Bad Laws Were Meant To Be Broken!

For those of you who do Internet marketing of products the Nexus Tax is a new and insidious horror that is already putting people out of business as it seeks to tax electronic sales of goods sold through the Internet. In this post I will show the unconstitutionality of this law and ways we can fight it – some are akin to sneaking on British Ships and throwing the Tea into the Harbor – I just want to warn you up front. Remember, just because some evil people who are in power say some action is a crime and make wicked laws to enforce their evil views, does not make it and actual crime. Stupid and evil rules were meant to be broken, and broken in a public and revolutionary way that humiliates the creators of those rules.

This tax is sometimes referred to as the “Amazon.com Tax” or just the amazon tax.  This is because Amazon.com immediately closed the accounts of those who belonged to its Associate Affiliates as it did to me and the book links you see on my site here (Which will soon be replaced by other booksellers who have not dropped trou to every government edict).  See the article here and here, and from Californias version here.

I understand why Amazon did this, they are taxed too much already, as we all are, and they just said “Enough!”  It’s too bad that we affiliates are the ones who got hurt by it.

The Nexus Tax in all of it’s varying forms from all of the various states is unconstitutional – but what is really a crime is this letter reprinted here, by the American Book Association who – instead of working to lower the taxes in North Carolina, used class envy to attempt to get taxes passed on affiliate book-sellers.  Instead of working to simply lower taxes on everyone so more business could be done (Which always increases actual monies collected by the state) they were given the same old tired liberal line of  ”unfairness” – so your being screwed by taxes, lets make sure EVERYONE is screwed…yeah, does that make you feel better?

I want to declare that any brick and morter bookseller who actually used this letter is a complete idiot and I will laugh at you when you store closes – you deserve it.

[STORE LETTERHEAD]
[DATE]
Dear [REPRESENTATIVE][LAST NAME]:

As an independent bookseller based in [CITY], North Carolina, I am urging you to support House Bill 558, legislation that would clarify state laws to require non-North Carolina merchants with online affiliates in the state acting as sales agents on their behalf to collect sales tax on purchases shipped into North Carolina. This bill would play a significant role in leveling the playing field for North Carolina businesses and help secure needed revenue to support essential local services. We are urging you to close this tax loophole now by supporting the Internet sales tax legislation currently under consideration in the Committee on Finance.

Not only is the tax avoidance being practiced by these out-of-state retailers unfair to the retailers throughout North Carolina that are collecting sales tax for online sales, but it has clear economic implications for the state, especially considering the current economic climate. According to the Center on Budget and Policy Priorities, our own state reported a mid-year FY2009 budget gap of $2 billion. This number is only going to get worse if states unintentionally continue to subsidize out-of-state businesses by allowing remote merchants with nexus in the state to skirt existing tax laws, thereby letting millions of dollars in sales tax revenue go uncollected. Now more than ever, North Carolina has an obligation to ensure sales tax equity.

Federal law clearly defines nexus as a retail store, warehouse, office, or sales agent. I believe it is indisputable that any out-of-state online retailer that has one or more affiliates based in North Carolina — affiliates that clearly act as solicitors on the online retailer’s behalf and earn commissions based on sales — has nexus in our state. These out-of-state online retailers should therefore be charging sales tax. North Carolina booksellers that have e-commerce operations collect and remit sales tax, and so should merchants outside our state that have nexus in the state.

When the state allows these online retailers to continue their sales tax avoidance practices, North Carolina’s citizens are the primary losers, as potential tax revenue is uncollected — monies that fund such essential services as schools and first-responders. According to a recently published University of Tennessee study, State and Local Government Sales Tax Revenue Losses From Electronic Commerce, in 2008, the total state and local sales and use tax revenue loss resulting from failure to collect current taxes on e-commerce sales in North Carolina was $145 million in 2008. As online shopping continues its robust growth, this figure is expected to balloon to more than $213.8 million in 2012. Furthermore, the study stressed that this failure to collect taxes that are due has put local retailers at a competitive disadvantage to e-commerce competitors as “consumers browse on Main Street but then make their purchases online to evade the tax.”

In 2008, New York State signed into law a provision that required out-of-state merchants that have clear nexus in the state to collect and remit sales tax. Though the provision was initially challenged by Amazon.com, a New York State Supreme Court judge dismissed the online retailer’s lawsuit. Amazon.com is currently collecting New York sales tax and has maintained its affiliate network in the state.

The time for North Carolina to act is now. The results of sales tax inequity can be seen in the many empty storefronts on Main Streets throughout North Carolina. Sometimes, however, it doesn’t result in a store closure, but it in lost sales tax through decreased sales and lost income tax through job cuts. A downturn on Main Street creates a ripple effect that echoes throughout our state’s economy. In the end, it’s the residents of North Carolina who shoulder this burden through higher property or school taxes. So it’s important to understand that when out-of-state retailers with affiliates in our state shirk their responsibility to collect and remit sales tax, it doesn’t just affect a few small businesses here or there, it hurts the state’s entire economy.

Importantly, I am not discussing any new “Internet taxes.” I am simply asking you to equitably enforce existing tax laws by supporting SB806, which clarifies existing sales tax laws to require out-of-state merchants with nexus in the state — via office, warehouse, sales agent, or affiliate link — to collect and remit sales tax on purchases made by North Carolina residents.

Thank you for your consideration.
Sincerely,
[NAME, STORE NAME & ADDRESS]

So how do we bypass or otherwise revolt against these obviously unconstitutional taxes? Well here are a few of my suggestions, please, by all means post a comment with your suggestions and I will put them up!

1.) If you are a business with out of state affiliates, don’t keep records of out of state sales, and use super -strong encryption for all access, links, and records you do keep with regard to those affiliates – basically just refuse the law and make it impossible for there to be evidence collected against you.  This one has some risk factors, obviously, but it definitely sends a message.

2.) Set up relay servers for your business in a state that does not collect Nexus taxes and relay your purchases through that server – combine this with incorporation in that state and viola! no more taxes because it will appear that all purchases were made in, say Nevada.  I predict that Relay services like this will be big business within a few months – especially for affiliates.

3.) Use Super-Strong encryption as in point 1, but do it over international anonymous server linkages such as those offered by the Swiss, the Cayman Islands and other countries.  Use the TOR anonymous network. Build a presence that appears to be in the states, but that is, in fact, not.

4.) Develop a new protocol similar to Torrent and do affiliates through that.

The bottom line is, we need to don our Indian war paint and take this fight to the electronic streets.  We need to publicly humiliate and desecrate the so-called “representatives” behind this legislation, and we need to make sure they never get elected again for even dog-catcher.

Frankly, they need to be scared.  That is the problem, these elites think they can’t be touched by us…

We need to show them how very wrong they are.

David T. McKee

Tags: amazon tax, Internet tax, Nexus, Tax Law