Amazon Advertising Tax
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Amazon Sales Tax Legislation
BENNET KELLEYBENNET KELLEYBENNET KELLEYBENNET KELLEY
April 14, 2009April 14, 2009April 14, 2009April 14, 2009
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NEW YORK SOLUTIONNEW YORK SOLUTIONNEW YORK SOLUTIONNEW YORK SOLUTION
CALIFORNIACALIFORNIACALIFORNIACALIFORNIA PROBLEMPROBLEMPROBLEMPROBLEM
Today’s Story
POT OF GOLDPOT OF GOLDPOT OF GOLDPOT OF GOLD
NEW YORK SOLUTIONNEW YORK SOLUTIONNEW YORK SOLUTIONNEW YORK SOLUTION
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Part 1Part 1Part 1Part 1The ProblemThe ProblemThe ProblemThe Problem
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Californians are known for thinking big and doing things on a grand scale.
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Both the good . . .
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Combined FY09-10 Budget($MM)
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
. . . . and . . and the not so the not so good.good.
$60,000
$40,000
$20,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
Original Budget Special Session
Revenue
Expenditures
Balance
Source: Governor’s 2009-10 Budget
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Projected Deficits FY09-10($BB)
CA
$27
$30
$33
$36
All states combined - $100.6B
NY IL
VA NC CT MN MD TN
$0
$3
$6
$9
$12
$15
$18
$21
$24
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California Constitutional Limitations
• Two-thirds legislative approval required for tax increaseincrease
• Democratic majority two votes shy in each house – as a result any tax increase requires GOP votes
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U.S. Constitutional LimitationsU.S. Constitutional LimitationsU.S. Constitutional LimitationsU.S. Constitutional Limitations
• Quill Corp. v. North Dakota(1) – Due Process and Commerce Clauses limit state taxing authority to entities with a physical presence in state.
• Borders Online, LLC v. State Bd. of Equalization(2)- Borders Online subject to sales tax since it was merely agent for Borders brick and mortar operations.
(1) 504 U.S. 298 (1992)
(2) 29 Cal. Rptr. 3d 176 (Cal. Ct. App. 2005)
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Part 2: NEW YORK’S
“AMAZON TAX”“AMAZON TAX”
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California has often looked to New York California has often looked to New York for talent and resources for talent and resources –– with great success.with great success.
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THIS INCLUDES INDUSTRY . . .
ARTISTS . . .
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AND ENTERTAINMENT
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AND ENTERTAINMENT
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OK . . . OK . . . OK . . . OK . . . Nobody’s Nobody’s Nobody’s Nobody’s perfectperfectperfectperfectperfectperfectperfectperfect
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NY’s Amazon TaxNew York Tax Code Section 1101(b)(8)
• Seller of tangible or personal property subject to sales tax if:
– the seller enters into an agreement with a resident ofseller enters into an agreement with a resident ofseller enters into an agreement with a resident ofseller enters into an agreement with a resident ofthis state under which the residentunder which the residentunder which the residentunder which the resident, , , , for a commissionfor a commissionfor a commissionfor a commission or other consideration . . . refers potential customersrefers potential customersrefers potential customersrefers potential customers, whether by a link on an internet website or otherwise, to the seller, if the cumulative gross receipts from sales by by by by the seller, if the cumulative gross receipts from sales by by by by the seller to customers in the state who are referred to the seller to customers in the state who are referred to the seller to customers in the state who are referred to the seller to customers in the state who are referred to the sellerthe sellerthe sellerthe seller by all residents with this type of an agreementby all residents with this type of an agreementby all residents with this type of an agreementby all residents with this type of an agreementwith the seller is in excess of [$10,000]in excess of [$10,000]in excess of [$10,000]in excess of [$10,000] during the preceding [four quarters].
– This presumption may be rebutted by proof that the resident with whom the seller has an agreement did not engage in any solicitation in the state on behalf of the seller that would satisfy the nexus requirement of the United States constitution . . .
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Amazon Complaint DismissedAmazon.com v. New York State Dept. of Taxation & FinanceAmazon.com v. New York State Dept. of Taxation & FinanceAmazon.com v. New York State Dept. of Taxation & FinanceAmazon.com v. New York State Dept. of Taxation & Finance, No. 60124/08 (Jan. 12, 2009), No. 60124/08 (Jan. 12, 2009), No. 60124/08 (Jan. 12, 2009), No. 60124/08 (Jan. 12, 2009)
The New York law:
requires a substantial nexus between an out-of-state seller and New York through a contract to pay commissions for referrals with a New York resident along with with a New York resident along with realization of more than $10,000 of revenue from New York sales earned through the arrangement. The neutral statute simply obligates out-of-state sellers to shoulder their fair share of the tax collection burden when using New Yorkers to earn profit from other New Yorkers.
