Illinois enacts Internet sales tax law

[Balta1701]

You don't realize why California stuck that down, either. Amazon is located in Seattle, not in California...and told California that they will yank all 11,000+ affiliates from them if they pass it. So, when they do pass it, they will do the same thing to CA that they just did to IL.

 

Once again bringing us back to my original point...it cant be a few states...it cant even be 25 states...it has to be so many states that amazon cannot avoid it anymore.

California struck it down because the last governor followed the "I can't approve any new taxes" policy.

 

The flaw of course is that every other state can say the same thing. You still can't get around this.

[Y2HH]

California struck it down because the last governor followed the "I can't approve any new taxes" policy.

 

The flaw of course is that every other state can say the same thing. You still can't get around this.

 

In 2011 Amazon threatened to terminate roughly 10,000 of its affiliates located in California if legislation pending in the state legislature to deem such affiliates as constituting a nexus that requires the collection of sales tax is passed. California affiliates would no longer receive commissions on referrals to Amazon.

 

In the end, it has to be done in every state...or once again, amazon doesn't lose here...but the businesses tied to amazon do...and the states those businesses are in.

 

You can keep going on and on here...but you are still failing to see why I maintain that unless it's done in every state, it doesn't hurt amazon.

[Balta1701]

You can keep going on and on here...but you are still failing to see why I maintain that unless it's done in every state, it doesn't hurt amazon.

EVERY STATE CAN'T PASS THE SAME LAW SIMULTANEOUSLY.

[Y2HH]

EVERY STATE CAN'T PASS THE SAME LAW SIMULTANEOUSLY.

 

YOU MISS THE f***ING POINT...AGAIN.

 

Seriously already...you continue to miss the point, whether out of purposeful ignorance or outright ignorance. Unless every state passes it, it doesn't affect Amazon...therefore, IT WILL NEVER *EVER* GET PASSED BY EVERY STATE, BECAUSE THEY REALIZE IT'S ADVANTAGOUS TO NOT PASS IT. If this isn't done federally...IT WILL NOT f***ING WORK.

 

It's pretty obvious by now you don't understand how business works, but thanks for trying. You refuse to apply reality/logic to this law. They've accidentally created a law that allows neighboring states to give businesses incentive to do business in their state, instead of the state trying to tax them. This means that some states will NEVER pass such a law...as it's advantageous to them to NOT pass it.

Edited March 21, 2011 by Y2HH

[Texsox]

YOU MISS THE f***ING POINT...AGAIN.

 

Seriously already...you continue to miss the point, whether out of purposeful ignorance or outright ignorance. Unless every state passes it, it doesn't affect Amazon...therefore, IT WILL NEVER *EVER* GET PASSED BY EVERY STATE, BECAUSE THEY REALIZE IT'S ADVANTAGOUS TO NOT PASS IT. If this isn't done federally...IT WILL NOT f***ING WORK.

 

It's pretty obvious by now you don't understand how business works, but thanks for trying. You refuse to apply reality/logic to this law. They've accidentally created a law that allows neighboring states to give businesses incentive to do business in their state, instead of the state trying to tax them. This means that some states will NEVER pass such a law...as it's advantageous to them to NOT pass it.

 

 

Dropping affiliates doesn't affect Amazon? I thought Amazon makes money on those transactions. Perhaps you are forgetting that business works to make a profit. Are they just doing it as a charity?

 

What advantage is there to the state to require it's local businesses to charge sales tax, but allow others not to? Hey Illinois customers, buy from an Illinois business who has a store in your neighborhood AND PAY SALES TAX! Buy from an out of state company and don't pay sales tax! BRILLIANT TAX POLICY! So why should Amazon move to Illinois? They benefit under the old system by selling to Illinois customers from out of state. If Amazon doesn't give a s*** about losing 10,000 affiliates, it must mean they do not sell that much through them.

[Y2HH]

Dropping affiliates doesn't affect Amazon? I thought Amazon makes money on those transactions. Perhaps you are forgetting that business works to make a profit. Are they just doing it as a charity?

