The Providence Journal discovers a story - The Amazon Law

For the past 9 months, I have been following the implications on small business as the states attempt to use their constitutional right to nexus provision to extend their taxing power to the Internet. Today the Providence Journal, the premier daily newspaper for the informed Rhode Islander, finally discovered and carried a story about the "Amazon tax" and its impact on a small business here in Rhode Island. Under the headline Small businessman says R.I. ‘Amazon law’ hurts him

If you have been following this blog, you will have read about my problem with the "Amazon Law" It put my own e-business plans on hold.

The Projo could have been more helpful and informative to the public, if it had picked up on and reported the story earlier. It also could have done a better job informing its readers if it put the story in its broader national context.

The "Amazon law" is a national problem, not just a Rhode Island problem. It is the law requiring out of state internet vendor's to collect sale taxes on goods and services sold to resident in the taxing state.

This is a common requirement for firms doing business in multiple states. For example, if you purchase a big ticket item from a company in Massachusetts that also does business in Rhode Island and the item is to be delivered and used in Rhode Island, you will pay the Rhode Island sales tax on the item. Why do you think the clerk asks for your zip code?

The problem comes when a vendor does not have a physical or business presence in the state. Under the nexus principle, that vendor would not be required to collect the sales tax for the taxing state. Amazon does not consider its affilates as employee or agents. Therefore Amazon and similar out of state vendors do not feel that they have representatives in the state, specifically in this case Rhode Island and are under no obligation to act as Rhode Isalnd's tax collector.

The Rhode Island legislature decided that any RI website which carries ads for Amazon or other e-commerce companies is an employee or agent for the companies whose ads they carry. This is sufficient grounds to require the parent firm to collect sales for the state on Rhode Island on all goods sold to Rhode Island residents.

In my case, I wanted to rent space to Amazon on my website to advertise their products. I felt that I was supplying a billboard as a way to help pay for the operating costs of the site. Amazon decided this imposed a potential tax and administrative burden on them. To avoid the issue, they and others have chosen to eliminate that risk by severing their ties to their affiliates. As a result, Amazon will continue to sell to Rhode Islanders and Rhode Islanders will continue to buy from Amazon.

However, Rhode Island businesses that depend upon the rental revenue they earned by allowing Amazon and others to advertise on the their site no longer have that revenue source. As the Projo story documents, they make less income and pay lower taxes. Meanwhile, because these sales outlets no longer sell for Amazon, B&H and other e-commerce firms, Rhode Island collects no new sales tax revenue.

Reading the comments to the Projo story shows how poorly the readers understand the issue and how poorly the Projo explained the issues. It is no wonder that more and more of us seek our news from more aggressive and informed sources.

RI Wind Power vs China Wind Power

As Rhode Island plans to develop its off shore wind resource, there is hopeful speculation about the industrial and manufacturing jobs that will be required to build and support the off shore wind farms. But before we get too excited about it, let's look at our competition. Not Massachusetts, but China. What lessons can we learn from the Chinese and where are the opportunities we can exploit give this knowledge. The article quoted below is a place to start.

Challenges with China's Wind Energy

Robert Hsu, February 23, 2010

China has been trying very hard to step up and take action to not only clean up its air and water pollution but also to prevent further pollution in the country. And as the Chinese government focuses on more of these green technology initiatives, many Chinese companies stand to benefit directly.

One industry, in particular, that is already reaping the rewards of a government focus on clean tech energy is wind power. In fact, China has become a powerhouse in wind power.

When China first started making wind turbine blades, the demand was low and the blade length was set at 37.5 meters. Two years later, the industry boomed and the once-popular 37.5-meter blades were no longer desired. Since so many companies hurried into the industry, there was a lack of research and planning; the main thing affected -- quality. The blades that were initially created were not long enough to generate anticipated electricity levels.

So producers scrambled and started manufacturing a 40.3-meter blade. With that, production rates increased, and the number of wind turbine makers grew from six to more than 70 in the country. As a result, China quickly became the third-largest wind power market in the world last year increasing the installed wind power capacity from 760 megawatts (MW) in 2004, to more than 20,000 MW in 2009.

However, 70% of the blades currently being used are still the shorter length, meaning they are not helping the environment, as they should. This poses a huge problem because there is now a surplus of products that don't fit the market. And prices have decreased even though there is an increase in demand.

This recent development further reiterates my reason for largely avoided investing in this sector. Now, with that said, renewable energy continues to receive strong support from the Chinese government even as investments in the sector declined sharply with the rest of the world during the past two years, and given China's new focus on green technology, green investing is an important investment theme for investors.

Right now, most forms of renewable energy -- such as solar and wind power -- are not economically self sustainable and rely on government subsidy to survive. And most renewable energy companies are also losing money with excess capacity problems.

So there may be investments in the solar or wind industry down the road, but for now, I think our renewable energy investments are better served in another part of the green tech industry.

Hopefully, those planning for the development of a wind power industry in Rhode Island will learn from China's problems and develop clear and focused marketing plans taking into account the real needs of their target markets.

Central Falls :Education reform and labor relations in Rhode Island

Rhode Island's economic problems are related its education system and the type of investment decisions the state and communities are making in their schools. On January 7, 2010 the Rhode Island Department of Education (RIDE) released its Strategic Plan The debate is heating up between the teachers unions and the educational administrators.

