I got this email today and am sorely disappointed in my legislators who promised me that there would be no new taxes.

Sadly, this provision is buried deep in a much larger bill so it is likely to get overlooked.

"The tax on the category "digital click-throughs" under which the Amazon agreements fall would raise $13.2 million next year, according to estimates by the General Assembly's fiscal research arm."

I'm guessing those folks are also the ones who think that everyone reports income from internet sales on their tax returns every year.

Heh, the government tries harder and harder to find every penny that John Doe is hiding away from them. "Sir, we are aware that your World of Warcraft rogue by the name of "Stabbity" is sitting on 91,234 gold. If you were to sell this digital currency, it could equate to several thousand dollars. We are going to have to arrest you for not claiming this on your tax forms at this time."

@Mark: Maybe they'll repeal the law quickly if enough companies pull out like that.

Good ol' government. Trashing this country one state at a time with their ridiculous taxes. Way to screw the citizens. Keep up the good work. Maybe if this crap keeps happening people will actually put a little research into who they vote for. I say good job (honestly) to Amazon.

What gets me is the whole "law of unintended consequences". In this case, NC wants their grubby hands on folks' money. The result?

Business just leaves.

The best part? It sounds like they're not leaving because of the tax per se, but because of the logistics of paying/enforcing it.

Yay for big government!

The entire country has gone tax crazy. I wish elected officials would do something other than sit around thinking up more ways to tax tax tax and spend spend spend.

I posted to a city council member's blog asking him to think of ways to save my money instead of thinking of ways to spend it. The reply was basically something like "your comment has been noted, now let's talk about the new arts center we want to build".

North Carolina residents who get click-revenue already declare it as taxable income (at least they are supposed to). Google, Amazon et al issue a Form 1099 so it's not something that's easy to hide.

@nucwin83: I think these might also be the folks who believe companies will stand still and allow themselves to get hit by such a tax.

I wish Amazon dropped referrals in New York also. Because the referral system was how the NYS government got Amazon to make NYS residents pay sales tax. And if more businesses did this, maybe someone will take notice, and stop all this tax madness.

@Saboth: I would love to see someone come up with a plan for taxing the in-game currency of MMORPGs and other online games. Would the value of the gold in WoW be worth more than Linden Dollars? Would they also put a tax on armor, weaponry and other items?

It's a good decision on amazon's part. I'm surprised they didn't do the same in New York when they decided that the affiliates program meant amazon purchases would be taxable.

@Mark: A hearty "way to go!" to Gov. Bev Perdue and our bumbling legislosers. Maybe we can bring back Mike Sleazly instead?

@Mark:

Likely to get overlooked? I doubt it. Amazon caught it and I'm sure others will too. And if they don't catch it right away, they'll definitely see it when that new tax comes across their sheets.

@nucwin83:

Maybe the little guy doesn't report revenue, but anyone with any type of market share does report income from internet sales. It's much cheaper to report it than to get hit with fines after the IRS catches them. Say what you will about government, but their are only two certain things in life: death and taxes.

@vladthepaler:

I'm going out on a limb here, but I think the benefits (added income) outweigh the costs (taxes) in NY. Though NC is 10th in population, it's 38th in household income, below the median US household income. Easier to cut out NC than NY.

I did some digging but can't fins much specific. It appears to be a state sales tax - not an income tax.

They don't want to raise taxes on everyone, they just want to find many little pockets of people they can tax separately. That way the outcry is smaller. Many people fall for this, and often think it is OK if they are not directly effected, especially if the reported reason is "for children" or the thing being taxed can be frowned upon.

I really think that if we need to raise revenue, we should raise the tax on everyone directly either in income or a general sales tax. That way the costs will be less per person and not look at certain groups to bare the costs.

One reason that governments are increasing enforcement of infractions that bring in fine income. There are many examples of this enforcement being used only to increase income. They should only be concerned with the actual issue: speeding, parking, whatever. Instead they are playing gotcha like credit card companies fees.

@MaytagRepairman: Indeed. I think the tax will raise significantly less once businesses simply pull out. Way to encourage economic growth, North Carolina.

