No Amazon Money for the Little Local Guy

Matt Allen has been talking about the Rhode Islander’s grab for tax revenue from Amazon’s affiliate/associate program is essentially a referral service. Web sites link to items on Amazon, and if their readers/visitors buy the item, the referrer receives a percentage of the sale.
Some folks use the service as another source of advertising revenue. Some use it to avoid creating an online store for their own products. What states, like Rhode Island, have been trying to argue is that affiliate programs amount to a “physical presence” in the state, requiring online retailers to collect sales tax on all items sold into the state, whether or not there’s an RI affiliate involved in the sale. The budget legislation accomplishes this end by changing the definition of “retailer” to include (PDF):

Every person making sales of tangible personal property through an independent contractor or other representative, if the retailer enters into an agreement with a resident of this state, under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an Internet website or otherwise, to the retailer, provided the cumulative gross receipts from sales by the retailer to customers in the state who are referred to the retailer by all residents with this type of an agreement with the retailer, is in excess of five thousand dollars ($5,000) during the preceding four (4) quarterly periods ending on the last day of March, June, September and December. Such retailer shall be presumed to be soliciting business through such independent contractor or other representative, which presumption may be rebutted by proof that the resident with whom the retailer has an agreement did not engage in any solicitation in the state on behalf of the retailer that would satisfy the nexus requirement of the United States Constitution during such four (4) quarterly periods.

According to the Wall Street Journal, Amazon has around 2,000 affiliates in Rhode Island who pay an estimated $3 million in state income tax. (The article doesn’t relate that income directly to Amazon.) Say this for our state: Rhode Island is very innovative — cutting edge — when it comes to finding ways to harm residents who are trying to scrounge together a living.

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Damien Baldino
14 years ago

Once again, the General Assembly shoots itself in the foot. Not only will they not be getting sales tax, but they also won’t be getting income tax on the commissions.
How long until other companies follow Amazon’s lead and implement the same policy?

14 years ago

No Amazon Money for the Little Local Guy… or for Republican websites either.
We’ve been using the Amazon affiliate program on The Ocean State Republican to offer conservative books and other things for about 1 1/2 years now. I just logged into Amazon, and our account has indeed been closed.
While we could leave the two Amazon book “carousels” which are currently on our site in place, and people could still buy books by clicking through to Amazon from our site, we will no longer get any revenue for it — not that we ever got much out of it anyway. I’ll be doing some site maintenance shortly to remove them.
Thanks RI General Assembly for screwing us over. We’ll try not to take it personally. I’m sure this won’t just stop with Amazon, once other big names get wind of what Rhode Island is up to. Why should any big name anything go out of their way to accomodate RI? What’s next?

14 years ago

What matters is that only rich people would be affected by this new tax …

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