The governor of Hawaii, Linda Lingle, vetoed a bill that would require online retailers, that do not operate their business in the state, but otherwise pay commissions to people who reside in Hawaii and refer traffic to their Web site (a.k.a. affiliates), to collect sales tax on Hawaii’s behalf. (Source: WebProNews.com)

Hawaii is not the only state doing so. And if such laws were enacted by all 50 states, a situation could arise that would require companies that do not operate in multiple states to deal with the burden of 50 separate state tax bureaucracies.

Rather than deal with Hawaii’s bureaucracy, Internet retail giants Amazon and Overstock decided to sever relationships with all affiliates in Hawaii, and thereby prevent anyone who wishes to earn from referring Web traffic to retailers, from doing so.

Due to Hawaii governor’s veto, Amazon announced it would resume its relationship with affiliates in the state. Amazon and Overstock also pulled the plug on their affiliates in North Carolina and Rhode Island, states which enacted similar laws to Hawaii’s, and hinted they would reestablish ties if those states’ new tax collection laws were repealed.

The moral of this story is that governments, especially democracies, are extremely limited in the amount of revenues they can raise from increasing taxes. This is because people will adjust, or avoid the taxed activity altogether, which is particularly easier for the walthy to do.

For some reason, the socialists either don’t understand it, or purposefully ignore this fact in their delusional pursuit of a government that takes care of all the needs of everyone.