Affiliate Marketer, Will Your State Put You Out of Business?


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3 Comments

taxes2It all started with New York and the now infamous ‘Amazon’ tax. New York was the first state to decree that if you had an NY affiliate who received a referral fee for selling your product, then that was enough to mean you had nexus.

Nexus means connection. And that connection meant that you were now responsible for collecting New York sales tax. So, what if you live in Texas, ship from Texas and sell to a Texas customer? You collect Texas sales tax, right? Well, New York says if you have a New York affiliate help you with the sale, you’re supposed to collect New York sales tax. It’s a mess. And that’s why Amazon challenged the law in New York court. And lost.

So Amazon and other websites cancelled their contracts with affiliates who lived in the state of New York. In effect, if you live in New York, you can’t be an affiliate marketer.

Other states have joined in on the bandwagon with both Rhode Island and North Carolina passing ‘Amazon’ tax laws.

Other states, now desperate for money, are talking about adding their own version. Most of these would go into effect, if passed, by June or July of this year.

They are:

    California
    Colorado * (if passed, will come into effect March 1st)
    Connecticut
    Florida
    Hawaii
    Idaho
    Illinois
    Maine
    Maryland
    Minnesota
    Missouri
    New Mexico
    South Carolina
    Tennessee
    Texas
    Vermont
    Virginia
    West Virginia
    Wisconsin

Mississippi just defeated their version of the ‘Amazon’ tax. Nevada’s governor is talking about his new budget plan that will include a version for Nevada.

Remember too if you have a website, then you need to be careful if you have affiliates in any of these states. You’ll need to start collecting sales tax on any sales that they help with. Most likely, it’s easier to just go the route of Overstock.com, Amazon.com and other big Internet businesses and cancel the affiliates in these states.



3 Comments

  1. Megan Hughes says:

    Hi Scott,

    Unless you live in Alaska, I think this approach could be problematic. The IRS will want to characterize at least part of the income as earned. You’re working directly in the business to create the income stream – it doesn’t happen unless you work to make it happen.

    Once that happens you have an obligation to register the business in your home state, with both the secretary of State and the state tax department. And when that happens, I believe you are back to square one.

  2. Many affiliates are no longer accepting us due to being based in North Carolina. This Amazon Tax is spreading like wildfire – even hitting Hawaii! I’m thinking the safest bet is to LLC in Alaska. Alaska has no sales tax or personal income tax. Does anyone see any problems with my thought?

  3. Megan Hughes says:

    I think one of the keys to defeating this legislation is to reach out to your state legislators, on FaceBook, Twitter, etc., and tell them how this bill will harm people. The thing I’m learning is that the nexus tax isn’t realizing any real money for states. Rhode Island has made next to nothing. Why? Because the big companies simply sever their ties with in-state affiliates. So not only is no tax gained on those sales, but there is also income tax lost on the income the affiliate would have otherwise earned, and lost sales tax on the stuff that affiliate would have bought with that income.

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