 

What advantage is there to the state to require it's local businesses to charge sales tax, but allow others not to? Hey Illinois customers, buy from an Illinois business who has a store in your neighborhood AND PAY SALES TAX! Buy from an out of state company and don't pay sales tax! BRILLIANT TAX POLICY! So why should Amazon move to Illinois? They benefit under the old system by selling to Illinois customers from out of state. If Amazon doesn't give a s*** about losing 10,000 affiliates, it must mean they do not sell that much through them.

 

Amazon replaces those affiliates without even trying...and amazon pays the affiliates to be part of their program, amazon can ship the same products from another affiliate just as easily. If it affected amazon more than the tax did, they wouldn't be so quick to just jettison them all...yet thats exactly what they did.

 

Look up the amazon affiliate program and you'll get a better idea how it works.

Edited March 21, 2011 by Y2HH

[Texsox]

It's not the taxes from the affiliate program, it's taxes on everything Amazon sells, that's the pot o' gold states are looking at. The current set up encourages companies to sell outside the state they are from.

 

Some will argue that a law needed to be put in place when on-line sales were less than 1% of total consumer spending. Maybe in 2006, when total consumer spending on-line was 6%, the law should have been in place. But the states waited. Not that on-line sales are almost 15% of total consumer spending, and state revenues are down, they are writing laws. Seems like a prudent time to start.

[Texsox]

Amazon replaces those affiliates without even trying...and amazon pays the affiliates to be part of their program, amazon can ship the same products from another affiliate just as easily. If it affected amazon more than the tax did, they wouldn't be so quick to just jettison them all...yet thats exactly what they did.

 

Look up the amazon affiliate program and you'll get a better idea how it works.

 

How much should states give up in sales tax to keep Amazon's program going? When on-line sales equal 50% of total consumer spending, should states look elsewhere to replace that income? Where?

[Y2HH]

How much should states give up in sales tax to keep Amazon's program going? When on-line sales equal 50% of total consumer spending, should states look elsewhere to replace that income? Where?

 

The point remains, IL gained nothing. Amazon simply doesn't sell out of IL affiliates anymore...this hurts the affiliates...it didnt hurt amazon. Amazon can ship the same merchandise out of an Indiana affiliate now, still tax free. Indiana has little incentive to pass such a tax.

[Texsox]

The point remains, IL gained nothing. Amazon simply doesn't sell out of IL affiliates anymore...this hurts the affiliates...it didnt hurt amazon. Amazon can ship the same merchandise out of an Indiana affiliate now, still tax free. Indiana has little incentive to pass such a tax.

 

Indiana has the sales tax on *everything* that Amazon sells in Indiana to gain.Again how many companies will you allow to be in your state without paying taxes? To keep people from buying on-line, why not eliminate sales tax? States have nothing to gain by charging sales tax.

[Y2HH]

Indiana has the sales tax on *everything* that Amazon sells in Indiana to gain.Again how many companies will you allow to be in your state without paying taxes? To keep people from buying on-line, why not eliminate sales tax? States have nothing to gain by charging sales tax.

 

This shows you don't understand how amazon works. If you buy something from amazon out of Indiana, they ship it from another state, not from your own state...so you don't get taxed. However the affiliates in Indiana ship to other states, and in these cases, do not have to pay that tax. The law simply forces the affiliates to pay that tax to their home state, even when shipping out of their own state...which amazon obviously wants no part of as it raises their prices and lowers the discount.

 

I'm not arguing that what amazon is doing is right...but I is within the law in most states.

Edited March 22, 2011 by Y2HH

[Texsox]

This shows you don't understand how amazon works. If you buy something from amazon out of Indiana, they ship it from another state, not from your own state...so you don't get taxed. However the affiliates in Indiana ship to other states.

 

Duh, that's what I'm saying. If you continue to allow on-line retailers to ship tax free into your state, you will keep losing sales tax revenues. Ten years ago on-line sales were less than 1%, now they are 15%, where will they be in 5 years? Under the current system, states will continue to see revenues from sales tax to fall as more people shop on-line. What should they do to maintain that revenue stream?

