Sales Tax News

Colorado recently amended its tax law to require Internet retailers to collect sales tax on sales to Colorado residents or give the state information about such sales so the state can collect use taxes from purchasers.  Amazon responded by canceling its relationships with all Colorado-based participants in its associates program:  “As a result of the new law we have decided to stop advertising through associates based in Colorado.”  Unlike other states that have changed its sales tax laws to target Internet sales, Colorado did not characterize a retailer’s relationships with affiliates as a nexus, the legal trigger for an out-of-state retailer to collect taxes on in-state sales..  Severing relationships with them does not change Amazon’s responsibility to collect and remit sales taxes or track and remit sales information, leading some to characterize it’s action as a “political maneuver:”  “‘This action to fire business associates as retaliation amounts to corporate bullying,’ said Alec Harris, an economist with the nonpartisan Colorado Fiscal Policy Institute in Denver. ‘Firing these guys is a huge political statement and a pretty rough one—but it doesn’t change [Amazon’s] legal obligation under this bill.'”  Amazon described the regulations as “burdensome,” unlike those enacted by other states, and “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.”  According to the linked Wall Street Journal article, Amazon’s Colorado affiliates earned about $37.5 million from Amazon-affiliated sales in 2007.

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