Rhode Island's General Assembly was faced with a tough budget this year.  Of course, one of the reasons the budget was so difficult was because legislators spent too much and refused to make enough cuts in previous years.  This year, the General Assembly once again cut too little and raised some taxes.  To their credit, they didn't raise the income or sales tax, but some of their increases are already having negative consequences.

     Amazon.com has announced that they are severing ties with Rhode Island businesses, due to the General Assembly's implementation of the "Amazon tax."  Internet retailers are not required to collect sales taxes from customers, unless the company has a physical presence in the state.  Amazon.com has an Associates Program which allows individuals and businesses to earn commissions on sales that were referred from their website.  In order to avoid having to collect sales tax, Amazon.com has terminated their relationship with these entities.  Rhode Island and North Carolina are the only states which have had such action taken against them.

     It appears that Rhode Island's legislators don't realize that they may have shot themselves in the foot.  Since Amazon.com has terminated their relationship with these business, that means they won't receive commissions.  Those in the Associates Program likely had to fill out I-9 forms, and that income was subject to state income tax.  Now, not only will the state not be collecting sales tax from sales on Amazon.com, but they will also be losing the income tax it would have collected on Associate referrals.  For a high traffic site, payments can be substantial.

     So, there you have it.  The General Assembly finds another way to squeeze money out of its citizens, which then comes back to hurt small businesses, and possibly reduce income tax.  Great job!