 

The law was to establish that Amazon would pay on all their sales, not just through the affiliates. Just like you have to pay sales tax on internet orders from companies located in the same state as the customer. The law claims that Amazon is in Illinois.

[Y2HH]

Duh, that's what I'm saying. If you continue to allow on-line retailers to ship tax free into your state, you will keep losing sales tax revenues. Ten years ago on-line sales were less than 1%, now they are 15%, where will they be in 5 years? Under the current system, states will continue to see revenues from sales tax to fall as more people shop on-line. What should they do to maintain that revenue stream?

 

I see what you said. But the problem remains that even changing the current system only works if every (or a vast majority) of states also pass it. The problem is, for states begging for business/jobs, this effectively incentivized them to NOT enact such a law. They'd rather have the jobs, businesses and people than the sales tax...the prior 3 combined easily pay more in taxes than that one sales tax will ever bring in.

 

Maybe you guys can't grasp what I'm saying because I'm saying it wrong...I don't know anymore. I really dont have another way to put this.

[southsider2k5]

Duh, that's what I'm saying. If you continue to allow on-line retailers to ship tax free into your state, you will keep losing sales tax revenues. Ten years ago on-line sales were less than 1%, now they are 15%, where will they be in 5 years? Under the current system, states will continue to see revenues from sales tax to fall as more people shop on-line. What should they do to maintain that revenue stream?

 

The law was to establish that Amazon would pay on all their sales, not just through the affiliates. Just like you have to pay sales tax on internet orders from companies located in the same state as the customer. The law claims that Amazon is in Illinois.

 

The trade off is jobs. City's make that decision all of the time by subsidizing businesses to come to their communities. Interest free loans, property tax breaks, incentives... I don't see sales taxes as any different. If states are willing to forfeit them in the pursuit of attracting jobs, it is their right.

[Y2HH]

The trade off is jobs. City's make that decision all of the time by subsidizing businesses to come to their communities. Interest free loans, property tax breaks, incentives... I don't see sales taxes as any different. If states are willing to forfeit them in the pursuit of attracting jobs, it is their right.

 

Exactly, no different than how Chicago handled Boeing. It just hurts when neighboring states use your new law against you...as they are in cases like this.

[Texsox]

I see what you said. But the problem remains that even changing the current system only works if every (or a vast majority) of states also pass it. The problem is, for states begging for business/jobs, this effectively incentivized them to NOT enact such a law. They'd rather have the jobs, businesses and people than the sales tax...the prior 3 combined easily pay more in taxes than that one sales tax will ever bring in.

 

Maybe you guys can't grasp what I'm saying because I'm saying it wrong...I don't know anymore. I really dont have another way to put this.

 

Imagine if a state told WalMart, open new stores in our state and we will make your sales tax free to our residents. After all, we need the jobs in this state. It's the same as allowing Amazon to operate tax free in the state. The problem is technology has jumped ahead of existing laws. Now the laws need to catch up.

 

I think we found the disagreement. Using Amazon as the example, most of their jobs are out of state. Ten years ago, less than 1% of consumer spending was on-line. Not a big deal. In 2006 is was around 6%. Today estimates are at least 15%. It is starting to get serious. I could easily see when half or more of taxable consumer spending will be on line with companies out of state. Addressing your concern, those out of state companies offer no jobs, businesses, or people to where they are shipping.

 

Amazon is willing to cut their affiliates to protect their main business. That tells me their main business is far more lucrative than their affiliate business. In California they were willing to cut 10,000 affiliates to protect what states are really after, the sales tax on everything Amazon ships into their state.

 

Put another way, having 25% of consumer sales on-line is about the same as cutting Illinois state sales tax to 4.75%. That revenue has to be made up somewhere. It seems to me that the fairest way to make up that difference isn't to create a new tax or fee, but to continue to recover the same tax, only this time to find a way to collect from the people that are selling to your state. As always, technology has leaped ahead of the law and now the law has to catch up.