@squinko - doesn't need firefighters: Actually, Sweden is trying this very thing. They are looking to tax in-game items and currency. [myselkie.com]

@Gramin: There are two problems with your theory:

1) The IRS is massively undergunned and does not have the resources to handle all the tax fraud/evasion that goes on.

2) Most medium size and major business people, those with "market share" as you put it are experts in finding ways to pay next to no tax (major corporations do it all the time too).

Being taxed is certain, but the government actually getting all the tax dollars they are owed is far from it.

@Saboth: State governments have lost their minds. South Dakota announced they were going to pursue people for not paying use tax on anything they purchased out of state. Anything being all the way down to a pack of gum. Since the population base of the state is on the borders of IA, MN and NE this is a problem.

California sent me a letter wanting me to pay income tax on some funds. The money wasn't wages, I have not been to CA for decades. So simply having someone in CA send you money could set off their revenue department coming after you.

@Canino: The thing is that raising taxes is the easy way out. It takes thought and effort to craft a well detailed plan for dealing with less revenue, it takes very little thought or effort to raise taxes. And lets face it, while there may be bright minds in government, they generally don't exist in positions elected by popular vote (with some exceptions). The unfortunate truth is I don't think most politicians have the ability or will to do very much to oversee or reduce spending.

@dragonfire81:

Actually, it's not flawed. The IRS is not capable of pursuing the average Joe who evades the IRS.

The market share businesses pay taxes. Period. Show me a large corporation that avoids taxes. Your claim is unfounded. I see financial information for middle market companies on a day to day basis and I can say, without a doubt, they're paying taxes.

@MatthewB42: That is just plain crazy.

As far as I am concerned there is only one fair and equitable form of taxation. A flat income tax where anything that adds to your net worth is counted as income.

Set a poverty line, no one pays anything on the first 20k say. Then tax everyone a flat 10 or 12% on the money above the poverty line. No deductions for anything.

My taxes would be 5 lines of very simple arithmetic. Everyone could understand their taxes, a laudable goal in my opinion. And the IRS could be downsized because they would only be responsible for verifying income.

Seams like everyone wins and no one could credibly call the his or her tax burden unfair.

My $0.02

If it's a sales tax then NC could charge tax on sales by vendors with a NC presence to NC residents. If having a NC affiliate constitutes having an instate-presence then Amazon would have to charge sales tax on sales to NC residents referred by a NC affiliate. That would be a nightmare. Some sales to NC residents would be taxable and others would not.

@Gramin:

Oops... I didn't finish my first thought. They don't have the manpower to pursue the average Joe who avoids paying 10K in taxes. However, they're perfectly capable of pursuing a large corporation attempting to avoid taxes.

@MatthewB42: i was expecting/hoping for an onion link

@cristiana:

I was just thinking that myself. Probably too much money in it for Amazon to drop the state of NY though. But thats OK, I just buy used via Amazon. Its cheaper, there's no tax and Amazon still gets their cut - and NY doesn't. Seems like a win-win-win to me.

@RobertW.TX: That would require a reduction in the bureaucracy, which means someone would have to give up some of the power they've accumulated. Don't count on that happening any time soon (although I completely agree with you).

@bohemian:

I really think we need to just start over...scrap the government, throw the bums out and start from scratch. It is getting ridiculous when your tax combined is approaching 40%+, and you STILL have to buy your own healtcare.

@RobertW.TX:

Sounds good in theory. Except for this thing called the AMT (alternative minimum tax) and the labor it takes to change the tax code. Since taxes are raised by Congress, it means Congress has to write a new bill, or rather, several new bills. And, whether you like it or not, I think most Americans believe they should get deductions for education expenses... and for charitable contributions... and for having children.

Again, what you say is nice in theory, but in practice, it's much more dificult and complicated.

@Canino:

If only Bill Clinton could hold the Office again. He reduced the Bureaucracy more than both Bush Sr. and Bush Jr. Ironically, they're Republicans and they're supposed to reduce government, yet, under their control, government grew!

