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.