Rhode Island's "Amazon tax" , does it make sense?

As Rhode Island and Rhode Islanders struggle through the economic depression, State and local budget and debt crises, and high unemployment, local elected official are reaching out for all possible sources of new revenue and cost cutting. The crisis can be treated as a threat or an opportunity. How the public and the politicians respond to the crises will have a profound impact on small business in the post crisis period.

For example, one step that the RI General Assembly and Governor have taken is the "Amazon Law", is also known as an "Ad tax." This is potentially one of the most costly short term solutions to the long term future welfare of small business, entrepreneurship and competitiveness in this state.

An excellent argument pointing out the potential impact of the law can be found at affiliates-make-money-online.

Key points:
(1) This "Ad Tax" is going to impose excessive bookkeeping requirements on small businesses selling out of state through affiliates as the small business becomes responsible to knowing, recording and collecting the appropriate tax on each individual sale into each jurisdiction which has imposed an "Ad Tax"

(2) Affiliate programs are fairly inexpensive to set up and run, making them attractive for the entrepreneurial unemployed and underemployed to start their own business. If successful they become tax payers instead of tax beneficiaries. If Rhode Island wants to claim the title, "The Small Business State," it should be breaking down the barriers of entry, not erecting new ones.

(3) Tax avoidance is a major problem in Rhode Island and its legacy of under the table transactions, its long list of special interest sales tax exemptions and Florida auto license plates. The state should be considering closing some of these loopholes.

One way to bring about change is to change the culture of tax avoidance. It could begin by using publicity to educate consumers about their legal responsibilities for use tax payments, and the cost of tax avoidance on the community and the state. Maybe even trying collections as a voluntary contribution to the state at tax return time rather than trying to collect it from thousands of residents by legal means.

The Rhode Island General Assembly should revisit the "Amazon Tax" and commission a professional third party study and analysis of the true cost and benefits of the Amazon tax to the state and to small business. Such a study could be commissioned by the RIEDC or RIPEC.

In defense of Rhode Island Teachers

In light of the Central Falls teachers crisis and the real vile comments that have been appearing in the comments to stories about the crisis on Projo.com, it is only fair to point out that the problem is not the truly professional teacher, it is in an educational system out of touch with the times and the institutions that support it.

Education is critical to individual and community success. Education is how society recruits and trains its young to become full citizens, adults and contributors to the common welfare. And education is done by teachers.

In these tough times, when taxes are perceived to be too high and the quality of the product these taxes buy seems poor and getting worse and when educational establishment itself is found wanting, let us not confuse the individuals who are responsible for what goes on in the classroom, with those institutions which claim to represent or command them.

Teachers, and teaching are a noble professional. Teachers are the link between our past and the future. They are the bearers of the community's wisdom and experience. They are charge with instilling in the next generation the knowledge, skills and values that make civil society possible. They are expected to take the raw talents and potentials of each child and shape and mold them into the best that they can be, even as the child rebels against it.

Rhode Islanders are today engaged in a serious dialogue over the merits and direction of its educational system. Interests groups are aligning themselves for and against the changes that must be made to bring our educational system into the 21st century and prepare our children to compete in the global economy and rapidly changing technological environment. While contracts, standards, policies, and philosophies are being debated, we most not lose sight of the individual teachers and what they do. These individuals are often maligned, disrespected, and treated as the cause of the problem rather than as the victims of the system that they are.

Ever heard the phrase "Those who can't do, teach"? At the Bowery Poetry Club, slam poet Taylor Mali begs to differ, and delivers a powerful, 3-minute response on behalf of educators everywhere.

Central Falls School Crisis -- Taking the High Road

How quickly things change and change for the better when Leaders decide that leadership and not ego is where their duty lies. In this morning's Projo Superintendent Gallo is reported to have replied to Central Falls Teachers Union president Jane Sessums.

On Tuesday, Seesums displayed real leadership when she made the first move to bring sanity to what was becoming an extremely emotional and partisan battle between the advocates for union rights versus union responsibilities. In a news release which appeared yesterday, Seesums said that the teachers were willing to embrace a set of reforms that were very similar to changes Gallo initially proposed.

