The Consequences of New Taxes - Jobs

As states struggle with increasing budget deficits, legislatures are turning to new sources to generate revenue. A popular new favorite tax is known as the "Amazon Tax" aimed at online merchants, coined after online retailing giant. While billions of dollars pass through these online retailers annually, most avoid taxation, the implementation of new sources of taxation have tangential consequences.

Colorado is a state that recently enacted such a tax, primarily aimed at a $1.3 billion budget shortfall. It is estimated that Amazon's tax bill would be $6.4 million annually in online sales taxes from this new tax. The Colorado tax is different than other states that have enacted similar taxes because the law requires out-of-state retailers to help enforce collection of the 2.9 percent state tax that online consumers in Colorado.

As a result of this new tax:
[R]etailers would have to tell their customers what taxable items they bought and that they need to pay the tax to Colorado. Retailers also would have to turn over those documents to the state to help enforce the law.



State revenue officials have acknowledged that retailers may want to avoid all of that, and just collect the tax themselves.


Unfortunately for Colorado, Amazon has announced that it will cut ties with Colorado-based affiliate marketers. These affiliates exceed 4,000 in the state of Colorado alone, which means jobs will be lost as a result of this effort to Colorado seeks to increase revenue.