What Would D-Mac Do


Thursday, June 30, 2011

California's internet tax

So California in its infinite wisdom has decided to put a sales tax on the Internet sales in that state.
Now on one hand, I understand the thinking - these are sales done in their state, they should be entitled to their cut since, after all, it's their state that the sale takes place in (there's all sorts of points to be made against the ethics of that, but we'll ignore those for now). On the other, this sort of thing just smacks of how short-sided lawmakers can be when meddling in the world of e-commerce. As the article states, Amazon and Overstock have now cancelled their affiliate deals with merchants in those states. 25,000 of them to be exact. The article suggests the larger ones will simply leave the state. But there's another piece of this. I'm talking about all the online businesses run entirely on the merits of their affiliate deals (Shoemoney's fanboys basically). Logic dictates that these 'businesses' will likely fold if their main source of revenue is taken away.

All of this of course falls on deaf ears if you happen to be the sort of person who thinks the Government should have more money to do great things (and we all know how forward thinking government bureaucracies can be) and small businesses shouldn't be entitled to all the money that they earn. I however am of the opinion that while governments need cash flow, obtaining said cash in ways that limit commerce (or out and out eliminate it) ultimately harm the state. The response to this tax by Amazon and Overstock demonstrate that. California has unwittingly thrown the baby (a really big ass baby at that) out with the bathwater

So congratulations California. At best you just prompted hundreds (if not thousands) of small businesses to pick up and leave the state, and at worst, you just put them out of business entirely.