Today the Texas House of Representatives will take up and consider SB 1. Part of SB 1 contains a provision commonly known as the “Amazon tax.” The law would required Amazon to collect sales tax on all goods sold to Texas residents.
One person who is quite familiar with the Amazon tax is Oliver Roup, founder and CEO of Califonia’s VigLink, a Google Ventures-backed online marketing company. Roup has already moved his company’s operations out of Illinois into neighboring Indiana in response to the Amazon tax passed this spring by the Illinois Legislature. Now he faces a tougher challenge with a similar law being considered in California, where his company is headquartered.
Roup explains the situation he is facing:
The affiliate tax efforts were last raised in 2009 and vetoed by then governor Schwarzenegger. Theyve received a new push this year as a result of an Astroturf campaign funded by the big-box retailers seeking to punish their Internet-based competition. A pair of bills recently passed the house and have moved on to the senate.
What we do if one of the laws pass is still being discussed and will depend on the exact content of the laws, the reaction of the retailers and a few other factors. Moving out of state is certainly a possibility – we have already closed an Illinois office and moved to Indiana as a result of a similar law there. More importantly, we think these laws are just bad policy – resulting in lower tax revenue, job flight and reduced investment in the very innovation on which California depends.
When I asked him if Texas seemed like an attractive destination if California passes the tax bill, he responded:
If we did decide to move, it would be critical to only have to do so once. The uncertainty around passage of an affiliate tax makes Texas a difficult destination to contemplate. Given that these laws have such severe consequences for us we need to think not just about the current regulatory climate, but about what it is likely to be in the future. Recent events in Texas give us pause.
Just to make sure I got it straight, I asked Roup if the problem was with Texas, or just with Texas’ current posture towards taxing Internet sales:
Austin is a very attractive potential destination – most importantly there is a strong pool of talented labor but other relevant considerations include the absence of state taxes, favorable climate, welcoming and business friendly culture and easy access back to the San Francisco bay.
Roup confirms that Texas is a great place to live and work, but we must remember that its inherently no better in this regard than California. Texas needs to keep this in mind when proposals like the Amazon tax come up if we want to keep Texas as an attractive destination for companies like Viglink and the jobs they bring. We are winning the jobs competition now because we are also winning the public policy battle over low taxes and less regulation. If we lose the policy battle, we’ll lose the jobs as well.
-Bill Peacock