Internet sales tax: Good? Evil? Salvation?

A lot of hubbub on the internet about terminating its affiliate program for Hawaii residents today. If you don’t know what is move along, scroll down somewhere to the puppy photos on this blog.

Waves of strife are washing ashore regarding a new tax bill which passed the legislature. House Bill 1405 will impose an excise tax (yup, that same convoluted 4.617% you see added to your receipts and don’t call it a sales tax, it isn’t and that extra .167% is a recommendation by the tax office but somewhat arbitrary as some places just use a straight 4%). As they say on Facebook, it’s complicated.

The tax (starting tomorrow July 1) is imposed upon businesses that have either a physical presence in Hawaii, like the Apple Store in Ala Moana or (this is the new part) is a mainland company that has Hawaii residents using referrals to get a kick-back on a sale. These folks typically have banner ads on their website from and earn some moola if someone clicks on the link and buys something on ‘Earth’s Biggest Bookstore,’ as they used to call themselves before they started selling Crocs, espresso machines, cameras and everything else (except grocery items to Hawaii, that’s a rant for a different day).

Sample Apple iTunes Music Store receipt, notice the Hawaii general excise tax added.
Sample Apple iTunes Music Store receipt, notice the Hawaii general excise tax added.

So here’s the scoop. doesn’t want to charge their customers tax and probably doesn’t want to deal with sending those tax payments to Hawaii or anywhere else. I mean, you can feel for them right? So they’ve told their affiliates in Hawaii adios unless they get on the horn (that’s what us old folks used to call the telephone when something was urgent) and call Governor Lingle to veto the tax bill because affiliates wouldn’t see anymore of that Amazon gold from sales.

Brilliant move by Amazon getting the masses of affiliates up in arms to defend their ability to make money and to say no to an internet tax for all sales to Amazon. Of course Amazon screwed-up a tiny bit saying folks had until July 15th which is the deadline for the Guv to veto the bill. Truth is that she had to notify the legislature TODAY if she was going to veto it. Procrastinating affiliates not to worry, she included HB1405 on the list of bills she *might* veto.

So is an internet tax good or bad for Hawaii residents?

Cons: We already pay though the nose for goods in Hawaii and adding taxes makes for more costs upon us. If you’re an Amazon affiliate your gravy-train of lunch money is gone, finished, kaput; go back to collecting pop bottles and cans (which could make you more money than Google AdSense, I’ll get to them in a little bit). If mainland companies are charged taxes they could just exclude Hawaii from sales, period. This could catch-on and Hawaii businesses may have to collect and pay out taxes to other states, Tennessee is the nation’s highest with a sales tax of 9.35%. That must have been an expensive liver.

Pros: A new source of revenue for our cash-strapped state economy (note to state workers, that $0.62 on the Green Day album above helps to pay your salary and that’s good right?) Levels the playing field between mainland businesses and local companies more on prices.

So with all this buzz about I wonder why I haven’t seen the 800-pound gorilla of internet sales not mentioned. Who is that? Why Google of course. Google probably has many, many more affiliates than Amazon in Hawaii and probably everywhere, take that Earth’s Biggest Bookstore.

Google AdSense ads, an affiliate program, sells just about anything and everything. Now perhaps they can slip through a loophole in the tax law saying they aren’t really selling anything, they’re just an ad broker for businesses that sell ‘tangible’ products as HB1405 calls it. They’re just in cloud-computing. Gmail, AdSense, Google Calendars, soon Voicemail, etc. But if the Hawaii tax collectors are smart they’ll get some of that Google gold just like they will from Amazon.

Just cloud-computing with no tangible products? Look a the shopping cart below, also notice no tax charged. You can see ‘tangible’ Google products here. This tax thing could be good for the state coffers if they get a piece of the Google ad revenue action. But Google could also end up charging Hawaii companies tax to take out ads via Google.

Yeah, I didn't really buy it. Hawaii gets hosed with shipping of course.
Yeah, I didn't really buy it, a Google hat. Hawaii gets hosed with shipping of course.

So is an internet tax good or bad for Hawaii’s residents?

Update (7/1/09): Governor Lingle just vetoed HB1405, now it goes back to the legislature.

One reply on “Internet sales tax: Good? Evil? Salvation?”

I try my best to avoid many internet purchases simply because it always seems there is a middle man…. or three or four… in between the time I purchase something and the time I receive.

The last time I purchased something… I ordered the wrong thing… I'm ending up paying close to about 8 times in shipping costs for this damn mirror I need then the actual cost of the mirror.

I am going to make a concerted effort to buy things locally… I hope others on this island will buy more local products if they are available.

I understand many things are not… and it sucks for us on the big island…

But I'm going to do my best to support local companies first before resorting to online mainland companies.

Yes, I did look at the scrap yards here on the Big Island for the Mirror I was looking for before ordering it online.

We really suffer here on the Big Island compared to Oahu…

It really seemed like I could find any thing used I wanted to on that Island w/ just a few phone calls.

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