The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Jeff Bezos Is John Galt

Posted on | July 1, 2011 | 26 Comments

Following up on California’s blunderheaded Internet sales tax — motivated by “typically short-sighted, money-grubbing desperation,” says the Orange County Register — I found this video in which Amazon.com CEO Jeff Bezos explained why this tax is not merely idiotic, but unconstitutional:

What it is, really, is an attempt by state governments to impose a tariff on goods sold by out-of-state mail-order vendors, thus usurping the power to regulate interstate commerce, which the Constitution specifically delegates to the federal government.

Whether individual customers order by mail or over the Internet, the transaction is the same, and there is extensive legal precedent that out-of-state mail-order vendors cannot be compelled to collect state sales taxes on such transactions.

What California authorities are trying to claim is that the California-based operators of Web sites which have affiliate programs with Amazon (or other online vendors) constitute a resident “nexus” that permits the state to collect sales tax. But this claim is demonstrably absurd.

The Amazon links on my blog are merely advertisements, for which I collect a (small) commission based on the sales generated by readers clicking through. California’s argument is like saying that, if a magazine based in New York published an advertisment for a Texas-based mail-order company, this advertisement constitutes a basis for making the Texas company collect New York sales tax.

A person who clicks on an Amazon ad might be in Florida or Oregon, so why does the fact that the Web site operator resides in California create a basis for collecting California sales tax on what would otherwise be a mail-order transaction exempt from state income tax?

People warned California Gov. Jerry Brown what he was risking by signing this idiotic Internet tax:

Rebecca Madigan, Executive Director of the Performance Marketing Association, stated, “The devastation is immediate, because the law went into effect upon signing. We tried to communicate to the Governor that this bill would only lead to dramatic income loss of small businesses and job loss, and he signed the bill anyway.”
Similar legislation has been proposed in numerous other states, only to be rejected because those elected officials recognized these proposals do not generate any additional sales tax revenue and, in fact, harm small businesses. When out-of state retailers stopped advertising on in-state websites, the states collect no new sales tax, and in fact lose income tax revenue.

So Amazon shut down its affiliate operations in California, which immediately deprived Bill Quick of more than $3,000 in annual income from Amazon. (That’s waaay more than I collect off Amazon sales, but then again, Bill’s the guy who named the blogosphere.) Jimmie Bise is amazed by the sadism of Democrats.

While the shutdown of thousands of California affiliate accounts was a drastic measure, Bezos was right to do what he did because if he didn’t, every other state would be tempted to try the same unconstitutional tax scam. By putting the economic power of his company decisively in the balance against this scam, Bezos is doing all he can to encourage the repeal of the California law and prevent other states from dogpiling.

Meanwhile, smart people in California are doing the only thing smart people in California can do: Get the hell out of California!

One affiliate, Ken Rockwell of San Diego, the owner of a 12-year-old photography website, said he planned to move out of state. “Will it be Las Vegas or Scottsdale or Ensenada?” he said. “It’s a question of where, not if.”

Like I said, California is Zimbabwe, U.S.A.

Category: California, Taxes

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