Many states are finding that they have a revenue shortfall. Like any government, many are jumping to the simple answer. Get tax revenue anywhere you can find! For many states, they have looked at the taxes that they lose from online sales to try and make up the difference. A few weeks ago, New York issued a law that stated that despite the fact Amazon did not have any physical presence in the state, Amazon was obligated to charge New York residents taxes because of Amazon's affiliate relationship. I am an Amazon affiliate. I sometimes link to Amazon when I'm I want to talk about books I like or products I just bought. New York reasoned that I as an affiliate represent a physical presence for Amazon. I couldn't disagree with this more.
In New York, Amazon succumbed. They now charge taxes to NY state residents even though Amazon has no physical location in the state. When I originally read this, I was rather disappointed as I was hoping Amazon would not back down from a fight. (In reality they haven't. They are appealing the decision but complying for now). But Amazon has now drawn a line in the sand. North Carolina was about to pass similar legislation and rather than just start collecting taxes, Amazon decided to cut ties with all of its North Carolina associates. They are planning to do the same thing in Hawaii.
This is a perfect example of government doing something extremely dumb that helps absolutely nobody. The state will collect no additional revenue from taxes. You could actually argue that they will lose some revenue since they will collect less income taxes from Amazon affiliates. The state might be able to collect some revenue from smaller retailers, but this will be offset by the damage they do to consumers who now have less money to spend at a time where they have less money in the pocket.
I really hope Amazon continues to take a firm stand. I hate the fact that government often feels like it can dictate how private companies must operate. While I think this situation is in the slightly gray area, I think the principal remains the same. Private companies should not take "government mandates" lying down. I often felt this way with Microsoft and the EU. Even though I know it would never happen, I would love to see what would happen if Microsoft, rather than comply with all the EU monopoly rulings, just said, "Fine, we will stop selling Windows and Office in Europe". I'm not sure who would be hurt more, but it would be something I would love watch unfold.
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