On Monday morning Colorado-based Amazon Associates woke up to an e-mail informing them that they were fired. Amazon said thanks to Colorado House Bill 10-1193 signed by Gov. Bill Ritter last month, all of their Colorado-based associates accounts have been shut down. Amazon Associates partner with Amazon by placing ads and links on their websites that link back to Amazon.com. Associates get a percentage of the profit made from products sold to consumers who reached Amazon.com from the associate’s website.
According to Amazon, the bill imposes sales tax regulations on online retailers that are “burdensome.”
“The new regulations do not require online retailers to collect sales tax,” Amazon said in an email. “Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to ‘voluntarily’ collect Colorado sales tax — a course we won’t take.
“Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado.”
One of the bill’s sponsors, Rep. Jack Pommer, D-Boulder, told Boulder Weekly that Amazon’s decision to fire its Colorado associates amounts to “spite” and vengefulness.
In explaining the intent of the bill, he says Amazon and other online retailers are not required to collect state sales tax with online purchases. That not only means lost revenue for the cash-strapped state budget, but it puts Amazon.com at a competitive advantage over Colorado retail establishments, because it allows the website to charge about 8 percent less for its products, Pommer says. That can put local retailers out of business, which then further decreases the sales tax collected by the state.
Amazon does collect state sales tax in the two states in which it has brick-and-mortar operations, since it is required to by law in states where it has an established presence, Pommer explains. But now more and more state lawmakers are introducing legislation requiring Amazon to begin collecting sales tax in their states as well, in some cases by defining its “associates” as an established presence that triggers a legal requirement to collect sales tax for the state.
New York, which enacted such a law in 2008, was unsuccessfully sued by Amazon, and after that 2009 court decision, Rhode Island and North Carolina followed in New York’s footsteps by passing similar legislation. Amazon then fired its associates in those two states.
“To me there is some sense of inevitability about this,” says Colorado Amazon Associate Dave Taylor. Taylor places Amazon.com ads on his blog, AskDaveTaylor.com, that link to a variety of DVDs, books and other items of interest to his readers. “What I hope is that we can get a constructive dialogue about this and it doesn’t end up being a ‘he said/she said’ and everyone gets mad and those of us in the middle get screwed. The worrying thing is what are the implications? Is this the harbinger of every company saying we don’t want to play with these things in Colorado? Or is it just Amazon being Amazon and everybody just says ‘whatever’?”
Pommer, who sponsored the bill with Sen. Rollie Heath, D-Boulder, says Amazon representatives objected to the bill. Initially, he says, an Amazon lobbyist claimed that the company didn’t have access to technology for collecting sales tax, which Pommer called “nonsense,” since many other online retailers do so. He points out that Amazon operates the retail website for Target, which collects state sales tax.
“I’ve learned that Amazon is not that honest when it comes to legislative issues,” Pommer says.
But he adds that he and his colleagues attempted to compromise. He says HB 1193, which was recently signed into law by Gov. Bill Ritter, originally contained language requiring online retailers like Amazon to collect state sales tax (using Colorado associates to establish that “presence”), but lawmakers removed that section, partly in an attempt to appease Amazon. Instead, the bill requires online retailers to notify its Colorado purchasers (and the state Department of Revenue) what they owe in state sales tax. The effect, Pommer says, is that the state would then bill purchasers for the sales tax they didn’t pay when using outfits like Amazon.com.
Pommer says he was shocked when he heard that Amazon had fired all of its Colorado associates, because the bill doesn’t even require the company to collect sales tax.
“It’s just spite; there’s no legal reason for it,” he told Boulder Weekly. “It’s the only retaliation they could come up with. I’ve never had a company blackmail the state legislature like this before.”
The fact that the company has reacted so strongly is telling, according to Pommer.
“I think what’s becoming clear is that they really rely on that price advantage,” he says. “Their business model is to undercut local retailers. I assume they are desperate to keep that price advantage.
“I didn’t realize how vengeful they were,” he adds. “They’re simply saying they’re angry at Colorado and they want to hurt Colorado. … It’s kind of shocking to think they would do this.”