The key area of conflict is "What will be done with under performing schools." In January the RIDE published its Protocol for Intervention According to the Protocol

Schools identified as persistently lowest-achieving require intervention by the responsible LEA [Local Educational Agency] beginning in the school year following identification by the state. There are four allowable school intervention models: turnaround model, restart model, school closure, or transformation model. If a school identified as a persistently lowest-achieving school has implemented, in whole or in part within the last two years, an intervention that meets the requirements of the turnaround, restart, or transformation models, the school may continue or complete the intervention being implemented.

The first battle in implementing these plans is taking place in Central Falls, where the Superintendent of Schools has just issued pink slips to all faculty members of the high school. In a interview with both the Superintendent, Frances Gallo, and American Federation of Teachers union rep James Parisi, videoed Friday on CBS station WPRI's NewsMakers program scheduled for Sunday February 14th, it is obvious this will be a major watershed for the Rhode Island public education system. That episode of NewsMakers is presented below,



How do you feel about this? Your comments are welcomed.

The Rhode Island 2011 Budget: WHAT WOULD YOU CUT, HOW AND WHY?

Rhode Islanders, like everyone, are complaining about their taxes, federal, state and local. But how many of them know what they are talking about? How many know how much of a free ride they are getting from others? How much others are getting a free ride off of them?

Do you know what the budget for running the state of RI is?
Have you ever thought of looking at it, analyzing what is there?
Do you know who is paying for what?
Or, Are you relying on the special interests to explain to you why they should get more and pay less?
Have you ever cornered your representative or senator and demanded to know what and why he or she is voting for a certain expenditure or tax?

Citizenship requires constant vigilance. If you are just complaining and whining but not taking any action to correct the problem, then the problem is you and not the government's.

The role of government is to respond to the needs and desires of its citizens. In a democracy that means responding to those who are exercising their first amendment right to the petition the government to help them with their grievances.

Reading the Providence Journal, and the comments often made to stories appearing there, I am amazed at the stupidity and lack of civility that many "thoughtful" citizens express. They rejoice in their 1st amendment right of free speech and the opportunity use a free press to spill their vial prejudices and ignorant opinions. But how many are following through with their responsibilities?

Are they using their right of free assembly to get together with others air their common concern to work out realistic solutions for the problems they see?

How many take the time and the effort to put those realistic solutions down on paper and bring them to their representation?

How many petition their representative for a hearing? And then, how many actually back their proposal and to push for their adoption.

I don't always agree with the Governor or the legislature. But I do understand the situation they find themselves in as public servants. If everyone hates you, then what is to be gained from trying help those who hate you, especially when your friends will happily reward you for your favors by reelecting you?

Sometimes weakness is strength. President Obama has been hamstrung by the Democratic majority in Congress. So has the Republican minority. With the election in Massachusetts of Senator Brown, Obama and liberal Republicans are freer to move to the center. Neither is totally accountable to their party any longer, their vote is no longer the determining factor to achieve party tactical advantage.

Each republican is now accountable to the voters in their state. And the President is now accountable to the American voters, all of those who help put him in office.

The real power in this country is among the independent, non- affiliated voters, a group of ranging from the politically alienated to the political centrists. It is here where the horse trading should take place, not with their radical cores of ideological party hacks.

Don't let these hacks and their media blowhards pigeonhole you into their simplistic categories of liberal or conservative.

The former don't know when to stop run and the latter doesn't know when to get off first base. If you are like me you want to get around the bases and score and not get thrown out or left on base.

But unless these independents stop whining, start rallying around their issues, and take responsibility for proposing realistic, actionable solutions to those issues, their voices will not be heard.

Right now we are seeing the birth of movement -- the Tea Party movement. Conservatives are trying to capture the energy they see there for their own agenda. Liberals are frightened by it. And entrepreneurial husksters, such as Sarah Palin and Steve Laffee, are making small fortunes exploiting them. Hopefully, as the dust settles, the emotional high runs its course and the opportunists go on to other victims, some real thought and leadership will emerge from the Tea party movement. Leadership and thought which will foster innovation designed to address real problems rather than current sloganeering. We will see!

In Rhode Island, we have a General Assembly bought and paid for by the donors to the Democrat party and a Republican party on oxygen. This is just the type of situation where a third party effort is needed at the grassroots. The only way to break the party stranglehold on individual legislators is to create an opportunity for local representatives and senators to vote their conscience. To do this means to free them from the monopoly power of party bosses. Here again the independents, united on the basis of their local concerns and interests, actively exercising their 1st amendment rights to the fullest, can provide the political cover these local representatives need.

If you think that public debt is too high, fine. How would you change it and where would you change it and have you really tested whether your solution can work?

The fiscal problems we face as a nation and as a state are too big and too important for you to sit in the stands. It is time to get off the bench and get out there and help solve the problems. It is time to put up or shut up. If you chose to shut up, just remember then that you are the problem. And, I know you won’t like the solution.

So here is the 2011 Rhode Island state budget proposal. Read it in detail. What don't you want in it, what do you want in it? How are you going to pay for it? And remember, the whole thing has to balance.

For more information about the Rhode Island budget for 2011 click here.