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State sales tax debate goes online

Posted July 1, 2009

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— Cary resident Fred Tutwiler works from home primarily as an Internet marketer and makes his living off the Web.

His main source of income is click-through sales from links he has on his three Web sites to other companies' sites.

Amazon opposes budget provision calling for online sales tax Amazon opposes budget provision calling for online sales tax

For example, if a visitor to his site purchases a product on another site using the link on his page, the company pays Tutwiler a commission.

But some of those commission opportunities are disappearing because of a provision in the state budget proposal that clarifies when out-of-state retailers must collect sales tax on sales made in North Carolina.

Amazon.com is the latest company to bail.

Last month, Tutwiler received a notice from the online retail giant informing him that his associate account was closed as a "direct result of the tax collection scheme expected to be passed any day now by the North Carolina Legislature."

To help fill a projected $4.6 billion budget shortfall, Democratic lawmakers want online companies, such as Amazon.com, as well as music and video download sites, that have a presence in North Carolina to collect sales tax.

Doing so, they have said, would generate up to an estimated $18 million a year.

Amazon.com generally does not charge sales tax on purchases made through the site – an exception is in New York, where the state won a lawsuit that requires Amazon to collect sales tax.

The company argues that it doesn't have a presence in North Carolina and that its affiliates serve as advertisers. The state, however, claims the affiliates are representatives doing business on behalf of the company.

Seven more states are currently considering similar legislation. Amazon.com has also dropped affiliates in Hawaii and Rhode Island over similar disputes.

Those in support of the budget provision have said it also has to do with fairness. A local company is at a disadvantage if it collects a sales tax compared with an online retailer that does not, some lawmakers have said.

Sen. David Hoyle, co-chairman of the Senate Finance Committee, wants the Department of Revenue to go after years of back taxes from Amazon.com

"We're trying to correct a wrong, and I'm sorry some innocent people may be getting hurt in the process, but Amazon owes us," Hoyle, D-Gaston said. "They've got to pay us."

Tutwiler disagrees.

"They're not doing it to make it more fair to brick-and-mortar businesses," he said. "They're doing it because there's billions of dollars a year sold on the Internet, and they want a piece of it."

So do some lawmakers.

“Seeing how many holes we can shoot in our foot is not an economic strategy North Carolinians can count on to reduce our record 11.1 percent unemployment rate,” Senate Republican Leader Phil Berger, R-Rockingham, said.

Berger has called the plan "just the beginning of the job and small-business losses for North Carolina’s economy."

“We need to be finding innovative ways to attract business to North Carolina, not creating obstacles that drive businesses and jobs from the state."

12 Comments

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  • ohmygosh Jul 3, 2009

    "Did our wonderful lawmakers ever think that maybe people buy online because the local businesses don't have the items we are looking for?"
    Right on! There is little to choose from here or within 20 miles of here. The local merchants are yelling "foul" because internet sales are not taxed. However you ask them, "Do you have a website" Most answer no and we don't have the knowledge to do so. They haven't a clue that a web presence could help their bottom line.

  • bottotina Jul 2, 2009

    It's not just Amazon, I have received notices from ALL my Affiliate MAnagers. I will loose ALL commissions. As to the "Brick-and_Mortar" stores - they don't have a website? And what is their excuse for not charging Sales tax to out-of-State shippments, hm?

  • skiallyr Jul 2, 2009

    I already pay a Use Tax with my State Income Tax for online purchases so I'll look for merchants that aren't in NC when I shop online - makes perfect sense to me. Now that the sin tax has gone up so much, should I should look online merchants and save my $$ - Something our elected officials can't seem to figure out.

  • jet2rdu Jul 2, 2009

    If the jokers on Jones Street could find half as many ways to save money and cut spending as they do find new ways to tax the citizens of NC, we would not have a budget problem.

  • fedupin benson Jul 2, 2009

    1st:Anyone ready for a RECALL ELECTION yet?
    2nd:This is a blatant theft attempt by NC. Amazon does not have a presence in this state. They are trying to tax "click-thru" ads, when there is no actual transaction taking place. Who knows where the buyer is. Why should they pay NC sales tax if they don't live here? To my knowledge, there is a "use tax" that is supposed to be paid on mail-order and internet items, but it is rarely collected.
    3rd:All we hear abut cutting is "essential" services.. Where's the cutting of non-essential services, such as ESL, free health care for illegals, putting illegals in our public schools.. etc.. Just a money grab to get sheeple to not be outraged about a HUGE tax increase. The winds of change are blowing, and its not the change that politicians want or expect. That's the main reason the 2nd Amendment is being gutted. They seem to forget our founding fathers preached revolution
    Last:BRAVO to Amazon for showing they will not be taxed w/o representation.

  • pappybigtuna1 Jul 2, 2009

    WHY? are the tax revenues not made public. WHY? is the sending not made public, I want to see the separation between salaries and services made public information. How much is the total govenor package costing? How much are the DOT salaries? How much is "pork barrel" sending is going on? WHY are we spending over 350 million dollars a year on school bussing? WHY? can't the school board find a contractor that lives in NC to build schools? -- I KNOW LET'S REELECT WHAT WE ALREADY HAVE -- Yea go ahead and tax me to death..........

  • whatusay Jul 2, 2009

    Problem with the state budget is - THE STATE WILL ALWAYS SPEND EVERY PENNY THEY TAKE IN AND INCREASE NEXT YEARS BUDGET...EVERY YEAR DEMANDS MORE SPENDING. When the state had a surplus (which is unlikely to ever happen again) it spent every cent instead of saving some for shortfalls like we see now. Just incompetent people steering the ship.

  • 1carpe Jul 2, 2009

    Sen. David Hoyle, co-chairman of the Senate Finance Committee, wants the Department of Revenue to go after years of back taxes from Amazon.com

    "We're trying to correct a wrong, and I'm sorry some innocent people may be getting hurt in the process, but Amazon owes us," Hoyle, D-Gaston said. "They've got to pay us." Would one of you yahoo's (or one of your minions) in the legislature explain why it was not wrong for internet companies to do this 4 years ago when we had a surplus (which you squandered). You want to pass a new (and dumb) tax now, fine...but if it the untaxed internet sales were wrong in the last 10 years, and you idiots go to court to collect them, you are publically admiting you have done your job in last 10 years. Which by the way if you had done your job, WE WOULD NOT BE IN THE SHAPE WE ARE IN NOW. The best thing which could happen to this state is the entire legislature NOT COME BACK TO RALEIGH AFTER THE 4th.

  • whatusay Jul 2, 2009

    "Those in support of the budget provision have said it also has to do with fairness. A local company is at a disadvantage if it collects a sales tax compared with an online retailer that does not, some lawmakers have said."

    Not neccessarily...when you add in shipping internet costs are usually higher. But, the internet gives a customer a better chance of finding price deals. I believe sales taxes are illegal. Why should anyone have to pay the state for the right to buy something?

  • ENLIGN Jul 2, 2009

    "(affiliates) are representatives doing business on behalf of the company"?? WHAT?? Do they handle inventory? Do they accept returns? Do they provide customer service? no. No. NO. They are being paid for driving traffic and that is all. Internet marketers don't even know who is clicking on their links or if they buy anything at all until and unless they get a commission.

    The NC State leadership needs to cut programs and benefits. If we can't afford them we must cut them. Unlike small businesses (especially here in NC) there is more to be saved by the State in cutting expenses than raising revenue.

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