping cart vendors will build this functionality into their services if they haven't already.

This is molehill being viewed through K.R's hyperbolic zoom. Don't take the bait!

[John Camp]

The lack of tax on internet sales is a serious problem. Notice how the pro photo stores in major metro areas have been disappearing? That's because it you want to buy an $8,000 Nikon, you'd be a fool to buy it locally. If I bought it in Minnesota, I'd pay $480 in sales tax. And that's why I can't see a Pentax camera in Minneapolis -- nobody stocks them. The stores are no longer big enough to carry a full range of cameras. If you want one, you buy it from B&H. Same with all higher-end items.

The answer to me is quite clear: The federal government passes a sales tax on all internet sales, exempts all internet sales from local sales tax (so they don't wind up paying two sales taxes) and then returns all the money to the states on a per-population basis. Of course, the feds wouldn't do that -- they'd want to take a schmear, or they'd attach some onerous proviso to it, but that would be the rational way to handle it. In addition to raising some tax money, it would also help out struggling local businesses who now have to compete with giant warehouse operations like Amazon and B&H. We might even get some more bookstores back...

JC

[Tom K.]

Many will want to kill me but....I always thought that people should be taxed when purchasing things on-line. If you walked in to your local camera shop and bought a new Canon 5D Mark II you would pay sales tax on it....correct? Then the same should apply to making the purchase on-line whether it is purchased out of state or not. That is my opinion.

[David Dyer-Bennet]

It's not just states, it's counties and cities. And it's not just figuring out how to do it once on one rare sale, often it's a matter of taking out a sales-tax license in each of those locations, and being required to send in quarterly or yearly reports.

In other words, while it's not THAT big a deal for Amazon to collect taxes in each jurisdiction in the USA, it'd be totally impossible for any small business. And lots of the most interesting things on the web are sold out of essentially hobby businesses, which would become unfeasible if they had to file in every tax jurisdiction in the country.

Which is why most of the laws that are tried apply to companies bigger than x, which I appreciate.

I hate and despise salestax, going back to when I first had to deal with it (in highschool, when Minnesota passed their first one, I got involved in starting a retail business in partnership with my shop teacher). They're regressive, and they make a lot of extra people spend time and money being unpaid accountants and bureaucrats for the government. I think the number of different *kinds* of taxes is the most offensive thing about our government. I'm willing to pay quite a lot of taxes because I think the government has a lot of important jobs to do (like fixing these damned pot-holes, NOW!) and the money has to come from somewhere, but I really hate being nickeled and dimed every time I turn around, especially if I have to do the paperwork on it to boot.

And, if taxation is theft, then resisting it is self-defense :-).

[MBS]

badlakes,

Nevada has no income tax. It most definitely has a sales tax. Oregon has no sales tax, though.

[Javier]

It's a shock to read your fellow citizens critizising US corporate tax or income tax, which probably are among the lowest in the civilized world. Or government spending: a couple American Economy nobel prizes have said before me that it's the most efficient they know. Is not that bad. In fact, the US became a superpower once the government got hold of most money and did some economic planning, almost soviet style. Remember WWII?

Maybe the California Legislator should go back to a classic idea: tax the rich. It's amazing what you can achieve. All of you know Warren Buffet: he is scandalised by how little rich pople is taxed in the US, and he should know. He narrated that once he did the rounds at his office asking everyone of his employees what percentage of his income they paid. Seems he personally paid less than his concierge.

In Europe we have a Value Added Tax that substituted the sales tax. Merchants collect on what they sell and deduct what they pay to their suppliers, not a bad system. And we pay anywhere from 16% to 30%. But if you buy or sell to a different state, you don't have to pay it, but must declare it for statistical purposes.

[MBS]

It's a tough situation. As much as I love to hate Wal-Mart, they have a point: brick-and-mortar businesses have always been unfairly treated as opposed to mail-order/internet businesses. But the solution isn't obvious.

