The recession has finally started hitting home for the government. Various states and provinces world wide are now facing huge tax declines and no easy way to cover their butts. In a brilliant failure the state of Rhode Island is actually doing something to try to solve their problems.
Rhode Island has decided to force state taxes to be collected from online purchases when the purchase was made, even indirectly, through the state. Basically it means that companies with an affiliate program now have to worry about where their affiliates are located to ensure they are collecting and remitting taxes correctly.
I am sure that the government in Rhode Island is busy congratulating themselves on such a brilliant move. This should generate quite a bit of money for them, assuming the various Internet companies out there actually take note and start collecting the taxes. I am not quite sure how this is expected to affect companies registered outside of Rhode Island, or even outside of America. Amazon, based in Seattle, has decided that this new law affects them, so I assume that it at least affects all American companies.
In response to this new law, Amazon has cancelled every single affiliate marketer located in Rhode Island. Net loss for Rhode Island 2000+ jobs and at least 3 million dollars in tax revenue. I expect that this is the first of several announcements from companies that rely upon affiliates for sales.
Online companies have traditionally not charged or collected sales tax. In a few cases companies have had to adjust their prices to build in the tax elements charged by the government but it is very rare for a company to tack on additional charges at the “till”.
Tax collecting costs traditional brick and mortar companies piles of money each year in tracking and reporting. I wonder why governments are knowingly creating more paperwork burden for already struggling companies. This is the time that the government should be streamlining and reducing business paperwork costs. Especially since each job created in this economy for the purpose of government paperwork will kill off at least 2 other more legitimate jobs. Why is the government forgetting this?
If you are an affiliate marketer, or a company who markets through affiliates you will need to take note. The government is gunning for more money from you and they are willing to sacrifice hundreds of people to do it.
Photo credit: melting mama