More and more states considering Internet sales taxes

Amazon affiliates in Colorado were informed yesterday that they were no longer welcome in the e-tailing giants program, which paid them a small fee for referring customers. Why? Blame the states new law which demands Amazon charge sales tax on every purchase made by a Colorado resident. Previously online retailers were only required to collect sales taxes in states they had a physical, brick and mortar presence in, but that has been changing rapidly. 16 states have considered instating internet sales taxes, and 4 have already signed them into law.

“I see this as a trend moving along–a lot of states are considering doing it,” said Joseph Henchman, director of state projects at the non-partisan Tax Foundation in Washington, D.C. But, Henchman says, the laws “won’t solve short-term budget problems, they signal business-unfriendliness, and they’re probably unconstitutional.”

The states that have put these sales tax laws in place insist they are being unfairly deprived of revenue and that online businesses have an unfair advantage over local businesses that collect sales taxes. A 1992 Supreme Court ruling however says that retailers can’t be forced to collect such taxes unless they have an office in those states.

New York, Rhode Island, and North Carolina’s laws say that if a retailer affiliate program it’s enough to required tax collection, hence the reason such programs have been shut down in those states by Amazon and others.

California, Illinois, Iowa, Maryland, New Mexico, Vermont, and Virginia have internet sales tax bills under consideration. Amazon is currently involved in a lawsuit against the state of New York saying an affiliate program does not and should not be considered a presence in the state. It lost and is appealing.

While New York, Rhode Island, and North Carolina’s laws are attempting to force Amazon to collect taxes directly, Colorado’s bill had the affiliate clause removed, prompting the Governor to tell angry residents who were dropped as associates that he is not to blame, Amazon is for attempting to “avoid compliance”.

An emergency repeal measure has been introduced but is not likely to pass.

Read [CNet]