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Filed under: Internet, News

Schwarzenegger: No internet sales tax in California, please stick around Amazon

Schwarzenegger on Twitter
It's not unusual to see a Republican politician promise not to raise taxes. But California Governor Arnold Schwarzenegger's recent promise not to sign any legislation that would force internet retailers to collect sales tax was designed specifically to keep companies like Overstock.com and Amazon doing business with affiliates in California.

In recent weeks, Amazon and Overstock have shut down affiliate stores in a handful of states that have passed such laws. Basically, the way things work right now is that online stores don't have to collect sales tax in a US state unless the store has a physical presence in that state. A handful of states including New York, North Carolina, Rhode Island, and Hawaii either have, or are expected to adopt policies that consider affiliates to fit the bill.

What's an affiliate? It's a person or business that has signed up with a web retailer to post links to the online store in exchange for a commission. Basically, it can be some guy who runs a web site that only his grandmother reads or a newspaper web site. Either way, it's not exactly a local store branch or distribution center. But I can certainly see how a state could decide affiliates constitute physical presence in a state. But I can also see how retailers would decide it's easier to pull out of that state altogether rather than have a competitive disadvantage with retailers that don't have affiliates and therefore don't have to charge sales tax.

[via Techdirt]

Filed under: News

Overstock kills affiliate programs in 4 states, just like Amazon

Overstock.com affiliate program
Amazon isn't the only company ending its affiliate programs in a handful of US states in an effort to avoid being forced to collect sales tax in those states. The Wall Street Journal reports that Overstock.com has shut down its affiliate programs for California, Hawaii, North Carolina, and Rhode Island.

Each of those states has either adopted or is about to adopt a law that would require online retailers with in-state affiliate partners to collect sales tax on items sold. The idea is that a web publisher who posts links Amazon, Overstock, or other web stores and gets a commission for items sold through those links is essentially giving the online store a physical presence in the state, which means state tax laws come into play.

On the one hand, states are struggling thanks to the recession, and it makes sense that some states would turn to this tax as a revenue source. On the other hand, if companies like Amazon and Overstock decide that the laws are too burdensome and just pull out of those states altogether, then nobody wins.

It's worth pointing out that you're really supposed to pay sales tax for most things purchased on the internet. But in most cases, the burden is on the shoppers, not the retailers. If enacted, these state laws would require the stores to collect the taxes which consumers pretty much never pay voluntarily.

[via The Business Insider]

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