In spite of the difficulties in government enforcing buyer-responsible sales-tax payments, I think the real problem has always been “who benefits.” Sales tax is assessed at the point of sale, and it’s that “point” that benefits. If I drive across the state line to buy something, the sales tax goes to the state I’m in at the time of purchase, not the state I live in. If I cross the state line via the internet (or the mail), then who gets the sales tax? It’s a big issue. If you make the buyer responsible for paying the tax, then you are taking revenue from the state in which the purchase was made. And with mail order/internet businesses, how do you determine where the purchase was made? Does Amazon “exist” in the state where they initially incorporated? This becomes a big issue because businesses like Amazon can produce far more sales than any brick-and-mortar storefront, and consequently far greater revenue for the state they’re in. I think this is why state governments are focusing on the affiliates. The can be viewed as being in their state in the same way as storefronts of a chain (like Wal-Mart). Easy out.

Dealing with it at the national level seems problematic at best, as it implies a Federal Sales Tax, and likely a uniform Sales Tax Code. Sales tax has always been the purview of state and local government, who should have the right to determine their own needs—not have such “needs” dictated to them by the larger entity.

Anyway you look at it, though, the response of state governments, like California’s, is likely to have an intolerable consequence: the death of many of the affiliates—the new mom-&-pop stores. When I read about the California legislation, it took me all of 0.27 seconds to realize the likely response from Amazon would be to simply pull their affiliate support (this is capitalism after all, where a founding ethic of the system is that ultimately everyone, and every corporate entity, will act in their own self-interest). It’s difficult to believe that the legislators in California didn’t see that as well. So, maybe this is just a move meant to set up the end game. But the cost of this move could still be the affiliates. These sites, like TOP and Rockwell and Luminous Landscape and DOP and many others I or you can name, are where the real action of the internet is happening. This is where you find real content, real interest, real innovation. Often these places are a bizarre mix (or bazaar mix) of new journalism, niche technicist/devotee nerdism, and marketplace/storefront. This is the new frontier, and they need to be protected—more than Amazon or Wal-Mart. The legislators need to look for a solution that is as innovative as the affiliates they are now endangering.

[Peter]

"True, and ditto for a lot of other things too."

Especially for things involving the Internet, where even national boundaries get made hazier every day.

[John F. Opie]

Hi -

What no one has said is that this has nothing to do with Amazon or any other online retailer: all mail order is handled this way.

Think of it this way:

1) sales taxes are paid at the point of sale
2) Point of sale for mail order is always the location of the company selling
3) Mail-order companies have traditionally been incorporated in states that have no sales taxes

The question becomes: where does the sale take place?

Fundamentally, it's transacted on the company's server, and that is where the sale takes place. The location of the seller is completely and totally irrelevant, as long as the buyer and seller are not located in the same state. If so, then the local sales tax applies.

This came up when mail-order folks started taking phone orders: it was determined that the place of sale was wherever the phone call was taken.

California (and the others) want to tax the sale as if it occurs in the resident state of the buyer. It doesn't. If they can tax this, then they are taxing a transaction that took place in a different state, where they have no jurisdiction.

End of story.

And for those trumpeting a VAT: bad idea. Very bad. I live in Germany and pay 20% VAT. VAT is a heavily regressive tax, since you can't escape it and the poor pay a massively disproportionate share of their income to taxes. Regressive taxes are the worst kind of taxation, taking from those who can least afford it.

Fundamentally, the affiliate problem could be simply solved: the affiliates have to pay taxes on their income from the seller. That is really all that is owed. Oh, they already do that, don't they?

This is an act of desperation from those states who don't have their spending under control. Allow this, and you will see increasing taxation. Not a good idea at all...

Closing down the affiliates sucks big time if you are an affiliate. For the online/mail-order sellers, it's peanuts.

[Chris]

They can't kill Ken off. Where else am I going to get breaking news like "the digital era is over and all the camera makers are scrambling to build film cameras". No one else is reporting this stuff. :)

Well, at least there was one good laugh amongst these fairly dark comments!

