Taxes without Borders

Some politicians in North Carolina want to collect and pay North Carolina state sales taxes.

This is troubling. In our federal system, states can only tax entities within their borders. And Amazon’s Washington state headquarters are three time zones away from the Raleigh, NC, statehouse. What gives?

The logic goes that Amazon works with affiliates to advertise and link to products it sells. Some of these affiliates are in North Carolina. Therefore, Amazon has a physical presence in North Carolina, and can be taxed. QED.

The problem is that affiliates are not owned by Amazon. They are independent entities. Amazon pays them to drive traffic to Amazon and get people to shop there. Affiliates are basically outside contractors.

The taxation-by-affiliate argument is really no different than making a Hawaii resdent pay North Carolina income tax simply because they do business with someone who lives in North Carolina.

This comes at a time when the economy is in recession, businesses are struggling, and workers are losing their jobs. Economists have known for a long time that when you tax something, you get less of it. Apparently politicians in North Carolina want less commerce.