Governor Bill Ritter may still be mending from his recent bicycle spill, but he's clearly in fighting trim judging by his feisty response to news that Amazon has closed the accounts of its associates in Colorado in retaliation for a newly enacted tax measure that impacts online retailers based out of state. About the move, a Ritter statement declares in part, "Coloradans certainly deserve better."
But Republicans appear to love this development. They quickly piled on Democrats as soon as the news broke -- which hardly caught Ritter spokesman Evan Dreyer off-guard. "What you're seeing from Republicans is political opportunism, which isn't surprising to anyone," he says. "That's what they do."
Most observers first heard about the strategic withdrawal of Amazon (which hasn't returned Westword's calls for comment at this writing) in an unusual way: Instead of putting a self-generated story on the home page of its website, Channel 7 linked to a blog by Nat Torkington on the O'Reilly Radar website. In his piece, Torkington shares an e-mail sent to all Amazon associates in Colorado:
Dear Colorado-based Amazon Associate:
We are writing from the Amazon Associates Program to inform you that the Colorado government recently enacted a law to impose sales tax regulations on online retailers. The regulations are burdensome and no other state has similar rules. The new regulations do not require online retailers to collect sales tax. Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to "voluntarily" collect Colorado sales tax -- a course we won't take.
We and many others strongly opposed this legislation, known as HB 10-1193, but it was enacted anyway. Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado. We plan to continue to sell to Colorado residents, however, and will advertise through other channels, including through Associates based in other states.
There is a right way for Colorado to pursue its revenue goals, but this new law is a wrong way. As we repeatedly communicated to Colorado legislators, including those who sponsored and supported the new law, we are not opposed to collecting sales tax within a constitutionally-permissible system applied even-handedly. The US Supreme Court has defined what would be constitutional, and if Colorado would repeal the current law or follow the constitutional approach to collection, we would welcome the opportunity to reinstate Colorado-based Associates.
You may express your views of Colorado's new law to members of the General Assembly and to Governor Ritter, who signed the bill.
Your Associates account has been closed as of March 8, 2010, and we will no longer pay advertising fees for customers you refer to Amazon.com after that date. Please be assured that all qualifying advertising fees earned prior to March 8, 2010, will be processed and paid in accordance with our regular payment schedule. Based on your account closure date of March 8, any final payments will be paid by May 31, 2010.
We have enjoyed working with you and other Colorado-based participants in the Amazon Associates Program, and wish you all the best in your future.
The Amazon Associates Team
Dreyer's take on that? "There was some controversy about this bill when it was initially introduced," he concedes. "It was coming particularly from the associates or affiliated businesses that Amazon has these relationships with. But we listened to those concerns, worked with them, and recrafted and modified the bill so there would be no impact."
Of course, opinions vary about this last assertion. The law asks online retailers to either start collecting the 2.9 percent sales tax that's placed on goods sold in brick-and-mortar establishments in the state or to inform their customers on an annual basis that they need to do so. With that in mind, Dreyer says "there's no reason under this legislation that they should have or needed to have done this."
Maybe not -- but the argument that the move was the removal of a tax exemption, not the imposition of a new tax, remains confusing for both the public and the press. Note that an Associated Press story on the Amazon development started with the sentence "Amazon is cutting off affiliates that help it sell products in Colorado because of a new tax on online sales." That prompted this e-mail from Katie Reinisch, a spokeswoman for Democratic legislators:
Dear Capitol Corps:
The below AP story mis-states the status of the out-of-state retailers/online sales tax found in HB 1193 -- IT IS NOT A NEW TAX.
The bill requires online retailers to collect and pay to the state sales tax, the same 2.9% sales tax that HAS ALWAYS EXISTED and has always been required. Online, out of state retailers have not collected the tax to this point. We are now enforcing the law and making them pay what every other main street retailer pays -- a 2.9% sales tax.
We expect it will bring in over $4.5 million a year.
It's also generating bitching aplenty from Amazon associates, whose comments on the Torkington blog have exceeded the triple digits. But Republicans are in their glory. Here's their take on the situation, complete with we-told-you-so comments from lawmakers Greg Brophy and Josh Penry:
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Democrats "go it alone" strategy on Internet taxes hurts Colorado
Just two short weeks after Democrats in Denver and Gov. Bill Ritter railroaded a tax increase on Internet purchases into law Amazon.com is severing ties with its Colorado affiliates.
The new tax was signed into law on February 24 and will increase taxes over $100 million in the next two years. In a strongly worded letter to its Colorado-based Amazon associates, the company called the new Internet tax "burdensome".
"Now that the ruling party has decided to go it alone and tax the Internet, young, tech savvy entrepreneurs have lost a great business opportunity in Colorado," said Sen. Greg Brophy, R-Wray. "We were afraid this would happen. It's so unnecessary, let's roll back the law. They can find a different way to tax the Net."
Amazon makes is very clear the decision to stop advertising through its associates based in Colorado is a direct result of the new law. "There is a right way for Colorado to pursue its revenue goals, but this new law is a wrong way," the letter said.
Effective today, Amazon will no longer pay advertising fees for customers referred to Amazon.com through Colorado affiliates. Amazon will continue to advertise in Colorado through other channels, including associates based in other states.
"The day that Economics 101 was being taught, the Democrats must have been absent," said Senate Minority Leader Josh Penry, R-Grand Junction. "When government raises taxes in a recession, it kills jobs. Shame on the partisan Democrats in Denver for ignoring this rudimentary economic reality."
Democrats ignored repeated warnings from statehouse Republicans that implementing a new tax on Internet purchases would kill jobs and dampen economic growth in the state. The tax on Internet purchases was one of a package of "dirty-dozen" tax increases passed by Democrats last month. In addition to raising taxes on Internet sales, the tax measures raised taxes on everything from candy and soda to agricultural compounds.
No wonder Ritter is so pissy in his statement. Here's what he had to say in its entirety:
"Amazon has taken a disappointing - and completely unjustified - step of ending its relationship with associates. While Amazon is blaming a new state law for its action, the fact is that Amazon is simply trying to avoid compliance with Colorado law and is unfairly punishing Colorado businesses in the process.
"My office worked closely with Amazon's affiliates and associates to modify House Bill 1193 to specifically protect small businesses, avoid job losses and provide a fair, level playing field for on-line retailers and Main Street, brick-and-mortar retail shops alike.
"Amazon's position is unfortunate, and Coloradans certainly deserve better."
No doubt Ritter's fractured ribs and dislocated shoulder are continuing to pain him. But stories like this one have the potential of doing more long-term damage.