Company leaves state to avoid online sales tax

TAXING WORK: Nest4Less CEO Jesse Kenner works with Vice President of Sales Stacy Randel. Kenner says Rhode Island’s so-called “Amazon law” forced him to move his business to Attleboro. / PBN PHOTO/TRACY JENKINS
TAXING WORK: Nest4Less CEO Jesse Kenner works with Vice President of Sales Stacy Randel. Kenner says Rhode Island’s so-called “Amazon law” forced him to move his business to Attleboro. / PBN PHOTO/TRACY JENKINS

Rhode Island’s commonly called “Amazon law,” which taxes online sales by retailers that have a “nexus” or physical presence in the state, forced Nest4Less to move its office from Pawtucket to Attleboro at the end of August in order to stay in business, according to CEO Jesse Kenner.
“I’m not happy about moving out of Rhode Island at all. I’m a Rhode Islander born and raised,” said Kenner, who lives in Providence and has a master’s degree from Rhode Island College. “My grandfather founded a company in Rhode Island, American Insulated Wire, and I was hoping to have my own business in the state.”
Two-year-old Nest4Less does marketing and advertising for home-related products and services ranging from mortgage companies to furniture and security systems.
Although the vision was to remain part of Rhode Island’s emerging tech community, Nest4Less took its CEO, chief financial officer, four full-time employees and a growing client base to Attleboro when its future was darkened by the Amazon law.
“Most of our vendors are out of state and they refused to do business with a company in Rhode Island,” said Kenner.
Nest4Less has about 400 vendors in home-related industries that pay a subscription fee to create an ad or discount featured in its network, either nationally or in a specific market, said Kenner.
“The problem we ran into was that we have companies in California, for instance, and we create an ad or discount for them and Rhode Island was trying to tax them for that,” he said. Massachusetts doesn’t have that same requirement, said Kenner and accountant Alan Litwin, of Kahn, Litwin, Renza & Co., which has offices in Massachusetts and Rhode Island.
“Massachusetts does not have that click-through provision for sales tax,” said Litwin. “Our office in Cambridge is in a hotbed of startup businesses and a number of them would not even consider moving to Rhode Island because of this provision.”
In the four years since Rhode Island’s controversial “Amazon law” went into effect on July 1, 2009, it was only in the first month or so that small businesses called the R.I. Division of Taxation to check the details. Many ended up giving Chief Revenue Agent Donald Englert an earful of their business woes. “The businesses that called me weren’t happy, but they weren’t leaving,” said Englert. “I haven’t had any calls after that first month or so asking for clarification on the Amazon law.”
Whether or not other small businesses have left the state or whether Rhode Island has lost revenue since the law went into effect isn’t easy to determine.
“I would describe it as more of a deterrent than something that is driving companies out of Rhode Island, “ said Betaspring co-founder and Managing Partner Allan Tear. “The companies that are most affected are those that have an e-commerce business model with national affiliates. We don’t have that many companies in this category.”
What was clear was that when the law went into effect, Amazon ended its affiliation with businesses in Rhode Island, so commissions earned by a “click-through” to order on Amazon evaporated.
The state, meanwhile, doesn’t know how much revenue the “Amazon tax” has brought into Rhode Island.
“We have no way to measure if Rhode Island has made any money since this law went into effect,” said Division of Taxation Chief Revenue Agent Neil Downing.
“Taxpayers do not have to say why they are paying tax,” said Downing. “That’s the only way we would find out if they’re paying tax as a result of this law or any law.”
Rhode Island’s Amazon law has a $5,000 threshold, so if an online company sells less than that amount in four consecutive quarters, it is exempt from the Amazon tax, said Englert.
Partridge, Snow and Hahn tax attorney Dave Morganelli said, from his experience, the Amazon tax doesn’t seem to be a major concern among businesses in the state.
“I haven’t had any clients ask me about it and we work with large and small businesses,” said Morganelli.
Legislation has been proposed in Congress to simplify and standardize online sales tax across the U.S.
Swipely CEO Angus Davis says his company is not affected by the tax, but he still doesn’t see the point of it.
“The state can’t point to any dime generated by it and it’s one example of small things our state does that serve no public purpose but limit private-sector growth,” said Davis. •

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  1. It is time to seriously consider repealing the “Amazon tax” in RI. Government intervention is not going to help local businesses compete against on-line retailers. These businesses have to create a pleasant shopping experience and develop relationships with their customers. Many do.

    RI’s economy could greatly benefit from the income created by residents with websites who are amazon affiliates. Some percentage of the sales that generate commissions on these websites will be from out-of-state residents who would never spend money at a RI store. They are simply starting their amazon shopping at a website they like to support it, and if it is not a RI site, it will be a site run by a resident of some other state, probably a state with a stronger economy than ours.

    https://www.change.org/p/gina-raimondo-amazon-com-affiliate-program-for-ri-websites?recruiter=50507608&utm_source=petitions_show_components_action_panel_wrapper&utm_medium=copylink