The Amazon Tax Debate: Income Tax vs Sales Tax

I just received a comment from another Hubber lamenting the fact that he could not participate in the Amazon affiliate program as a result of being a Colorado resident.  Obviously, there is little that I can do although I did express my condolences.  I would, however, like to point out the obvious in case any state lawmakers from some of the other states that haven't imposed the "Amazon tax" happen to use the internet and would like to impose some logic and rational thought in their legislative career.  I would especially want Indiana lawmakers to take note of what I have to say.

For those of you who are unaware, there are several states which have decided that Amazon affiliates located in the state constitute Amazon's physical presence in that state.  Therefore, Amazon is responsible for collecting state sales tax on products sold through those affiliates.  Amazon does not feel that this is a just tax and from a logistic standpoint would be incredibly difficult.  So Amazon has eliminated all its affiliates in the affected states.

Needless to say, the result of "firing" all the affiliates in those states wishing to impose an "Amazon sales tax" means that the idea of taxing those products has resulted in zero revenue.  The idea of protecting a local merchant who has to collect sales tax is not valid.  Does that mean that residents of those states will stop buying products from Amazon? Of course not! They will either go to the Amazon website or buy from an affiliate in another state. Amazon will not suffer.  They have a great business model.

What about collecting a sales tax from the individual purchaser?  Does the state think that the individual is going to report each internet purchase? That won't happen. I can't remember 15 months later when filling out tax forms which products in my home were purchased from a particular vendor.

Of course, now that there are no affiliates in the state the income that those affiliates were making will no longer be available to tax as income.  Amazon would be reporting that income since an affiliate has to submit a social security number or business tax ID number to be paid.  This is easier for Amazon to track since this information is reported for federal income tax purposes as well.  But now the states won't get that tax.  That income will go to other states that have not imposed sales taxes on the affiliates.

Furthermore, the affiliates in those states will have less income to spend.  Many affiliates make a substantial amount of monthly income which would have been spent at businesses in the state.  Lawmakers fail to realize that sales tax can only be collected when spending occurs.  If their tax policies cause unemployment, then an affiliate with no income cannot be taxed at all.  Why state lawmakers can't even realize something so simple and elementary is beyond me!  I just hope that my home state of Indiana maintains some common sense when it comes to tax policy and the internet.