Amazon.com Inc. has informed its marketing affiliates in Hawaii that it is ending its business with them to avoid collecting sales tax in the state.
Lawmakers in Hawaii, following in the footsteps of North Carolina and Rhode Island, have passed legislation that would require companies to collect sales tax if they have marketing affiliates in the state. Affiliate marketers run blogs or Web sites and get a sales commission by featuring links to outside e-commerce sites.
Although sales taxes are an efficient way for state and local officials to raise lots of revenue, sales taxes are a vestige of the industrial age which are doomed to extinction in the information age.
Consumers don’t have to buy goods and services locally. They can shop on the Internet from amongst retailers worldwide.
That means state and local governments face competition.
Just like Delaware chose to become the most hospitable jurisdiction for corporations, a state like Wyoming (notwithstanding the fact one of its senators is a champion of stepped-up sales tax enforcement) could choose to become the most favored location for online commerce.
Online merchants could establish a physical presence in Wyoming, and — since most of their customers would reside in the other 49 states — they wouldn’t have to collect sales taxes on most of their sales.
Wyoming merchants could sell their products and services at very attractive prices to the entire country. Wyoming could become a FedEx and UPS distribution hub. Wyoming could become the most dynamic economy in the nation.
If Wyoming doesn’t step up to the plate, some other state (or country) will.
Think about it: Sales taxes are doomed.