Monthly Archives: April 2011

Why Vermont Senators Should Vote Against H.143

Below is a copy of a letter I recently sent to the members of the Senate Finance Committee, which is currently reviewing H.143.


Senators,

I am writing to encourage you to vote against H.143.

This bill was envisioned to both “level the playing field” and generate additional tax revenue for the state of Vermont.  It will not accomplish the former and will actually cause a decrease in taxes collected by the State.

Leveling the Playing Field

The proponents of this bill look at it as a way to force Internet retailers to collect Vermont Sales Tax on sales made to Vermonters.  If this were to happen it would in fact be beneficial to the State and its retailers.  The intentions are good, I believe, and I sympathize with the plight of our local retailers in their effort to compete with out-of-state Internet retailers.

Unfortunately, this bill will do nothing to level the playing field.  If this bill is signed into law, Amazon and other Internet retailers will still sell books and other products to Vermonters and will still not be required to collect sales taxes on those sales: the playing field will still be tilted in favor of Internet retailers.  This is so because all the major Internet retailers will simply cancel existing contracts with Vermont affiliates, such as myself, and will thereby no longer have any “independent contractors, agents, or other representatives” in this state.  The Internet retailers will still be unencumbered by the need to collect sales taxes.

The only change that will happen will be that Vermonters who earn income from their relationships with Amazon and other Internet retailers will lose that source of income, and Vermont will lose the taxes it collects on that income.  This leads me to my second point.

Generating Additional Tax Revenue

The goal of collecting Sales and Use Taxes that are due to the State is also a worthwhile goal.  As with the above goal, however, this bill will accomplish nothing of the sort.  Instead it will actually decrease the State’s revenues.  When Internet retailers cancel contracts with Vermont businesses, those businesses will lose an important source of income.  With the income gone, income taxes collected by the state will also decrease.  Entrepreneurs who have built a business based on affiliate advertising will either need to close their business or move to another state.  Certainly, Internet content providers and advertisers who might have considered moving to Vermont will no longer consider that an option.

Here is an interesting statistic: 99% of the visitors to my site are from people who do not live in Vermont.  Given that statistic, it is safe to assume that approximately 99% of the revenue I generate is from sales to people in other states.  For example, if a person in New York buys a book from Amazon after clicking on a link from on my site, I generate income.  Neither Amazon nor the shopper have a presence in Vermont, yet Vermont benefits from the income I generate.  Under H.143, this benefit will disappear when Internet retailers cancel contracts with Vermont affiliates.

Who Benefits and Who Loses under H.143

Under H.143, nobody benefits: not Vermont retailers, not the State of Vermont.  Well, perhaps Internet content providers in other states who compete against Vermont content providers benefit; they would benefit as their competition dwindles.  The only real impact of this bill will be felt by Vermont content providers and affiliate advertisers (who sell mostly to residents of other states) who will lose this source of income.

Sincerely,
Victor E Nuovo