As in a gleam to collect additional revenue for the State from affiliates that is. Amazon, OverStock, BlueNile are all pulling out of States that issue affiliate tax bills. –

These new battle lines are being drawn just as the dust settles on the latest confrontations. Over the past month, lawmakers in New York, Rhode Island, North Carolina and Hawaii passed legislation that would force e-commerce companies to collect sales tax if they have in-state online-marketing affiliates, people who get a commission from sales via their Web sites or blogs. The states argue that that those affiliates amount to sales agents with a physical presence, while e-commerce companies say they’re more akin to advertising channels.

To avoid getting caught by the new laws, Amazon, Overstock, Blue Nile Inc. and others dropped or threatened to drop affiliates in some states.

In response, some states backed down on their plans. On Wednesday, Hawaii governor Linda Lingle vetoed her state’s e-commerce tax bill, saying it would have negative consequences for local businesses. Gov. Arnold Schwarzenegger of California, which has contemplated similar legislation, also promised Wednesday that he would veto any such proposals.

Hawaii has already blinked. CA is wavering. So it looks like the tax man is not getting much in the way of revenue and burning a lot of extra manpower in the back pedal.

The idea to use affiliates as a way to force e-commerce companies to collect sales tax came from former New York Gov. Eliot Spitzer, who included it in his 2008/2009 budget. Overstock responded at the time by pulling out of its affiliate business in New York. Amazon kept its affiliate business there, but joined Overstock in challenging the law in court. They lost the case, but are currently appealing it.

The threat of retailers terminating in-state affiliates helped convince states including Maryland, Minnesota and Tennessee to abandon proposals for new online sales tax laws.

Thanks Mr. Spitzer, I see hookers weren’t the only thing you were trying to get in bed with.

linky.

Update. Now Hawaii is in play as well. Looks like there is a whole series of States wanting to play this game. Does Amazon have the guts to keep cutting? I hope they do. –

Amazon (NSDQ: AMZN) has informed its marketing affiliates in Hawaii and Rhode Island that their business relationship with the online firm has been ended. Amazon has been dropping its affiliates in states that approve the collection of sales taxes for online transactions.

It is a massive game of chicken. The only people getting hurt are the citizens affiliates in these States. Thanks Legislators. You are screwing your own citizens and not gathering any taxes.

Linky.

Its been a requirement for years, just like requirement for logging personal vs business use of automobiles. But now it looks like the IRS is really getting serious about the whole idea of taxing employer provided cells that are used for personal calls. To the IRS it represents a funded benefit –

The Internal Revenue Service proposed employers assign 25% of an employee’s annual phone expenses as a taxable benefit. Under that scenario, a worker in the 28% tax bracket, whose wireless device costs the company $1,500 a year, could see $105 in additional federal income tax.

The IRS, in a notice issued this week, said employees could avoid tax liability if they showed proof they used personal cellphones for nonbusiness calls during work hours. The agency also could decide on a set number of phone minutes as “minimal personal use” that would be untaxed.

In a third option proposed by the IRS, employers could use a statistical sampling to determine what portion of workers’ cellphone use is personal and how much is work-related. Workers would be taxed on the difference.

The IRS move, which is spurring efforts by the wireless industry and others to kill the idea, would mark a stricter enforcement of an existing rule that classifies employer-provided cellphones as a taxable benefit, rather than a 24-hour-a-day work tool.

Sounds all nefarious and that the tax man will get tons of new revenue right? Not so fast. There is a very quick and painless way to resolve this problem and give the IRS the finger at the same time.

Get a prepaid phone. You can go down to WallyWorld and pick one up for $50. Use it strictly for personal calls and treat it like a twit message via voice. You would be surprised how far $50 goes when you don’t talk all the way to your home on the commute. The phone your employer gives you? Use it just for that. Its 100% business. The tax man can’t come after you.

Two phones? Well yeah, but they are so small these days most people would not even notice they are lugging two phones around. Especially if you are using a computer bag.

Linky.

About this I mean. I doubted that the top tier IT firms would have much to do about pending tax plans. How wrong I was as one of the biggest ones — Microsoft — rattles the tax saber. –

Microsoft Corp. Chief Executive Officer Steven Ballmer said the world’s largest software company would move some employees offshore if Congress enacts President Barack Obama’s plans to impose higher taxes on U.S. companies’ foreign profits.

“It makes U.S. jobs more expensive,” Ballmer said in an interview. “We’re better off taking lots of people and moving them out of the U.S. as opposed to keeping them inside the U.S.”

Obama on May 4 proposed outlawing or restricting about $190 billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.

U.S. tax rules let companies defer paying corporate rates as high as 35 percent on most types of foreign profits as long as that money remains invested overseas. Obama says he wants to end such incentives to keep foreign profits tax-deferred so that companies would invest them in the U.S.

Microsoft reported an overall effective tax rate of 26 percent for 2008 in its last annual report. “Our effective tax rates are less than the statutory tax rate due to foreign earnings taxed at lower rates,” the report said.

Barry Bosworth, an economist in Washington at the Brookings Institution research center, said many software companies such as Microsoft have exploited tax and trade rules in the U.S. and other countries to achieve a low overall tax rate.

No Microsoft won’t go over lock, stock, and barrel but they will shift as much of their labor force as possible to sites other than US. Which means that if MS is thinking it, you can bet the CFO’s of ALL the top IT suppliers have been given the order by the CEO to run the numbers and make a recommendation.

Bottom line. If they up the tax, more jobs will be lost, the recession deepens and tax receipts fall. Obama, good move dude. If you wanted to destroy the economy of the US that is.

Linky.

[Update]: The political blog HotAir give its tongue-in-cheek coveted ‘Louis Renault Award’ to Ballmer for his blatant shock of the implications of being a big Obama contributor. Link.

Following NY state, Wisconsin has also implemented a tax on download sales of MP3’s and the like. –

Wisconsin today followed in the footsteps of New York State by passing a stimulus bill that includes a measure for adding sales tax to digital downloads starting October 1. The bill also includes budget cuts as well as a variety of tax increases to patch Wisconsin’s $600m shortfall under its current budget set to expire June 30.

But the bill is getting a lot of media play for its digital tax provisions, fingered as (the arguably misleading moniker of) an “iPod tax.” The name obviously downplays the true reach of the tax, which levies a 4 per cent charge on “digitally delivered entertainment services” including music, movies, e-books, greeting cards, ringtones, and many other downloadable items. It’s expected to generate $11m for the state over two years.

We don’t think we’re being pedantic over the overly-specific term “iPod tax” judging by the shock and horror from New York state pundits recently learning their digital download tax will also cover internet pornography. We pointed this out back in December, but clearly its taken a while for the revelation to spread (although I think there’s a cream for that).

Of course its wrongheaded. The lack of tax is what has kept the internet sales game going. Though downloads have no shipping, any physical good sales online will be impacted.

The tax mavens have not thought this through. If every state implements a sales tax on internet goods there will be a move afoot by the business types. Business has been ambivalent about sales taxes. Most businesses operate out of and collect for one state jurisdiction. Now tell them they have to tool up and collect for 50? Now it is a different beast. Don’t be surprised if business also starts clamoring for both a federal and state flat tax to simplify things.

link.