As you may have heard, the advertising tax, HB-1193 passed the Colorado House. The next round goes to the Colorado Senate.
Until then, I thought I’d share an email I got from Representative Beth McCann. Unlike some of the other cut and paste emails I’ve received from committee members and state representatives, hers is thoughtful and on point.
I like that she pointed out that smaller companies with affiliates in Colorado (like bloggers who sell ebooks or blogging conferences with affiliate programs) won’t have to pay (or charge) tax. Of course, this means the big boys like Overstock and Amazon will pay – and are being targeted.
Hi Ms. Nichols,
Thank you for your comments. This is certainly a very challenging time for individuals and businesses as well as governments with respect to the economy and our budget. I appreciate your taking the time to write and will keep your comments in mind as we struggle to come up with reasonable solutions to the budget situation.
HB 1193 will require online retailers to collect sales tax from Colorado residents who purchase products online if the retailers have an affiliation with a Colorado company that actively engages in solicitation on behalf of the retailer. The sales tax must only be collected if the retailer's cumulative gross receipts from Colorado sales generated by all affiliates in the state exceeds $10,000 in the preceding year.
I realize that this change will adversely affect many Colorado companies who manage online advertising for large out of state retailers. Many of you have emailed about your concern that these retailers will no longer allow advertising by Colorado companies and will move their contracts to out of state companies. If this happens, it will certainly have a negative impact on some Colorado businesses and it is possible it will not bring in the revenue projected.
However, it is important to remember that we are dealing with sales tax that is legitimately owed to the state of Colorado. It is also important to remember that the current situation has a very adverse effect on our own Colorado retailers who must collect sales tax, particularly independent book sellers who compete with huge companies like Amazon. Those Colorado residents who go to our retail stores and purchase products from our local businesses must pay sales tax and those who operate the stores must collect the tax and pay the state. By allowing these large out of state retailers to avoid paying Colorado sales tax, we are not only adversely affecting our state services, we are hurting our local retail businesses.
I agree with those of you who have said this should be handled at the federal level and I urge you to contact your Congressional representatives and make that argument. However, Colorado and other states must move forward this time to address our significant budget shortfall. The drafters of our legislation have looked at what other states have done and have learned from their efforts. As a result, our bill has a very narrow definition of affiliate. We will continue to look at this legislation to evaluate its impact.
Please rest assured that we continue to search diligently for savings in government. We have cut public and higher education, health care, mental health care, state services and many others. All of these actions are painful and negatively impact some people and businesses. Thanks for sending me your thoughts.
Sincerely,
Rep. McCann
Rep. McCann brings up a very valid point that it’s hard for independent and chain bookstores to compete with online booksellers like Amazon – not only on price and convenience, but on not charging sales tax as well.
Still, I believe that Amazon and other online sellers will cancel affiliate programs to continue selling in Colorado so they can pass on that “tax-free” benefit to consumers. Consumers don’t see tax revenue. Instead they compare and buy from the retailer with the best prices.
In addition, even if they do start having to pay sales tax, online sellers still have an advantage over “brick and mortar” shops – convenience, more variety, deeper discounts, and in my case, my town’s low sales tax as compared to the higher tax in Longmont, Boulder, Loveland or Ft. Collins.
Case in point, I often shop Kohls.com when I cannot find a color of clothing in my size. Yes, I may have to pay a few dollars in shipping, but that beats driving all over Boulder and Larimer counties to several Kohl’s stores. Plus I pay a cheaper sales tax and get exactly the merchandise that I want.
So advertising tax or no tax, local booksellers are still going to have a tough time competing without offering additional services like coffee shops, free wifi, book signings and story time activities for kids.
