Amazon Associates Cuts Off Colorado Affiliates Over New Sales Tax Law

A new Colorado law to force Amazon to collect sales taxes resulted in Amazon Associates being terminated in Colorado.

The law was crafted to get around a U.S. Supreme Court ruling that states that a retailer need collect state imposed taxes on sales only if the retailer has a significant enough physical presence in the state, or a “nexus” of business in the state. Since Colorado can not directly compel Amazon to collect sales taxes, the state instead passed a law deliberately making it nuisance to do business with residents of Colorado.

Technically, whenever a person makes an online purchase, they still owe the sales tax due on that purchase even if the online vendor does not collect the tax directly. The customer is legally obligated to voluntarily forward the appropriate sales tax payment directly to the state, which, of course, never happens. The new Colorado sales tax law states that for any sales made via Colorado residents who participate in the Amazon Associates program to customers whose purchases are shipped to a Colorado address, Amazon must mail a letter to the customer stating the amount of sales tax the customer owes.

Colorado Sales Tax Law Designed To “Get Around” The Constitution

What makes this new Colorado law so slimy and underhanded is how disingenuous it is. Both the State of Colorado and Amazon know that sending these letters will not result in any significant increase in the amount of sales taxes collected by the state. In fact, the only real effect of the legally required letters will be to waste more paper, and increase the cost of doing business in Colorado for Amazon. The legislation’s supporters hoped the law would be such a burden that Amazon would choose to just collect the sales taxes for the state instead. In other words, the legislature deliberately passed a law that they didn’t want anyone to follow in order to make companies do something that the state cannot legally force them to do. It’s a trick worthy of the sneakiest con artist.

The law is also decidedly self-serving since it only compels online retailers to notify residents of how much state sales tax they owe. There is no requirement to notify residents of any city or local taxes that they might owe on their purchases!

Of course, Amazon has no intention of implementing such a burdensome procedure. To track which sales were made via Colorado based Amazon affiliates, and then match those sales to shipping addresses in Colorado, and then to mail those residents letters telling them how much state sales tax they owed, would be a big logistical challenge, even if the company did want to comply with the law.

Instead, Amazon responded the same way it has in the past, by terminating the participation of Colorado residents in the Amazon Associates program, just like it did in Rhode Island and North Carolina. (A similar law in New York was challenged with a lawsuit. Presumably, Amazon would end its New York program if they lose the lawsuit.) Colorado lawmakers seemed surprised or dismissive of the program termination in their state, calling it a publicity stunt. Apparently, these legislators can’t be bothered to research the laws they are passing before they vote on them or they would have seen what happened in the other states that did the same thing.