Bill Ritter-Amazon feud: Industry rep sees company's actions as understandable, not evil

fred nicely.jpg
Fred Nicely thinks Amazon and Colorado can get along, well, nicely, if the state backs down.
In yesterday's blog about Governor Bill Ritter's displeasure at Amazon over the company's decision to sever relationships with its Colorado associates over a new tax measure, we noted that Amazon hadn't responded to requests for comment.

Several hours after the piece's publication, Amazon spokeswoman Mary Osako belatedly reached out -- but in lieu of answering questions, she offered only a copy of the e-mail sent to Colorado associates previously reproduced in the item linked above. However, she suggested that those wanting to get what she called "an industry perspective" on the controversy should contact Fred Nicely, tax counsel for the Washington, D.C.-based Counsel on State Taxation (COST), a trade association of which Amazon is a member.

Amazon has been attacked for its decision by many observers, including the Denver Post's Mike Littwin, who branded the company's move "evil" a column today. But, shockingly enough, Nicely sees Amazon's actions as wholly understandable.

Like Amazon, COST disapproves of Colorado's measure, Nicely says, because "it's very suspect constitutionally -- and, most importantly, it's not helping to simplify the complexities of the state's sales-and-use tax systems. It's adding to the complexity by adding more requirements."

Ritter spokesman Evan Dreyer argued that the law, which asks online retailers to either start collecting the 2.9 percent sales tax that's placed on goods sold in brick-and-mortar establishments in the state or to inform their customers on an annual basis that they need to do so, doesn't add to a company's cost of doing business. Nicely rejects that supposition.

"It definitely costs money," he stresses. "You have to go through and provide required notices. And, rather offensively, the Department of Revenue is able to get this information electronically, but the sellers are required to provide the information to the purchasers via the cost of first-class mail.

"And there's another side of the equation -- a problem that's twofold. The states can impose huge penalties for a failure to collect the tax. But if you incorrectly charge tax for something that's not taxable, you open yourself up to class-action lawsuits from purchasers. So you can be hit both ways. Not only do you have exposure for not collecting the tax, but if you volunteer to collect the tax and you don't do it right, you can have class action suits filed against you."

The lack of regulatory uniformity from state to state also troubles Nicely -- and he sees the problem growing worse.

"Colorado's unique," he maintains. "The state basically says, 'If you are not collecting our tax, you need to provide notice to purchasers and send us an annual report of who you sold to.' But there's also New York, which passed a law in 2008 that's still the subject of appeal as to whether or not it's constitutional; Rhode Island and North Carolina pretty much copied it. And what New York says is, 'If you are doing advertising on someone else's website and they click through to your Internet site and purchase something, that's enough to create a requirement to collect the tax.'"

The solution to this growing patchwork of provisions, from Nicely's perspective, is a nationwide agreement that levels the playing field for companies interested in operating across state lines -- and such an effort is underway. The Streamlined Sales Tax Governing Board promotes a "Streamlined Sales and Use Tax Agreement" that is said to have sprung from "the cooperative effort of 44 states, the District of Columbia, local governments and the business community to simplify sales and use tax collection and administration by retailers and states," with 23 of those states reportedly passing conforming legislation.

COST is in favor of this concept, too.

"I think what Amazon and businesses as a whole are saying is, 'You need to work with the other states,'" Nicely allows.

But there are a couple of rubs. For one thing, Congress would also have to pass a measure along these lines. For another, the initiative has been grinding away for more than a decade; the agreement got its start in 1999. And with states gasping for revenue right now, few of them will be eager to simply wait for an overall pact to be enacted.

Nicely is optimistic that Congress could move forward with streamlined legislation either this session or next: "There's light at the end of the tunnel," he insists. Meanwhile, however, he feels the ball is in Colorado's court.

"The hope is that legislators in Colorado will potentially do what Rhode Island is exploring, which is repealing its legislation," he says. "They may have to potentially make some changes to the state's constitution. But with other states, they should definitely be looking at complying with the Streamlined Sales and Use Tax Agreement. Those are steps Colorado should take."

Otherwise, Amazon just might think the state is evil...

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