[David Dyer-Bennet]

I don't know about mail-order companies being 'traditionally' incorporated in states without sales taxes. The one that leaps to mind is B&H, in New York, which has had sales tax for a long time. I don't know if Maine (Eddie Bauer) got their sales tax recently, that doesn't seem to be terribly easy to find out. But I may be not even thinking of what big old mail-order companies are, which are the ones that would show that trend. (Minnesota got a sales tax in the last 1960s).

[Robin Dreyer]

Amazon, I recently discovered, has already done this in North Carolina. No Amazon affiliates in NC--they cite North Carolina's "unconstitutional" tax policies in their explanation.

[Richard]

Didn't Congress specifically prohibit the collection of sales taxes on internet sales for a few more years? If so, my internet purchase from a website that links through another website which happens to be in California would not be taxable.

Where is the server that hosts Ken's website anyway? Just get one out-of-state.

The other solution, at least for Ken, is Reno, as in Reno, Nevada.

[Bruce Appelbaum]

Living in NY, Amazon already collects sales tax from me by order of our state government. And, to add insult to injury, I have to pay state sales tax along with my state income tax on internet purchases made in the previous year. Bastards.

[Rodney]

Well I don't believe it likely that B&H and other stores do collect tax for any of their international customers.

Here in New Zealand the shipping company UPS etc along with the customs department are responsible for collecting the tax from the customer. B&H and amazon etc just provide invoices and thats the end of their involvement.

[Tim]

In what way can a website be based in California, or anywhere?

If it's where the hosting server is located, that can be fixed.
If it's where the owner lives, that is illogical.

It all seems like a complete failure to understand the Web as a state/nation-free world in its own right, to me.

[Mike]

Is no one interested in Yitta Schwartz?

What a remarkable story hidden in an ordinary life.

The idea of a woman with between 4 and 6 surviving children insisting on an apprpriate relgious burial for another woman whilst interned in Belsen is humbling to say the least.

Her desire to be carried in her chidlren's dn grandchildren's hearts, rather than in pictures, humble and human.

"When there are so many problems in life, I should put myself on the scale?"

Mike

[Dennis Allshouse]

Barnes and Noble online collects sales tax from me (I live in a sales tax state). So it's obviously doable. This is actually cheaper for me than buying retail in the state next door(10 miles door to door). Use them for books(?)

Ctein is right: everyone wants the services, nobody wants to pay.

[Josh Hawkins]

Amazon provides check-out and e-commerce for Target, which has to charge taxes on all sales. This line that they can't do it is hard to figure when they already do it for their e-commerce Enterprise Solutions customers.

Having said that, I'd love to see them not charging the tax for both my own savings and the fact that sales taxes are regressive. On the other hand online shoppers tend to be upper income so at least they'd lose at least one tax dodge.

[ObiJohn]

When I see the likes of Sean Penn or Warren Buffett claiming that we should all be paying more taxes, then I think they doth protest too much.

No one is prevented from donating more money to the US Treasury. That's right... you are perfectly free to send as much money in as you want and the government will gladly accept it. You even get a write-off: every dollar above your tax liability is treated as a charitable donation.

When Buffett donates all but $100 million or so to the US Treasury, I'll take him seriously. Until then, he's just a poser. Same thing for Sean Penn.

As for me, I've been rich and I've been poor. Being poor sucks. There is no nobility in poverty or hard work. There's just drudgery. Re taxes, taxes are used to influence our behavior. Why do we have a tax system that punishes people for being successful, for not saving? Get rid of the income tax and put a national sales tax that is constitutionally limited to 10% and that applies to everything except groceries/food? That way, the high school grad couple that lives together can save and invest without worrying about taxes, and the trust fund brats who spend, spend, spend will be paying out the wazoo. It would also raise around $1.5 trillion... and certainly that should be enough for the government to spend every year.