Colorado Follows New York: Amazon Resellers Out of Business

Well, it’s happened again: a state has decided to penalize many of the small businesses operating in it by forcing Amazon.com to collect sales tax there. The “how ugly can you make your business change?” culprit this time around is Colorado. It’s just plain not OK. As I told you about as early as February of 2009, when New York led the way in this travesty, the conflict arises when a taxing authority says a company like Amazon.com is “in” their state because the people who sell their goods are located there.

Dig into this, and you can’t help but notice: what’s being flat-out ignored here is that sales taxes aren’t the responsibility of the seller.

States want their revenue, and when you fill out your state tax return you are specifically asked if you made out-of-state purchases on taxable goods that you didn’t already pay sales tax on. If you told the truth (ha!) you’d generate a tax liability for yourself.

That being the case, and given that you pay sales tax to a merchant for them to submit to your state, it seems obvious that it’s the PERSON who is responsible for the tax, and not the merchant.

Essentially, therefore, this kind of land grab by the states is an admission that they need others to collect taxes for them because they believe that their real constituents will lie, and not pay them.

Don’t blame the Amazons of the world. If we enact a national VAT, the issue goes away. If we don’t, the states need to take it upon themselves to find a way to collect that doesn’t put out-of-state companies in a position where they need to act as unpaid tax collectors.

And yes, passing that bill in Colorado, as with the situation that exists in NY, truly did put people out of business. Business Change? No. Business Death.