Affiliate Marketing & Programs
 

Is a resolution to the affiliate nexus tax in the works?

 

Affiliate Nexus Tax - Amazon Affiliate ProgramsStill fretting about the Affiliate Nexus Tax issue in California? It’s possible a solution is in the works. Late last week, several Democrats in the U.S. Congress introduced a bill to prevent states from creating unfair rules to tax online retailers.


This bill is named the “Main Street Fairness Act.” It’s co-sponsored by Sen. Dick Durbin (D-IL), Sen. Tim Johnson (D-SD), and Sen. Jack Reed (D-RI) as well as Reps. John Conyers (D-MI), Peter Welch (D-VT) and Heath Schuler (D-NC) in the House. This bill has been formally endorsed by Amazon.com and Sears Holding Co., the owner of KMart, Sears and Land’s End.


“I think in terms of the sales tax issue in total, the way you should think about it, we support a federal simplified approach, as we have for more than 10 years,” Amazon’s Chief Financial Officer, Thomas J. Szkutak, said during the company’s second-quarter earnings call. During the call, Szkutak said Amazon believes the tax issue needs to be addressed at a federal, and not state, level.


Some organizations are opposing the bill because of what they say is an unnecessary cost burden on small businesses. Sen. Durbin said, however, the bill exempts small businesses from collecting online taxes.


In a statement, Sen. Durbin addressed the purpose of the bill:


“Consumers shouldn’t have to face the burden of reporting all of their online purchases. Main Street retailers collect sales taxes on behalf of consumers, why shouldn’t online retailers do the same? In 2012, states across the country, including Illinois, are expected to lose as much as $24 billion in uncollected state and local taxes on internet and catalogue sales. From 2005 to 2010 the state of Illinois estimated it lost $153 million each year. The Main Street Fairness Act doesn’t ask anyone to pay a single penny more in taxes. Instead, it would help governors and mayors collect taxes that are already owed,” Durbin said.


While Amazon currently benefits from not having to charge sales tax, they would be forced to collect tax on all U.S. transactions if this bill becomes law. And while that seems counterintuitive to their business interests, this bill would provide a solution that would create across-the-board fairness and provide Amazon with a single solution and clarity around tax standards in the United States.


The opposition is led by eBay, which has been joined by the the Electronics Retailing Association, the Computer and Communications Industry Association, TechNet, and the far-right National Taxpayers Union, among others. eBay, which includes a gigantic network of individual sellers and small retailers, would be forced to require each one of their sellers to charge sales tax on every transaction.


eBay, which represents a vast network of small businesses and individual sellers, would presumably be forced to require each and every one to charge sales tax.


As readers of the AffiliatePrograms.com blog already know, current federal law requires retailers with a physical presence in a state, known as a nexus, to charge sales tax. Otherwise payment of the tax is left to consumers, who are required to self-report such purchases. Amazon first challenged the law’s interpretation in 2008, fighting efforts by New York State to tax digital good in 2008 and 2011. Amazon also cancelled the affiliate contracts of thousands of California affiliates earlier this summer because of a California law that required it to collect sales tax on all transactions because of its affiliate base in California.


Based on the U.S. Congress’ inability to come to a quick resolution to the recent debt ceiling crisis, it seems likely that this bill may stall until the next session of Congress, which begins in 2013. However, the bill is backed by major campaign donor who may be able to force a resolution of this issue.


Additional Resources


Library of Congress – Full text of the Senate bill.
Library of Congress – Full text of the House bill.


What are your thoughts about this bill? Do you think a standard approach to sales tax would be good for affiliate marketers?


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2 Responses to Is a resolution to the affiliate nexus tax in the works?

  1. Sten Wilson August 5, 2011 at 3:22 pm

    There is a simple solution: TaxCloud (http://taxcloud.net).

    The statements by Ebay in the article confuse me. My company currently uses a PayPal checkout button (PayPal is an Eaby subsidiary) that works with TaxCloud’s service so my business (with less than $50k in annual sales) already calculates, collects and remits sales tax for any jurisdiction in any state. It is simpler in most cases for my business to calculate and remit sales tax than to deal with shipping.

    If my business can manage to collect the legally due sales tax for my customers, why is it so hard for Ebay?

    Technology available freely on the internet (like TaxCloud) is more than capable of handling sales tax calculation and remittance. Sorry everyone, the “too burdensome” argument carried merit in 1967 and in 1992 (when SCOTUS last ruled on this matter), but in the era of modern computing where Ebay maintains a dominant position, multijurisdictional sales tax calculation and remittance is easily accomplished.

    So what is the real reason Ebay chooses to evade supporting your schools, hospitals, infrastructure, libraries, parks and so much more?

  2. Jeff Greer August 5, 2011 at 9:59 pm

    You’re right about eBay’s opposition. It’s disingenuous.

    eBay has built a strong business collecting micro-fees from sellers. It’s ridiculous to think they couldn’t manage sales tax as well.

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