Saturday, February 20, 2010

California-Amazon Tax War!

Only in California.

Maybe you can attribute this to sunstroke by desperate California legislators whose minds aren't functioning properly. They are about to introduce legislation that will do nothing but ruin part-time businesses for many of those residing in the state.

Here's the play-by-play:

The state of California wants Amazon, a Seattle-based company, to collect sales taxes on California residents' online purchases of books and other products made through Amazon. Currently, Amazon doesn't do so. Technically, California residents are supposed to somehow pay the sales tax on their own, but no one does.

As far as Amazon collecting it, they don't because they have no stores, warehouses, office buildings or other physical presence in California and a 1992 Supreme Court decision says that because they have no physical presence in the state they are not required to collect such sales taxes.

BUT, because Amazon allows web sites owners to act as affiliates (including some in California) and drive traffic to Amazon and receive a commission on products bought through such affiliate relationships, legislators in state of California views this as a "presence" in California by which they want to demand that Amazon collect the sales tax.

The state is facing a $20 billion deficit and it is projected that this tax, get this, would generate all of $150 million annually, IF it could actually be collected (which it won't). Thus there is zero net monetary gain for California in this bizarre tax legislation. But many state officials want to carry on with the harassment of Amazon. LaTi reports:

The state Senate approved the legislation Thursday as part of a deficit-reduction package, and it is expected to pass the Assembly as well.

But Amazon says it will cancel all contracts it has with California companies and cancel it's relationship with affiliates, if the legislation becomes law. Amazon has carried out this threat in the few other small states that have attempted such a forced tax collection.

If Amazon follows through on its threat, and it has every incentive to do so, it will allow Amazon to still ignore sales taxes in California. This is much more important to Amazon than the small amount of traffic that is driven to them by California affiliates that they will lose. Thus, California won't even get the $150 million that they are expecting from the legislation.

The only thing the legislation will do is shut down the California-based part-time businesses of those that drive traffic to Amazon through their web sites.

In a state that faces a $20 billion deficit, this is what the state legislators spend their time and energy on. A non-productive bill that does nothing but harass Amazon and damages a bunch of small part-time businesses, during a time of a major economic downturn.

No wonder the Mamas & the Papas in California Dreamin' sang about wearing flowers in your hair. The state is definitely not right brain functioning.

Yet, it has a mean streak in its legislators that will damage anyone around it, if it senses not every demanded penny of tribute is paid into its coffers.

When totalitarian rule crosses the 50% line in the United States, I contend it will happen in California first.

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