Just a short update on California. According to a short article in the Los Angeles Times Blog, Governor Schwarzenegger has vetoed the Internet tax.  The article also quotes Overstock as stating they will reinstate California affiliates. Let’s just hope the veto sticks.

They have also vowed to terminate affiliates in any state that passes new nexus rules that would require them to collect sales tax.

You can read the article at the LA Times Blog

I am angry, disappointed and sad.  I am also  truly dismayed at how little has been learned from last year and how little has changed. 

Lesson has not been learned.

Last minute terminations are pouring into the emails of affiliates in Hawaii, North Carolina and Rhode Island.

Last year everyone blamed day before terminations on  the lack of information or on the speed of the legislation.

Those were just convenient excuses.

Silence from others continues to be deafening.

Yesterday,  I was talking with a merchant about the Internet tax situation. This merchant is concerned about the impact of collecting tax, they wonder if it would have an adverse effect on their customer’s shopping. My thoughts have always been that it would make little difference. I base this on my own experience and on discussions I have had with friends, family and even my website visitors. We shop online because it is more convenient. You can almost always find what you want in stock, it is usually delivered within a couple days and you  don’t have to deal with crowds or traffic. I am sure some people do shop online to save taxes but I wonder what the percentage is.

The  merchant I spoke with asked if I could find anything to back up my thoughts. He needs something to show his partner to convince him not to sever ties with affiliates in an affected state. I have begun researching to find data to back up my opinion. It didn’t take long to find information. I immediately found an article at Online Wall Street Journal.

An article titled ”Amazon Fights Sales Tax Drive, Despite Modest Impact” written by By Scott Morrison of Dow Jones Newswires states that research has shown that sales tax collection has only limited impact with online sales.

But analysts said taxing Internet transactions would likely have a minor impact on the business of retailers like Amazon. Bruce Cundiff, an analyst at Javelin Strategy & Research, said Amazon has firmly established its reputation and relationships with online shoppers, and estimated a sales tax might reduce the company’s overall revenues by “low-single digit” percentages.

Mr Morrison also provided a quote from Bill Fox, one of the researchers involved in an University of Tennessee in-depth study of the impact of sales tax and online shopping. According to the article, Mr. Fox says that people are so comfortable with shopping online that sales tax has little impact.

In my opinion, “State and Local Government Sales Tax Revenue Losses from Electronic Commerce” By Donald Bruce, William F. Fox and LeAnn Luna, is a must read for everyone. A copy of this is available to read at the Streamlined Sales Tax Project ( Streamlinedsalestax.org )  website  Supporting Documents for Information on Federal Legislation for Streamlined Sales Tax. There is also a second article, “State Revenue Report for April 2009″ that contains fascinating information.

I will continue to look for additional research but this should serve as  a reminder to merchants, don’t make  decisions without knowing the true impact of collecting tax.

Like many others, I wonder why Amazon has decided to remove affiliates in some states with an Internet tax. Perhaps all the tax collection is just too much?