Hawaii Governor Vetoes Amazon Tax Law

California follows suit

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Hawaii Governor Linda Lingle has vetoed a bill that would have required online retailers such as Amazon.com and Overstock.com to collect and pay sales tax on their affiliate programs within the state.

Earlier this week both Amazon and Overstock had notified affiliates in the state that they would be ending their programs there due to the new tax requirements.

Linda Lingle
Linda Lingle

"I am vetoing this bill immediately to help ensure Hawai’i is not economically hurt by legislation that was not well thought-out and would have negative consequences for non-profits such as the University of Hawai’i bookstore, and businesses throughout our State," Governor Lingle said. 

"I am hopeful by vetoing this bill that mainland-based companies will promptly restore their relationships with our State."

Amazon said in an email it would be willing to re-open its associates program in Hawaii if the tax law was vetoed.

"In the event that Hawaii’s governor vetoes this tax collection scheme, and that veto is not overridden, or in the event the law eventually is repealed, we would certainly be happy to re-open our associates program to Hawaii residents," Amazon said.

Arnold Schwarzenegger
Arnold Schwarzenegger

California Governor Arnold Schwarzenegger also vetoed similar legislation that would have forced online retailers to collect and pay taxes on their affiliate programs within the state.

"I vetoed the majority vote tax increase passed by the legislature. With unemployment at an all time high, we should be doing everything we can to – keep jobs and create jobs – in California," Governor Schwarzenegger said.

"That is why my Administration immediately contacted Overstock.com when we learned of this news and, I am pleased to announce Overstock.com has reversed its decision and will continue to do business with affiliates here in California."

Amazon and Overstock have pulled the plug on affiliate programs in North Carolina and Rhode Island due to similar tax collection schemes. Both companies have signaled they would be open to restarting their programs in those states if the tax laws were repealed.


Hawaii Governor Vetoes Amazon Tax Law
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  • http://www.laokay.com Steve

    Not that I’m doing much business with Amazon.com, but this is merely sales tax, which is being collected and passed to the state for purchases of residents within the state of California, so why is it that Amazon.com wants to cease doing business with affiliates located in those states?

    I mean so what if you still have to pay sales tax. Isn’t it mostly cheaper online anyways to start with? A lot of times even with sales tax added, and a lot of times free shipping, it’s cheaper to buy things online, and if not, at least you can compare prices and get the cheapest, if it be in a store, so be it.

    I just do not get it. I almost feel it’s like Amazon.com saying it can’t be competitive by collecting the state’s sales tax.

    • Guest

      You’ve obviously never been involved in keeping track of — and filing — sales tax receipts, which is an even uglier mess when it involves administering for the vast array of tax jurisdictions (which are not limited to only the state level in some cases), each with their own peculiar rate structures.

      If you don’t get why that’s a burden, it’s probably because you’ve never actually run a business.

      • Guest

        Collecting sales tax is no joy; I do not believe it is actually passed on to the respective states as it is too cumbersome.

        • Guest

          It’s a line item on the bottom of an invoice.

          After a while, nobody will hardly notice.

          Just like when you buy something in a store, or at a restaurant.

      • Steve

        I’ve worked for several at the level for one where I was running their finances and over 200k a month would go through my hands. Plus they had a reseller license, so I know all about shipping stuff out of state and paying sales taxes (and I learned how to drive a forklift too). Paying the taxes was quarterly and took 5 minutes to do, which mostly was due to the printing of the check to the state.

        That is what computers are for, to figure out what tax rate should be paid and what state it’s being collected for.

        Yes, somebody in accounting will have a little bit more work to do. Big deal. What happens when every state starts asking for taxes on online sales? What’s Amazon.com to do, go out of business and that’s that? Sales tax defeats the mighty Amazon.com and all other online retailers, forces some to open retail stores, where sales tax is acceptable to the public? Get real!

        But I’d like to hear what kind of income we’re talking about here that they are going to loose by turning down affiliates left and right as each state starts wanting their piece of the action of online sales for purchases being shipped to that state.

        California has what’s called personal use tax. So technically all Californians should be paying sales tax for online purchases, but for items bought outside of the state of California it’s not up to the retailer to collect and pay the tax, it’s up to the purchaser. Other states may have similar personal use tax laws as well, you’ll have to check.

        I think it basically comes down to this. Let’s say you found the best price on something and it’s located in Boston, and you’re in Los Angeles, the law would require Amazon.com to collect the sales tax and send it to California at their rate.

