Amazon Terminates Illinois Affiliates

> They have to pay a shipping tax ... that eliminates Amazon's competitive advantage.

Not really because Illinois based businesses have to ship their goods into the state as well and then have their customers pay Illinois sales tax on top of the shipping cost reflected in the sales markup.

I disagree. Consider the following sequence of examples:

1. I have a store in Oregon, a US state with no sales tax. You live in France, and while on vacation here, you buy a trinket, and carry it home in your luggage. Clearly, I don't have to pay French sales tax. You might owe some import duty when you bring it home.

2. Suppose instead that the trinket is big and heavy, so rather than putting it in your luggage, you have me mail it to you. Its still pretty clear I shouldn't have to pay French sales tax.

3. When you get home, you like the trinket so much, you want a second one. You know that your cousin will be visiting the area, so you give her money, she gives it to me, and I mail you the second trinket. You probably still agree I don't have to pay French sales tax.

4. Suppose your cousin, and nobody you knew, was going to be near my store. So instead you hire an agent to deliver me the money instead. Now perhaps its starting to get a bit murky, but I don't see that the agent is morally different from your cousin, and the use of an agent should not avail me to French sales tax liability.

If that agent is named "the postoffice", then what we have is a typical mail-order business. And I think you can make a good case that online business should be treated a lot like mail-order business.

* * *

Now if we repeat those examples with my store in California and you in New York, there are two differences. First, California has sales tax, so in the first example, California sales tax would unquestionably be owed. Second, at some point along the way to the last example, we became engaged in inter-state commerce. The United States constitution forbids states from regulating inter-state commerce. This has been construed to mean that mail-order business is interstate commerce, and as such, neither the state of the seller nor the state of the buyer have a right to impose sales tax. Online business has, correctly I believe, been treated the same as mail-order. Most states have a "use tax", which requires a tax be paid on new goods brought into the state for use in the state. The problem is out of state sellers can't legally be required to collect it, or even report enough details for the state to reasonably enforce it.

Legal issues aside, allowing inter-state commerce to be used as a sales tax evasion scheme doesn't seem like good public policy. But the obvious fix - collecting sales tax for the locale of the buyer - is not logistically simple: states, counties and cities can all impose their own sales tax, so across the country there are thousands of different government authorities to which sales tax must be remitted and thousands of different tax rates which are constantly changing. Requiring every online seller to keep track of that - and exposing them to audit liability from all these different authorities, would not be beneficial to public policy either.

The vendor never has to "pay" any sales tax: they collect it (my initial wording was wrong).

It's the buyer who has to pay sales tax. Being French, if I buy anything anywhere in the world, I owe the French government 20% of the amount of that purchase; if I'm able to hide my purchase in my suitcase, then I'm evading taxes, but I'm certainly never exempt.

The crux of the matter is whether Amazon is an "out of state seller": is it? When an Illinois resident buys something from Amazon from the comfort of their own home in Illinois, they are not importing something from another state.

Amazon contends they are, though; they may have a case but I very much believe they will lose in the end.

No, read the damn paper..Illinois is bankrupt they are asking for sales taxes to get them out of debt..

5. Suppose you get so many orders from France that you figure it makes more sense logistically to bulk ship items to a central location in France and then drop ship from there with the French office merely acting as a forwarding location. Surely this is roughly equivalent to the previous scenario.

6. Since demand from France is fairly predictable, you figure you can actually ship based on anticipated sales, shortening fulfillment time. Surely this is roughly equivalent to the previous scenario.

7. Since you realize the drop ship location is fairly close to many of your customers, you can offer a saving to the customer by allowing them to physically travel to the warehouse and collect their goods. Surely this is roughly equivalent to the previous scenario.

8. Since customers are frequently coming to pick up their orders, you realize you can neatly and logically order the items in your warehouse to facilitate easy retrieval of pickup orders. Surely this is roughly equivalent to the previous scenario.

9. Since people are coming into the warehouse, it makes no sense to force them to do the purchasing online when they could just wander through the warehouse, decide what they want and purchase right there and then. Surely this is roughly equivalent to the previous scenario.

10. Suppose you now figure out that it makes sense to advertise this warehouse space since people in the surrounding area could come in, wander through the aisles and make impulse purchases. Also, investing money in improving the physical appearance of the warehouse will also draw people in. Surely this is roughly equivalent to the previous scenario.

11. You figure out that it makes sense to place multiple warehouses in different places around the country since this will attract more people from that local area. Surely this is roughly equivalent to the previous scenario.

12. Given how logistically complicated this has become, you hire an entire French team who operate largely independently of the US parent office and manage the roll out of these fulfillment centers (they call them le store). Surely, but surely, this is roughly equivalent to the previous scenario!