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'Amazon tax' roils Colorado retailers
Big merchants threaten to cut off small local affiliates if bill passes
Herald Denver Bureau
At a Colorado bookstore, buyers can expect to pay another 86 cents in state sales tax, plus local taxes.
On Amazon.com, “The Lost Symbol" sells for $12 plus shipping costs. Tax free.
And it's the tax-free part that's not fair, said Peter Schertz, co-owner of Maria's Bookshop in Durango.
“What we're asking for as a very small bookstore is just a level playing field," Schertz said.
He is willing to compete with Amazon and other Internet sites, and Maria's has its own Web site, so customers don't even need to visit the downtown Durango store. But people who buy from Maria's online have to pay sales tax.
The Colorado Legislature is debating a bill to add the state sales tax to Internet sites. Democrats have introduced 10 bills to raise a variety of taxes, but it is House Bill 1193 - the so-called “Amazon tax" - that has attracted national attention.
The bill is scheduled to be debated Monday in the Senate. It passed the House last week by the slimmest of margins, 33-32.
While Colorado bookstores and other retailers support the bill, legislators are concerned it could damage the livelihoods of about 4,000 Coloradans who run shop-at-home businesses.
With Internet sales increasing every year, states have been looking for a way to tax online sales. But U.S. Supreme Court rulings have forbid taxes on companies that don't have a physical presence in a state.
New York's Legislature decided in 2008 that “affiliate marketers" establish that presence. Affiliates typically are people who work at home and put up Web pages with links to Amazon.com, Overstock.com and other national retailers.
Rhode Island and North Carolina followed New York's lead, and Amazon cut off its affiliates in those states to try to avoid taxation. Virginia, New Mexico and Mississippi introduced bills this year, but only Virginia's is still alive.
Colorado is the next state in line.
Republicans are opposing the tax, along with nine other tax bills.
“This sends the message across the nation that Colorado is not open for high-tech, Internet, retail-type businesses," said Sen. Keith King, R-Colorado Springs.
The House of Representatives tried to immunize Colorado affiliates by changing the bill to single out people who speak out loud in a public setting - such as a club or church group - to encourage others to visit an affiliate site. Even one such person would be enough to establish a legal link from a retailer to Colorado, which would allow the state to tax all the business' sales.
But big retailers still are threatening to cut off affiliates like Jeannine Crooks of Parker.
Crooks and her husband run affiliate marketing programs for fireplace accessory and candle stores.
“Our 401(k)s have been absolutely decimated, and this is our hope for our retirement," Crooks said. “It's either that or be a greeter at Walmart."
She testified about her fears to the Senate Finance Committee in a hearing that ran late into Thursday night. Retailers will fire their affiliates in favor of people who live in states without Amazon laws, Crooks said.
“The thing is, we need the merchants. They don't need us," Crooks said. “This bill will definitely kill 4,200 small businesses if it's passed."
But Sen. Michael Johnston, D-Denver, said changes to the bill make it clear Colorado affiliates don't put Amazon on the hook for taxation.
“Instead, what's at stake is using Colorado as a battleground for a national policy question," Johnston said.
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