Survey Says – Legislation Not Needed

As is often the case, things are not as quiet as they might seem. This is especially true when it comes to affiliate marketing and nexus issues.

This past year, a few legislators in states attempting to pass new nexus laws came out and stated that it was their belief that new legislation was not needed. They said current laws already required collection by remote sellers as a result of in-state affiliates (or performance marketers if you prefer that term), the new legislation was for “clarity”.

In fact, if you had attended any of the dozen or so Affiliate Advocacy open webinars and conference calls this past year on this issue you probably heard about the states who take this stand.

Over the past two and a half years, we also suggested contacting revenue departments with questions or looking over the FAQ’s at the revenue website. Every revenue department will answer questions, usually via a simple email contact. We did this several times for many states and sometimes we were shocked at the answers received. Realize that your asking a question of a revenue department does not replace your need to retain professional counsel.

Recently, the BNA released the “BNA 2010 Survey of State Tax Departments”. According to their blog post, fourteen states feel that there is no need for new legislation – their current law already includes the “Amazon law”. This confirms some of the answers received via email  as mentioned above. The states listed by BNA are Arizona, the District of Columbia, Florida, Iowa, Maryland, Missouri, Nevada, New Mexico, North Dakota, Pennsylvania, South Dakota, Tennessee, Texas, and Washington. What does this mean?

Maybe something, maybe nothing. Answers to a survey do not indicate what it means in any individual case. As we have said hundreds of times, no one should jump and act without qualified counsel.

But the results of the survey may explain why a few merchant removed affiliates over the past year. Over the past year I received emails from affiliates in several of the states listed above regarding their termination from some programs. Follow up with merchants revealed that in most cases it was a direct result of ‘nexus questionnaires”.  The questionnaires made the merchants nervous so they removed affiliates. (Actually, it is likely that the removal of affiliates would do nothing to remove the nexus as nexus. Nexus does not disappear immediately; it varies by state, but it usually takes a year or more to wear off.) States have always sent out these questionnaires but recently it does seem like more activity. Why? Maybe we are just more aware of it. Or, perhaps faced with financial difficulties, states have become more aggressive in collecting sales and use tax.

All of this indicates the need for Federal action. State by state Amazon tax works for no one – not the states, the merchants or affiliates. We need to work on a long term answers. Main Street Fairness act, the SSTP, flat rate or just required collecting on all sales – many to choose from but the key is to first educate yourself as to what each means. In my opinion, it is inevitable that remote sellers will be required to collect sales in the not too distant future.

It has been over two years since collecting sales tax on Internet sales has been of major concern for many. We continue to fight small battles on a state front, but the worst is still ahead of us. The financial situation continues to worsen for most states. Legislators who were once opposed to modernized nexus laws or stepping up enforcement are beginning to say “let’s look into it”. Legislators are even spending time researching for a “new and improved” nexus law. Florida and Colorado are just two of the states who have looked or are looking at new approaches to taxing online sales.

Only some of the fourteen states listed above had pending legislation this past year. Others listed above took no legislative action but were more active in reviewing remote (out of state) sellers. Again, what does this mean?

The answer is the same. It means you have to be more educated and more proactive. If you are a merchant, do not make uneducated decisions, retain professional counsel and do not relay on opinions expressed by others. The only ones who can give you counsel are lawyers and accountants you have retained for yourself. Do not panic and simply pull the plug on any or all affiliates.

If you are an Affiliate, continue to diversify and always have a back up.

No matter what role you fill in this industry, preparation and education is critical.

Tagged as: Advertising Tax, Amazon tax, Internet Sales Tax, Internet Tax, Legislative Updates