Rhode Island Governor Signs E-Fairness Provision Into Law -- Efforts Continue in Four States

When Rhode Island Gov. Donald Carcieri signed his state's new budget into law on Tuesday, June 30, Rhode Island became the second state to require online retailers with affiliates in the state to collect tax on sales made to in-state residents over the Internet. In 2008, New York became the first state to enact such a provision, legislation that has withstood a legal challenge from Amazon.com and has resulted in $46 million in sales tax revenue from the 30-plus vendors that registered to collect sales tax.

"Rhode Island's new budget, with its Internet Sales Tax provision, is a major victory for fairness and equity for all of the state's retailers," said ABA CEO Oren Teicher. "From the start, booksellers in Rhode Island and other states have been making the case that it's not the role of government to pick winners and losers in the retail landscape. This is an issue of fairly enforcing existing tax law across the board, which makes sense for both retailers and the cities and towns that depend on sales tax revenue to fund such essential services as fire fighting and policing."

The news from Rhode Island was set against a backdrop of last-minute, legislative jockeying in other states where proposed Internet Sales Tax provisions have been making headlines, as elected officials scrambled to pass state budgets before the end of the fiscal year. In addition, the legislative progress of Internet Sales Tax provisions has triggered the sudden de-listing of in-state affiliates by Amazon.com and other online retailers in Hawaii, North Carolina, and Rhode Island.

Following the victory in Rhode Island, Teicher encouraged the state's booksellers to write to their elected officials to thank them for their strong support for sales tax equity. Booksellers can find their Rhode Island senators here; their representatives here; and contact information for Gov. Carcieri here.

At press time, the e-fairness fight appeared close to a tipping point in California, Connecticut, Hawaii, and North Carolina.

Regarding legislative activity in other states, Teicher said, "We have never been closer to achieving such significant success in the fight for e-fairness, but, in political situations like this, nothing is certain. It has never been more important for booksellers and other retailers to contact their elected officials to let them know how strongly they support the Internet Sales Tax provisions in their states."

California

In California, where legislators labored to close a budget deficit of more than $24 billion, indie booksellers and other retailers continued to voice their support for an Internet Sales Tax provision in the proposed budget. In addition to booksellers, ABA, the Northern California Independent Booksellers Association, and the Southern California Independent Booksellers Association have written to Gov. Arnold Schwarzenegger in support of e-fairness.

Teicher noted to BTW that "the fight in California is incredibly important, and it's unclear when the window of opportunity for booksellers to influence their elected officials will close. There's never been a more important moment to voice your support for securing fairness and equity in the collection of sales tax." The groups have provided a template letter that booksellers can adapt and send to their elected officials. They also asked that David Grogan, ABA public policy liaison, be notified when letters have been sent, to help compile information to support future lobbying efforts.

Connecticut

In Connecticut, at press time it was expected that the state's fiscal year will end without an approved state budget and that Gov. M. Jodi Rell would begin paying state bills by executive order on Wednesday, July 1, as reported by the Hartford Courant. The New England Independent Booksellers Association and ABA have been assisting booksellers in lobbying their elected officials in support of the Internet Sales Tax provision in the proposed state budget. The associations have provided a template letter that can be adapted and sent to Connecticut lawmakers, and to State Sen. Eileen Daily, chair of the state Finance Committee, who has been a strong supporter of the Internet Sales Tax provision.

Hawaii

On Wednesday, July 1, Gov. Linda Lingle announced that she would veto legislation that would clarify the state's general excise tax so that out-of-state retailers with online affiliates would be required to collect and remit sales tax, as reported by AP. Last week, ABA had written the governor urging her to sign the bill. Democrats, who have a legislative majority, were expected to convene on Wednesday to evaluate which bills had the sufficient two-thirds majority necessary to override the governor's veto in a July 15 special session, as reported by AP.

On Tuesday, Gov. Lingle had included the bill on her "potential veto list," as reported by the Honolulu Advisor. Commenting on Amazon.com's decision to de-list affiliates in Hawaii and other states, Patty Smith, an Amazon spokeswoman, said, "We feel that the way the state legislatures are going about this is inappropriate," adding "it places an unconstitutional burden on interstate commerce for a state to require a seller without a physical presence in that state to collect sales tax." Countering that argument, Lenny Goldberg, executive director of the California Tax Reform Association in Sacramento, California, noted, "What the affiliate marketing programs are, are people who are under contract through Amazon who are being paid on commission for referring sales to Amazon. That's drop-dead nexus [physical presence]," as reported by the Honolulu Advisor.

North Carolina

In North Carolina, lawmakers passed a temporary spending bill as the fiscal year ended on June 30 without an approved budget. As debate on the budget continues, booksellers in the state have been contacting their elected officials to voice their support for e-fairness. In a recent e-mail to North Carolina booksellers, Sally Brewster of Park Road Books in Charlotte, Tom Campbell of The Regulator Bookshop in Durham, Linda Barrett Knopp of Malaprop's Bookstore/Cafe in Asheville, and Nancy Olson of Quail Ridge Books & Music in Raleigh, wrote: "[The Internet sales tax provision] is great news for indie booksellers, but we need to make sure that this provision remains in the budget as the conference committee readies the bill for the governor's signature. Please join with us, SIBA, and ABA, in this important effort. We are writing to you as fellow booksellers because we believe that there exists a real opportunity for us to make a difference -- and we'd be remiss if we didn't stress this point."

To assist booksellers in their advocacy efforts, the Southern Independent Booksellers Alliance and ABA have prepared a template letter that booksellers can adapt and send to their senator and representative. ABA and SIBA also ask booksellers to notify David Grogan, ABA public policy liaison, when they have sent their letter. This will help both SIBA and ABA compile information to support their sales tax lobbying efforts. --Dan Cullen