March 13, 2010

Colorado House Bill 1193 vs. Amazon.com

The Colorado Legislature is trying to bridge a $2.2 billion budget deficit this fiscal year, which ends June 30. To help this effort Gov. Bill Ritter recently signed into law House Bill 1193 requiring online retailers to tell people how much state tax they owe on their online purchase. In effect, the legislation requires online retailers to collect state sales taxes because of the punitive measures and mandates included in the Bill. In addition to notifying consumers to pay their state sales tax, online retailers are mandated to produce consumer sales records, and if consumers did not pay the tax, the online retailer will be required to pay a fine for every violation. To avoid these penalties, online retailers are, in essence, being required to collect the sales taxes themselves.

Legislators assert online sales are significant and growing. The argument is that when the state doesn't collect taxes from online purchases at retailers like Amazon, it damages local businesses, while reducing tax revenue to the state. The result of laws like this is that Amazon and other retailers would have to deal with more than 8000 different tax computations should every state pass a law like this.

Amazon's response to this legislation was to sever ties with Colorado and close its Associates Program (a program I, myself, participated in) in Colorado, putting over 5000 people out of work. Amazon's response was not a surprise as it did the same thing in North Carolina and Rhode Island (a state, which reportedly saw no additional revenue generated after passing a similar law). To no one's surprise both sides are hurling barbs at each other. "They've done nothing here but spit in our face," Colorado Senate Majority Leader John Morse said on YouTube, where he went on to describe Amazon's actions as "such tyranny." Interesting choice of words, "tyranny" which is defined as "oppressive power exerted by government." It's ridiculous to think Amazon has the power to impose its will on the people of Colorado. It does have the power to pick up and leave. Colorado, on the other hand, does have the power to tax and coerce corporations to follow its laws.



I understand the "fairness" argument. It's persuasive. Why should online retailers have an advantage over stores operating in buildings located in the state? I get it. I understand why groups are launching boycott efforts that are likely to have little or no impact. I also believe that many online retailers like Amazon developed sophisticated technology, an infinite number of reasonably priced products, and a first-class delivery service. I agree their success hurts many local businesses, but it also benefits the consumer. I'd guess, the tax savings consumers reap from online purchases will be spent in these local businesses, on other products.

On its face, House Bill 1193 is anti-capitalistic and proves the State Legislature is willing to risk thousands of jobs in Colorado for a couple million dollars.
 
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TheBAFSignal by Bradley A. Friedman is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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