[Texsox]

The trade off is jobs. City's make that decision all of the time by subsidizing businesses to come to their communities. Interest free loans, property tax breaks, incentives... I don't see sales taxes as any different. If states are willing to forfeit them in the pursuit of attracting jobs, it is their right.

 

Would you allow a brick and mortar store to operate as a sales tax free zone? After all that actually adds jobs in the community, not at a service center and warehouse many states away.

 

Currently if Amazon happened to be an Illinois company, with a warehouse in Illinois or service center Illinois, residents wold have to pay sales tax on items bought there. Offer an incentive for getting that part of their operation. The affiliates are often times part time sellers with hobby businesses, not full time, businesses employing a lot of people. States understand what is at stake as well and will eventually push for a share of on-line sales taxes. They have to with so many sales heading in that direction.

[southsider2k5]

Would you allow a brick and mortar store to operate as a sales tax free zone? After all that actually adds jobs in the community, not at a service center and warehouse many states away.

 

Currently if Amazon happened to be an Illinois company, with a warehouse in Illinois or service center Illinois, residents wold have to pay sales tax on items bought there. Offer an incentive for getting that part of their operation. The affiliates are often times part time sellers with hobby businesses, not full time, businesses employing a lot of people. States understand what is at stake as well and will eventually push for a share of on-line sales taxes. They have to with so many sales heading in that direction.

 

Honestly it depends on the situation. The reality is that it isn't any different in theory than giving property tax abatements to a factory full of union workers to come to your town, which happens all of the time, and is perfectly acceptable in today's political world. The only real difference is the taxing body involved here, and the way laws are currently written. Right now, at least in the state of Indiana, there aren't any exceptions for brick and mortar stores. If there were, I wouldn't have a problem with it being used like any other business recruiting tool that is used.

[Texsox]

Honestly it depends on the situation. The reality is that it isn't any different in theory than giving property tax abatements to a factory full of union workers to come to your town, which happens all of the time, and is perfectly acceptable in today's political world. The only real difference is the taxing body involved here, and the way laws are currently written. Right now, at least in the state of Indiana, there aren't any exceptions for brick and mortar stores. If there were, I wouldn't have a problem with it being used like any other business recruiting tool that is used.

 

I agree with all your underlying points, but come to a different conclusion.

 

I believe the big difference is "coming to town". Amazon is not coming to town. You are giving an incentive for an Oregon company, who employs a ton of full time people out of state, to continue to use part time employees in your state. Plus, I really question how much these affiliates contribute to their home states. I suspect many are on par with eBay sellers. I was thinking about the 10,000 affiliate number in California. How much business would Amazon have to have to support 10,000 full time workers? If it was truly that much, would they really walk away from that much business? They were being asked to do exactly what they are in their home state, collect sales tax on sales to that destination.

 

Another thought, is it fair that an Oregon business ships sales tax free into Illinois, yet an Illinois based internet business would have to charge sales tax? It seems like states have a really tough time with this. I would rather offer the incentive to create an Amazon competitor in my state, than give an incentive to an out of state company.

[southsider2k5]

I agree with all your underlying points, but come to a different conclusion.

 

I believe the big difference is "coming to town". Amazon is not coming to town. You are giving an incentive for an Oregon company, who employs a ton of full time people out of state, to continue to use part time employees in your state. Plus, I really question how much these affiliates contribute to their home states. I suspect many are on par with eBay sellers. I was thinking about the 10,000 affiliate number in California. How much business would Amazon have to have to support 10,000 full time workers? If it was truly that much, would they really walk away from that much business? They were being asked to do exactly what they are in their home state, collect sales tax on sales to that destination.

 

Another thought, is it fair that an Oregon business ships sales tax free into Illinois, yet an Illinois based internet business would have to charge sales tax? It seems like states have a really tough time with this. I would rather offer the incentive to create an Amazon competitor in my state, than give an incentive to an out of state company.

