Drs Foster and Smith has shut down their entire affiliate program due to concerns over Internet sales tax legislation. As in their previous terminations of affiliates there was no advance notice given. Since New York Affiliates were removed two years ago, I learned of this move through a post by Linda Buquet of 5 Star Affiliate Programs. Please read Linda’s post Drs Foster and Smith Drops Affiliate Program Due to Advertising Tax for a complete summary of the information on the letter received.
In the letter sent out to all affiliates, Drs Foster and Smith say, in part:
The single reason for the decision at this time is the moving target of the ever-growing patchwork quilt of state legislatures that are considering nexus legislation relative to affiliate marketing and sales tax. It has become increasingly difficult to determine who is considering such laws, where they are in the process and what the ramifications are in each state. What affiliates may not be aware of is that such nexus situations do not only relate to sales tax collection, but potentially state income tax for a corporation as well.
This move does not surprise me, other lower profile merchants have made the same move.
There is an alternatives to ending a program, collecting the sales tax. Several companies such as Avalara can automate the process quite a bit. I am hoping merchants are making educated decisions.
{ 3 comments… read them below or add one }
Does anyone really care with the way they treat affiliates? This just proves tax evasion anyway.
Stan, this is by no means tax evasion. Companies like Drs. Foster & Smith does not have nexus in most states of the Union, including my home state of California. State legislators are trying to create nexus by twisting the definition of nexus to the point of being nonsensical. Worse, their attempts will only harm small businesses and not result in the collection of sales and use tax.
What Drs. Foster & Smith point out is that companies that accept the new definition and collect the sales and use tax and remit it to the states are then might find themselves rewarded with penalties for not filing state corporate income tax returns and paying that tax.
Why not wait a few more month before shutting down the affiliate program to see if the internet sales tax law will require collecting sales tax anyway?