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Assembly MemberAssembly MemberAssembly MemberAssembly MemberAssembly MemberAssembly MemberAssembly MemberAssembly MemberSkinner’s IdeaSkinner’s IdeaSkinner’s IdeaSkinner’s IdeaSkinner’s IdeaSkinner’s IdeaSkinner’s IdeaSkinner’s Idea
• AB 178 – Mirrors NY Bill
• “I introduced Assembly Bill 178 for two reasons: to create a level playing field for our brick and for two reasons: to create a level playing field for our brick and mortar businesses and to collect sales tax that is rightfully owed, thereby helping our budget shortfall.”
• Support from offline retailers
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A Double SolutionA Double SolutionA Double SolutionA Double Solution
• Not treated as tax increaseincrease
• Two-thirds vote not required
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Now BoardingNow Boarding
�� ConnecticutConnecticut
�� HawaiiHawaii
�� MarylandMaryland
North CarolinaNorth Carolina�� North CarolinaNorth Carolina
�� MinnesotaMinnesota
�� TennesseeTennessee
�� VirginiaVirginia
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Part 3: Part 3: Part 3: Part 3: The Pot of GoldThe Pot of GoldThe Pot of GoldThe Pot of Gold
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California has a history of being at the center of Gold Rushes
(actual and metaphoric)
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TOTAL REVENUES TOTAL REVENUES TOTAL REVENUES TOTAL REVENUES ($MM)($MM)($MM)($MM)
SALES TAXSALES TAXSALES TAXSALES TAX
CACACACA
$405,610.0$405,610.0$405,610.0$405,610.0
$831.5$831.5$831.5$831.5
$19,170 $19,170 $19,170 $19,170
$0$0$0$0
Why Amazon?
CACACACA
Sales tax avoidance isSales tax avoidance isSales tax avoidance isSales tax avoidance ispart of Amazon’s business modelpart of Amazon’s business modelpart of Amazon’s business modelpart of Amazon’s business model.
-------- Assmb. Member SkinnerAssmb. Member SkinnerAssmb. Member SkinnerAssmb. Member Skinner
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The Pot of Gold
$68MMNY: FY 2010
NY: FY 2009
$68MM
$61.3MM
$50MMNY: INITIAL PROJ.
CA: INITIAL PROJ.$55MM
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v.
• 7,500 taxing jurisdictions make collecting sales tax too burdensome,
• Amazon provides back-end (including collection of sales tax) for sites such as too burdensome,
complex
• NY law unfair since don’t always know what state affiliates are from
tax) for sites such as Target.com
• Amazon threatened to terminate its Hawaii affiliates if state enacted NY type law
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Who Opposes AB 178
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Arguments Against
• Place California companies at competitive disadvantage
• Chill state’s leadership • Chill state’s leadership in e-commerce
• Harm small business growth
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Costs of Amazon Tax
Result in a net loss of revenue
– Expensive litigation
– CA Affiliates will be terminated
• eBay is threatening to terminate • eBay is threatening to terminate California affiliates
– Loss of 16,000 jobsLoss of 16,000 jobsLoss of 16,000 jobsLoss of 16,000 jobs
– $1 billion in revenue$1 billion in revenue$1 billion in revenue$1 billion in revenue
(Source: Performance Marketing Alliance)
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Publishers Terminating NY AffiliatesPublishers Terminating NY AffiliatesPublishers Terminating NY AffiliatesPublishers Terminating NY Affiliates
Acorn Media
Amerimark
Baby Universe
Backcountry.com
Binoculars.com
Checks Unlimited
Collectors' Choice Music
Compact Appliance
CSN Stores
Garden's Alive
Geeks.com
Gurneys
Henry Fields
Home Shopping
LinenSource
Luggage.com
Michigan Bulb
Musicians Friend
MyTwinn
Red Envelope
ReStock It
Ritz Camera
ShopNBC
ShoppersChoice Binoculars.com
Blair.com
Bodybuilding.com
Brecks
CafePress
CCVideo
Celebrate Express
Checks In The Mail
CSN Stores
Deep Discount
DVD Planet
Eastwood Company
Fingerhut
FirstStreet
Footsmart
Gaiam.com
eToys
Home Shopping Network
Jewelry Television
J&P Cycles
Justflowers
Karmaloop
KB Toys
LampsPlus
Leaps And Bounds
NetShops
Northern Tool
One Step Ahead
OnlineShoes.com
Oriental Trading
Overstock
Palo Alto Software
Silhouettes
Spilsbury
Spring Hill
Thompson Cigars
Tirerack
uBid.com
US Toy Co
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Meet California Affiliates
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Status
CaliforniaAB 178 – hearing postponed (again) until April 27
ConnecticutSB 806 – Senate vote as early as today.
HawaiiHB 1405 – Stripped from bill
Maryland
SB 1071 – Still in Committee
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Status
MinnesotaSF 282/ HF 401 – hearing set for April 16
North Carolina
TennesseeSB 1741 / HB1947 stalled in committee, opposed by Dept. of Revenue
North CarolinaSB 487/HB 558 –no action (combined with download tax)
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Bennet Kelley(310) [email protected]