 

None of it is "fair" The newest companies get the biggest subsidies as the older ones are weened off of their initial benefit package. A perfect example is that Michigan City's original mall was opened in 1966. In the late 80's they offered a 10 year tiered property tax abatement to what ended being the second outlet mall built in the country. Was it fair to the other mall? Not really. But it brought what ended up being about 100 stores worth of jobs, not to mention an assload of tourist dollars to the community. We lost in dollars up front, as we didnt' collect full property taxes for 10 years there, but we made up for it in other ways (keeping unemployment much lower, adding sales taxes, having more people come to MC etc). Like I said, I see this issue in the same light. Sure you would rather give it to a company that is there already, but that isn't how the system works.

[Balta1701]

None of it is "fair" The newest companies get the biggest subsidies as the older ones are weened off of their initial benefit package. A perfect example is that Michigan City's original mall was opened in 1966. In the late 80's they offered a 10 year tiered property tax abatement to what ended being the second outlet mall built in the country. Was it fair to the other mall? Not really. But it brought what ended up being about 100 stores worth of jobs, not to mention an assload of tourist dollars to the community. We lost in dollars up front, as we didnt' collect full property taxes for 10 years there, but we made up for it in other ways (keeping unemployment much lower, adding sales taxes, having more people come to MC etc). Like I said, I see this issue in the same light. Sure you would rather give it to a company that is there already, but that isn't how the system works.

You know full well why that's a bad example...it doesn't take into account Tex's point about subsidizing jobs out of state, rather than in state.

 

This is Michigan City paying a big tax abatement to build a mall in New Buffalo, MI.

[southsider2k5]

You know full well why that's a bad example...it doesn't take into account Tex's point about subsidizing jobs out of state, rather than in state.

 

This is Michigan City paying a big tax abatement to build a mall in New Buffalo, MI.

 

Except Amazon does have locations in state, or they wouldn't have locations to shutdown. So no, it isn't a bad example.

[Balta1701]

Except Amazon does have locations in state, or they wouldn't have locations to shutdown. So no, it isn't a bad example.

But as Tex has pointed out, those "locations" do a small enough amount of business that Amazon doesn't hesitate to close down 10k of them.

 

Nobody in their right mind is looking at Amazon's affiliates and thinking "Here's the next big thing for our state".

[NorthSideSox72]

But as Tex has pointed out, those "locations" do a small enough amount of business that Amazon doesn't hesitate to close down 10k of them.

Oh they hesitated - but its simple math. They can lose a bunch of affiliates - most of whom direct very small amounts of business to them - or they can lose a heck of a lot of customers among the entire state population because they are now being taxed. They chose the lesser evil. Still not what they want (they'd rather the law just not change at all), but its better than the alternative. I don't blame them for making that choice at all.

 

I will say though, there's a good chance that lots of states will enact similar laws in the next few years. So eventually, this will be a non-issue. Sure there will be a few states that consistently avoid it, but if a majority of states (particulary if they are key, large population states) do this, then it will in essence level the playing field. So I don't necessarily blame Illinois either.

 

But here is what I'd love to see happen (I know it won't)... have the US government enact a national sales tax, solely on non-essential goods (excludes store-bought food, clothing for example)... lower the federal income tax by that amount for all brackets, but specifically targeting the lower ones more significantly... and then allow the states to decide whether or not to increase their state income taxes to fill that gap. What this does essentially is, without adding any more net tax dollars, shift the national nature of shopping online to the federal level where it is more effective, and give the states back the revenue via a transfer of burden.

 

[southsider2k5]

But as Tex has pointed out, those "locations" do a small enough amount of business that Amazon doesn't hesitate to close down 10k of them.

 

Nobody in their right mind is looking at Amazon's affiliates and thinking "Here's the next big thing for our state".

 

Or they realize that the cost of shutting them down, and finding someone else to do them in the next state over is cheaper than paying the local tax rate. Either way, it is a jobs consideration to some extent. It is no different than Wal-Mart opening up across the street from the Chicago city limits to save the four percentage points of sales tax, knowing that it will draw more customers, or operating in the next town over because they get a better incentive package from them. Tourism isn't the best thing for Michigan City, but it is something better than 20% unemployment.

 

In the big picture this really isn't any different. if you aren't competitive, you lose. That is exactly what is happening to these states right now.