If I lived in NC, I would be loathe to purchase anything from the Internet. Why pay taxes on top of shipping?

@Gramin: That is one of the huge problems with the flat tax- everyone thinks things THEY do should be deductible. The thing is everyone does some of these things throughout their life and the cost of the deductions needs to be added to the rate. Why not just have a lower rate and make our personal decisions not taxable events. Our rates would end up lower so the costs would end up about the same.

@RobertW.TX: Except that 10-12 percent wouldn't come close to funding the federal government. You'd have to make a flat tax come closer to 30% to do that, and you'd either have to (1) exempt more income, thus making the One Tax Bracket To Rule Them All even higher, or (2) accept that people in the lower reaches of the middle class would get royally screwed.

Or you'd have to cut spending, but where? You tell me. If I had to do the cutting, I'd start with that five-sided building in Alexandria, VA. Plenty of pork to cut there, I guarantee it. Of course, the same people who swear that the Flat Tax or Fair Tax or whatever they're calling it nowadays would scream bloody murder at the first mention of cutting DoD's budget.

@HurtsSoGood: Egad, that was horrible. Let me fix that last sentence:

Of course, the same people who swear that the Flat Tax or Fair Tax or whatever they're calling it nowadays is the silver bullet that will fix everything would scream bloody murder at the first mention of cutting DoD's budget.

@Gramin: You mistyped "Ronald Reagan".

I'm very suspicious here... I cannot find a single source that references specific legislative text. It's hard to decide for myself if this is a reasonable position or not based on just a couple of blog posts.

Personally, I think that Amazon and other online retailers should suck it up and go ahead and pay sales tax. It would not be as difficult or expensive to implement as Amazon claims. (They already do it for target.com, which they run.) I realize this would probably take federal legislation. Certainly calling an affiliate a "substantial presence" is a bit of a stretch.

@RobertW.TX: I've been the flat tax guru for my circle of friends for a while, trying to flip them all to my opinion. None of them really had any idea of the types of taxes that can be had, but I'm constantly championing it. One person at a time, it's slow but at least I'm making them aware of the alternatives out there. They know keywords like consumption tax and VAT tax...but they dont' realize the pro's and con's.

Little by little I try to bring them on board the Flat Tax train...the obviously fair way to tax everyone across the board.

I find it funny that rich people are "looking out for those less fortunate" when they say flat taxes are bad but consumption taxes are good. hypocrites and asshole one and all.

@tungstencoil: Amazon is not leaving NC.

@Canino: That's because all of your fellow voters (if not you) are telling your council member "Stop spending, except on the things I care about."

@sirwired: It's probably a pre-emptive strike by Amazon. The winds of change are blowing against online retailers - people are starting to think it's unfair that Local Store gets taxed while internet stores aren't.

@RobertW.TX: If my stock portfolio doubles, I've added $X to my net worth, but $0 to my cash. Do I now owe .10 x $X, even though I have no additional cash with which to pay the tax? What happens when the market goes down, and my portfolio drops by $Y? Do I get a refund for $Y x .10?

If you then modify your tax to only count adding to cash position, that won't work either. Employers would then start loading up on compensation via non-cash fringe benefits to avoid payroll tax.

"Simple" ideas end up being more complex than "5 lines of very simple arithmetic."

@Canino:

Oh no, I mean Clinton. Reagan was a liar and a racist.

@sirwired:

Amazon has the means to pay the tax. But the costs outweigh the benefits. Why "suck it up" when it's cheaper just to stop doing business? I don't fault Amazon. This is a mistake made by NC.

I am so PO'd that Amazon would just drop us! I have worked so hard on driving up my sales. It just started snowballing for me and they cut me to the quick! I have no clue who to write or if it will do any good. The letter that Amazon sent us was so cold. I looked at the site they referred us to and no answers. There's help listed for every state that on that page, just not for NC. Does anyone know who to contact or what we can do? Or are we just lying in wait for our heads to be chopped off?

Figures! Always go after the little people who are just getting by.

IRS doesnt handle state taxes.