        Where Amazon.com may think it’s crazy is that there will be some states where partial payments go to seperate governmental entities, and then you have each state, so quarterly, or sometimes it might be monthly, there will be tax payments and it can be a nightmare to sort it all out, so I do see a point there, however I’d still like to see if it was not worth hiring a couple of more accountants than loose the income from those affiliates who were terminated.

  • http://cableorganizer.com Paul Holstein

    While many online retailers sell for less than their bricks and mortar competition, their costs are not necessarily less than an off-line store’s would be. For midsize online sellers, their costs are often much more than a midsize store. online sellers have the same costs of offices and warehouses with the electricity, insurance and other costs that come with them. Additionally, they also have to handle every package twice and box them as well for delivery. Traditional stores only have to handle the item once when it is received by the store, the customer does the pickup and delivery.

    On top of that, online sellers have additional IT staff, Customer service staff, marketing departments that include PPC and web analytics and finally professional writers that traditional stores do not have. Unfortunately, there is a myth that online sellers have it easy. The truth is that it’s hard to make money online.

    • Guest

      You are beyond incorrect. Online sites, depending where you go can be MUCH LESS EXPENSIVE. Try shopping at commercial stores and see.

  • http://www.commerceregistry.com Lee

    For more than 9 years now states have been attempting to find a way to collect sales taxes they have lost due on online sales that are being delivered outside the business’ host state.

    Many years ago, to combat the loss of sales tax some states created a Mail Order/Telephone Order sales tax. Not all states created this type of sales tax. Each state does have a Nexus (not the shampoo) Law which clearly states that if a business has a nexus then the business must charge sales tax as appropriately apportioned.

    Clearly the North Carolina, Rhode Island and New York (which seems many have forgtten about) have attempted to extend the Nexus Law to include affiliate marketers. Affiliate marketers are by extension sales representatives who fall within the Nexus Law as a nexus within the state.

    The states are well within their right and protected by the US Constitution to set up their own laws.

    The problem isn’t necessarily one of collecting, managing and paying sales tax for the various states. The problem is more cost/benefit to the business being forced to spend money on something a “third-party” state is demanding. The cost is all on the business with no benefits.

    Programming sales tax calculations with all the various sales tax levels is virtually impossible. Several companies have been created to provide sales tax calculations. Even with those service providers available the cost is still on the business. The business now needs to reprogram their purchase and data collection systems to incorporate a third party. The third party could have a technical program and the cost the business money and customers.

    States need to change their sales tax laws to be consistent across all states. One level of sales tax; not a portion for the state, the city and the county. Then no exemptions on dairy, produce, clothing, or anything else. Perhaps better yet, no sales tax at all–some states get along well without sales tax. Just tax things differently!

  • http://www.theweightlosswebsite.com John Mowatt

    Collecting sales tax for numerous different levels of government in various states,provinces and federal jurisdictions is the worst possible nightmare for an online seller. It is also a near impossible scenario for the likes of Amazon and eBay who are expected to monitor all of this and ensure compliance.
    The only possible result is that affiliate business for these huge companies becomes so impossibly complicated that they have to shut it down. This means a loss of income for the thousands of mostly small online affiliate sellers involved and for the parent companies.It is a no win situation.The state collects nothing.The companies and affiliates lose their business.
    This is simply an ill thought out attempted cash grab from the states and jurisdictions involved which is unworkable and only negative in its results. John< a href="http://www.theweightlosswebsite.com">lose weight fast Mowatt

  • Arnold

    We are being taxed to death. Stop accepting new taxes as a just a penny here, a penny there, no big deal. It all adds up in the end.

    Government needs to stay within budget and stop with the hand outs. Everytime you give in to another tax, twice the money will be spent and a new tax will be around the corner to compensate. The people that were smart enough to understand this protested and created America. Don’t let us become what we escaped in the past. (Although it may be too late!)

  • http://www.stonerscolony.com FaTe

    It really is just too bad for the high street shops its like MANY stories going on at the moment regarding advertising, Fair play and of course who can forget the AP.

    What they all have in common? Failure to comply to modern day standards and services and the only way your primitive minded Governors know what to do is make on-line services more expensive…

    Sorry harsh words but that’s purely retarded.

  • http://www.independentcomputerconsultant.com/ computer consultant

    At least some states are not raising taxes

  • http://www.warriorforum.com/members/haloreachaimbot.html Jessie Mohamed

    You really make it seem so easy with your presentation but I find this topic to be really something that I think I would never understand. It seems too complex and extremely broad for me. I’m looking forward for your next post, I will try to get the hang of it!

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