‘Amazon tax’ has not generated revenue

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DISCONNECT: Owen Johnson, managing partner of Betaspring, runs a site called Connect Providence, which was previously an Amazon affiliate.
Posted 12/21/09

But the state law has done nothing to increase tax revenue. Officials at the R.I. Department of Revenue “do not believe that there has been any sales tax collected as a result of the Amazon legislation,” said Paul L. Dion, who heads the department’s revenue-analysis office.

For a company like Amazon, there is little risk in pulling out of Rhode Island, which has the nation’s fourth-smallest state economy, said Lee Hower, principal at Point Judith Capital, a Providence-based venture capital firm. But affiliate marketing is a “very common” component of many Web startups’ business plans.

“Amazon doesn’t care,” Hower said. “The only thing that Amazon has changed because of this policy is they’ve stopped paying companies in the state. … The reality is we haven’t gotten the revenue or the policy benefits out of this, but we do have this downside.”

Angus Davis, a tech entrepreneur who lives in Providence, said the law should be called an “affiliate tax” since it has no impact on Amazon. “It’s really slamming the door shut at the borders of Rhode Island to any kind of online advertising industry,” he said.

Lydia Walshin, who lives in Scituate, depended on Amazon affiliate marketing to monetize her cooking blog, ThePerfectPantry.com. After Amazon cut off its affiliates, Walshin moved her operations to Massachusetts, where she also has a home and a bank account, and Amazon had her back up and running within 24 hours.

Owen Johnson, on the other hand, was earning “small, but growing income” from his personal blog and a site he runs called Connect Providence as an affiliate before Amazon ended the program here. Now he is wondering whether to move his business out of state. “You’re creating an environment of uncertainty in which to do business,” he said. •

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