This shift in position is a welcome change from the bellicose bullying and insensitivity demonstrated back in February by American Federation of Teachers union rep James Parisi . By demonstrating a more reasonable position, Seesums opened the door for reconciliation.

According to today's story, Superintendent Gallo's response is

“My heart skipped a beat,” Gallo said after reading Sessums’ proposal. “I thought, ‘They are basically saying they want what we want for the first time, with the kind of assurances I need.’ … This brings the union back with us, in the conversation about meaningful reform. It’s where they should be.”

While there are issues still to be resolved, these adults have potentially given the students of Central Falls High a valuable lesson about responsibility and conflict management.

Transformation requires the cooperation of all parties and transformation is the only way to salvage the best of the past while adapting to the realities of a rapidly changing future. Now if only the public commentators will take a moment to reflect on what is happening, maybe they will support Central Falls' effort to correct the problems that are causing their high school to be classified as a "Failing School." Then Central Falls might become a positive model for educational reform, rather than the partisan poster child for those who would destroy unions or destroy public education.

Best of luck to all.

Central Falls High School Crisis --The Revolution and Counter-revolution continues

Earlier in February, we asked our viewers to comment on the pending confrontation between the Central Falls School Administration and the local AFT Union. Today's Providence Journal describes the latest in the battle for the hearts, minds, and soul of Central Falls and its parents, teachers, unions, school administration, and most of all, the students.

To read the comments to this article is to get peek into the soup that is public opinion. There are the emotional and, at times irrational, members of the public who place their ideological biases over their own best interests and the interests of the community. And then there are those who see the problem and want to help, to enlighten and to solve it by offering analysis and information.

The Central Falls case is not a simple labor management issue. It is far bigger than that. It impacts the rights of parents and students to expect and get a decent education and preparation for the future. After all isn't that what education is for?

It is about the self identity that the teachers have for themselves. These highly trained and well paid, professionals have not been behaving like the professionals they claim to be. Instead they are are behaving like union day laborers who approach their work as if it were an hourly wage job. If they wanted to be day labors, become substitutes, if they want to be treated as professional learn what the word means.

It is is about a bankrupt State that can no longer afford to feed off of federal handouts, excessive state and local taxes, and one shot stop gaps and windfalls. IT IS ABOUT ECONOMIC DEVELOPMENT for all.

AND it is about survival. It is about the survival of students in a rapidly changing and unforgiving world. It is about the survival of a community high school and its traditions which once helped hundreds of immigrant families to work their way into the American middle class. It is about the survival of a public education system in this state which can prepare the next generation of working+consuming+ taxpaying citizens.

We are in the middle of a revolution and the world is watching. The Central Falls situation has made statewide news. It has made the regional news. It has made the national news and even drawn the attention of the US Secretary of Education and the President of the United States. It has even reached to the other side of the world in New Zeeland. Just about as far as you can go before you start back.

Be aware Rhode Island, this is another Gaspee burning. We are witnessing a revolutionary moment. Where do you stand?

Frances Gallo: Her side of the Story

We have been following the Central Falls School crisis with great interest.

On Saturday February 27 Superintendent Frances Gallo of the Central Falls School Department was a late addition to the Annual Winter Meeting of the Rhode Island State Coalition (RISC) held in Newport, RI. After weeks of controversy, Superintendent Gallo was given the opportunity to give her side of the story leading up to the firing of the whole teacher staff at Central Falls.

I came away from the meeting extremely impressed and moved by this very professional and articulate woman and the courage she is demonstrating to take on the Teachers' union and to call their bluff. I want to share that moment with you. Thanks to RISC the following two segment of their video record (posted on You Tube) of the Winter meeting captures the moment.

Yesterday, March 1st, her actions drew comments from President Obama supporting the need for radical change in those schools which are failing to educate their students. Here, in her own words, is her side of the story.

RISC Winter Meeting: Central Falls Superintendent Frances Gallo (part 1)





RISC Winter Meeting: Central Falls Superintendent Frances Gallo (part 2) [NOTE: If the video does not launch automatically, DOUBLE-CLICK ON IT, it should take you directly to YOU TUBE]



I think she has said it all. The issues are not local, they are national and impact the future of this nation.

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.