Rich's posterous

What can still be done?

The Greensboro News & Record is reporting that "the House and Senate are agreed to continue the “click through” tax provision in the House proposal that has hacked off Amazon and other online retailers." Reading the details, we can see that legislators have left the deal in the hands of the Finance Committee Chairs. That means the following people:

House Finance Committee
Senior Chairman Rep. Luebke
Chairman Rep. Gibson
Chairman Rep. Wainwright
Chairman Rep. Weiss

Senate Finance Committee
These and eight conservative Democrats represent our best chance of stopping this thing. The hour is late though and a deal may be finalized tomorrow (Wednesday).

I'll be contacting them tonight and tomorrow morning. My key points right now are:
  • Why would they do this knowing that it will actually reduce tax revenue collections for NC?
  • Why would they put an industry out of business without so much as a hearing?

Text of email sent to House Finance Chairs

Here are three new things you should be aware of:
  • The Fiscal Research Division confirmed yesterday that their nexus & click-through projections are based entirely on sales & use tax increases and do not include lost income tax from NC website owners. Nor does it factor in the cost of litigation.
  • Yesterday the Governor of Hawaii vetoed similar legislation and California's Governor promised to do the same. This makes five states where similar legislation has been defeated this year (the others are TN, MD and MN).
  • Listed below are merchants who have terminated relationships with NC website owners. More are expected today:
Textbooks.com
Blue Nile
Oriental Trading
Overstock.Com
CSN Stores
Fingerhut
ShopNBC
Cabela's
Drs Fosters & Smith
MusiciansFriend
Cafe Press
FootSmart.com
Amazon

It is crucial that you remove the nexus and click-through provisions from S202 ASAP before any more damage is done. This legislation is destroying an entire industry in NC and doing great damage to the state's reputation in the tech sector. There are many good reasons this legislation is being defeated in so many states. Please feel free to email me or call me at the number below if you have any questions.

NC Legislature's motivation: Grudge match with Amazon or doing what's right for NC?

 


Why would the NC legislature want to reduce tax revenue and drive companies out of business? That's what I've been asking legislators recently.

Living in an ideal world

I understand their desire to force online merchants to collect sales tax. The state is in a terrible budget situation. And I understand many legislator's anger that Amazon and other online merchants have turned their affiliates into an effective lobby, arguing against this tax.

The reality

But we don't live in an ideal world. As of July 1, Amazon and at least nine other merchants have terminated their relationship with NC affiliates. This means there will be little to no increased sales tax collections from e-tailers. But passage of the legislation will mean less income tax from NC website owners. So the question is, why are so many legislators still supporting this tax?

Grudge match with Amazon

My conclusion after talking to several who were so angry with Amazon that they couldn't even hear me say "less revenue for NC," is that they are in a grudge match. And if they don't come to their senses, they will have less tax revenue, and they'll shut down lots of NC businesses in the process.
C'mon Senators and Representatives, do the right thing.

Defeating the NC Internet tax

A legislator just shared some insights with me on who we need to approach to defeat the "nexus and click-through" portion of S202, AKA the "Internet tax" or "Amazon tax."

But don't forget to contact your own legislators and members of the House and Senate Finance Committees. S202 conferees are another target.

Here are the new targets:

Rep. Ty Harrell (D-Wake)
919-733-5602 Email: Ty.Harrell@ncleg.net
On the list because he is Chair of the House Science and Technology Committee

The rest are on the list primarily because they are fiscal conservatives that don't like voting for tax increases (or come from conservative districts).

Rep. Joe Tolson (D-Edgecombe, Wlson)
919-715-3024 Email: Joe.Tolson@ncleg.net

Rep. Nelson Cole (D-Rockingham)
919-733-5779 Email: Nelson.Cole@ncleg.net

Rep. Ray Warren (D-Alexander, Catawba)
919-715-8361 Email: Ray.Warren@ncleg.net

Rep. William Brisson (D-Bladen, Cumberland)
919-733-5772 Email: William.Brisson@ncleg.net

Rep. Van Braxton (D-Greene, Lenoir, Wayne)
919-715-3017 Email: Van.Braxton@ncleg.net

Rep. Jim Crawford (D-Granville, Vance)
919-733-5824 Email: Jim.Crawford@ncleg.net

Rep. Bruce Goforth (D-Buncombe)
919-733-5746 Email: Bruce.Goforth@ncleg.net

Rep. Tim Spear (D-Chowan, Dare, Hyde, Washington)
919-715-3029 Email: Tim.Spear@ncleg.net

Also important, not because they will change their minds, but because they need to know legislators are feeling the pressure:

Sen. Dan Clodfleter (D-Meckelnburg)
(919) 715-8331 Email: Daniel.Clodfelter@ncleg.net

Rep. Mickey Michaux
919-715-2528 Email: Mickey.Michaux@ncleg.net

All about the "Amazon tax"

For anyone who isn't aware, many state legislatures are fighting massive revenue shortfalls and are eying taxes on Internet sales as an easy target.

