Remember the old adage be careful what you wish for - it may come to pass. If the state prevails over Amazon we are facing a significant hit on new business startups and job growth. This bill is a business and job killer - in the middle of a recession.
First off, I am not an opponent of adequate taxation. Nor am I opponent of taxes that hit me. In fact, I was one of those that was vocally upset when Jared Polis threatened health care over a tax increase on small business owners - like me.
Second, I agree it is unfair that Amazon does not have to pay sales tax while Target does. Clearly an unfair advantage (although many people, like me, buy from Amazon for convenience - not price).
Third, the state needs the money. We need it bad. And this is one of the few places we can go without a TABOR election (which our legislature is too chickenshit to ask for).
Ok, so why is this bad news? It's bad news for two reasons. The first hits all online businesses and the second hits those selling digital goods. (This is discussed in the context of what the state is trying to accomplish, for Amazon to collect sales tax.)
First the hammer of doom for everyone.
Determining the taxes owed by an address - pretty simple. There are services you can buy that do this and your system can calculate that just as it calculates shipping. That part's easy.
Now comes paying the taxes. Who do you pay? There are a gigantic number of taxing authorities in Colorado. Each has it's own system for tax payment, each has it's own rules. So we have to find out what is required for each area - what fees have to be paid, what forms have to be filled out, when they have to be filed.
Now multiply this by 47 states (3 have no sales tax). A company could be looking at 500+ entities it has to file with. This is not that big a deal for Amazon because it can be spread across so many sales. But for a small company just getting started, where they make 1 sale into a state, and suddenly get pulled into this mess for that state - that is a business killer.
For some it will mean the difference between success and failure. For the rest it means slower growth due to the significant effort on this rather than on growing the company. And both cases mean fewer jobs. A lot fewer because it's the small companies that provide the vast majority of job growth in this country.
Second is the anvil for companies that sell digital goods.
I asked both the City of Boulder and the State of Colorado who gets the taxes under the specific scenarios of most of our sales. These were not hypothetical, these were existing scenarios.
First off, I still don't have answers to half of them from the state Department of Revenue (motto - "we're not doing anything"). Second, about half the ones I did get answers on, the state answers differ from the City of Boulder answers (Boulder has been very responsive - if Bill Ritter wants a competent director for the Department of Revenue - hire Boulder's).
So companies selling digital goods now face getting guidance from 500 taxing authorities. And those authorities will conflict where 2 or 3 will all claim they get the tax on a given sale. We can't collect it 3 times, and if we wait for them to work it out, the sale will go elsewhere.
Sales tax was designed around a physical good being sold at a physical location. Two people set up a coffee shop and they have a total of 2 taxing authorities. The nexus where they sell is very clear cut as the product is delivered there.
If Internet sales pay sales tax, then opening 1 coffee shop has the tax filing overhead of opening 500 - but it still has the profits of just 1.
I look back to when my company started about 5 years ago. If each new sale required discovering and then filing with the relevant taxing authorities. And many of them had been held up as we got a determination as to who got what part of the sale, we would not be in business today.
We can afford it now. But it will cost. And that cost is probably a couple of new jobs each year. Now a couple of jobs isn't much - unless you're one of those new hires and you now have a job.
I understand that the state is desperate for tax revenue. But killing all new online businesses, harming existing online businesses, and forcing software companies out of state - that's not worth the small amount of money this generates.
The determination, collection, and payment of taxes should have as little impact upon people, businesses, and job growth as possible - not the most. Kill this and put a measure on the ballot to raise income taxes on the rich - I'll fight for that. Because even if you collect twice as much from me in additional income taxes as you would get from the sales tax - it's still less money out of my pocket.
And for all of you looking for a job, or looking for a better job - cross your fingers that Amazon wins.
