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American Dream Betrayed

Amazon vs. Illinois

"Some Illinois-based Web businesses were furious Thursday at a legislative plan that would require online retailers, such as Amazon.com and Overstock.com, to collect a 6.25 percent state tax if they have commissioned affiliates in the state," the Tribune reports.

*

Amazon says they simply won't play along. This arrived in the Beachwood HQ inbox on Thursday:

From: associates-autoresponse@amazon.com
Subject: Possible Termination Because of New Illinois Legislation
Date: January 6, 2011 5:47:42 PM CST

Greetings from the Amazon Associates Program:

We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates. You are receiving this email because our records indicate that you are a resident of Illinois. If our records are incorrect, you can manage the details of your Associates account here.

Please note that this not an immediate termination notice and you are still a valued participant in the Amazon Associates Program. But if the governor signs this bill, we will need to terminate the participation of all Illinois residents in the Associates Program. After that point, we will no longer pay any advertising fees for sales referred to amazon.com, endless.com and smallparts.com nor will we accept new applications for the Associates Program from Illinois residents.

The unfortunate consequences of this legislation on Illinois residents like you were explained to the legislature, including Senate and House leadership, as well as to the governor's staff.

Over a dozen other states have considered essentially identical legislation but have rejected these proposals largely because of the adverse impact on their states' residents.

Governor Quinn's office may be reached here.

We thank you for being part of the Amazon Associates Program, and wish you continued success in the future.

Sincerely,

Amazon.com

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"The law would require Internet retailers that sell through affiliates in Illinois, and which sell at least $10,000 each year to Illinois residents, to collect the taxes, says a spokesman for state Senate president John Cullerton, a Chicago Democrat backing the bill," Internet Retailer reports.

"'The bill treats online merchants more like bricks-and-mortar merchants,' the spokesman says. 'The retailer would be responsible for collecting the tax.' He notes that the bill covers only online retailers that have affiliates in Illinois in an effort to satisfy a 1992 U.S. Supreme Court ruling that says only web merchants that have a presence within a given state must collect taxes there.

"The spokesman could give no estimate about how much Illinois might collect from such a tax, but, previously, a spokeswoman for the Illinois Department of Revenue told Internet Retailer the state could recoup $150 million annually from the use tax."

Not so fast.

"Contrary to the claims of supporters, Amazon taxes do not provide easy revenue," The Tax Foundation says. "In fact, the nation's first few Amazon taxes have not produced any revenue at all, and there is some evidence of lost revenue. For instance, Rhode Island has seen no additional sales tax revenue from its Amazon tax, and because Amazon reacted by discontinuing its affiliate program, Rhode Islanders are earning less income and paying less income tax. There's no reason why Illinois wouldn't suffer the same fate."

*

Now, the Tax Foundation isn't exactly an non-ideological source. But Amazon did indeed pull its associates program out of Rhode Island.

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Comments welcome.




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Posted on January 7, 2011


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