This actually isn't a new tax. If you make an online purchase, you're supposed to note this on your tax form and pay sales tax at the end of the year. But nobody does it. Hence the incentive for legislatures to go after it. And while it may not technically be a new tax, the reality is that it's more money going out of your pocket and into government coffers.

And then there's the other side of the argument, coming from e-commerce giants such as Amazon. They don't want to have to track sales tax rates in 50 states and hundreds of municipalities, nor do they want to subject themselves to audit by that many jurisdictions. 

Stuck in the middle

In between these two camps are "affiliates." That's folks like me with websites that link to Amazon and other e-tailers. I have a site where I review GPS units, cover industry news and offer tips about using these devices. I get a small percentage of each sale when you visit one of these online merchants (and make a purchase) via a link on my site. It's not a way to get rich quick, but I've built it up into a full-time gig. Lest you think it's easy money, I've been at it for four years and there are times I work 80 hours a week, but hey, I like what I do. 

WTF is nexus?

Here's the rub. Amazon doesn't have to charge sales tax in states (like NC) where they don't have a physical presence. But state legislatures like North Carolina's are defining "affiliates" (that's me), as a physical presence like a store front or warehouse. Because I link to Amazon. Creative, huh? They call this "nexus," basically a tie that binds. If you want to read the legalese, it's runs from line 42 on page 268 to line 18 on page 269 in NC Senate bill 202 (PDF).

Blackmail or smart business practices?

So Amazon says, as soon as this passes, we're going to cut off all affiliates in your state. Ha! No nexus! Then you can't force us to collect sales tax! Oh wait; that means website owners like me no longer get paid. Did I mention that I do this full time, depend on this revenue, have a family and don't want to be homeless? And there are folks out there who may be in worse shape -- like the mom with a 5 year old mentally handicapped son she must stay home to care for. Affiliate marketing allows her to do so.

Now the legislators say hey, we're being blackmailed! But Amazon isn't opposed to taxing online purchases. As a matter of fact, they support the...

Streamlined sales tax project (SSTP)

The SSTP is a collaborative effort of 44 states to pave the way for taxation of online purchases. According to the state legislators I've spoken to, implementing this requires an act of Congress, which the Supreme Court cleared they way for in Quill vs. North Dakota. North Carolina is a full member of SSTP, but apparently they have gotten tired of waiting for Congress to act. I'll be looking into this more, but I'm betting Congress really doesn't want to pass an Internet tax law. Talk about unpopular! Can you blame them?

In my next post, I'll share my experience meeting with state legislators on this issue.

To fight this legislation in NC, call your legislators and tell them you are opposed to the Internet tax provisions in S202. And sign this petition.

Reasons to oppose S202 SECTION 27C.2.(a)

  1. This will hurt many small NC website owners, because Internet advertisers will sever their relationships with them, just as they did in NY. Examples of companies that terminated relationships with all NY websites include Overstock.com, ShopNBC, Backcountry.com, KBToys, NorthernTool, Just Flowers, Geeks.com, Gardens Alive, Cafe Press. There are many more. 
  2. The Legislature is gambling that Amazon is bluffing. In doing so, they are risking millions of dollars of NC small business income, in a gamble to receive a similar amount of new tax revenue. There is a much less risky path to pursue -- the Streamlined Sales Tax Project.
  3. If Amazon makes good on their promise to sever relationships with NC website owners, the state will lose income tax on that revenue, and increase the number of residents in financial crisis (adding to unemployment, foreclosures, etc.)
  4. The legislature is discriminating against small homegrown businesses in favor of large out of state corporations like Apple, who they are giving millions of dollars of tax breaks to.
  5. I may be able to relocate my business out of state, but this will cost me time and money at a point where I really can't afford it (and I'll take a huge hit selling my house now). Many small website owners do not have this option.
  6. Website referrals are simply one form of advertising; the Legislature is discriminating based solely on how businesses with ad revenue are paid, and choosing not to tax other media such as radio, television and print.
  7. The legislation will further hurt NC's anti-business reputation and will severely damage its reputation in the tech industry, one of the few segments of the economy poised for growth.
  8. The legislation is clearly unconstitutional, this having been decided in the 1992 US Supreme Court case Quill Corporation v North Dakota. The basis for this decision appears to be as much about the complexity of the 50 United States sales tax laws and impinging upon the free flow of interstate commerce, as it is about nexus.
  9. The legislation will require many website owners to laboriously remove links manually. My own sites have over 1000 pages with Amazon links. These companies may legally require websites to remove these links.

Comment below or send them to gmail address. It's richowings. You can probably figure out the rest.