State Sales Tax: No Time To Sit Still
| Bridget - Thursday, June 25, 2009 0 Comments |
Guest Post by Smokey Burns, CEO, Epicenter Network
Last week, Amazon announced that barring any last minute reprieve, it will be forced to sever ties with its North Carolina affiliates once that state’s new sales tax law is passed. The law—not unlike ones being debated in other statehouses around the country—declares that online marketers with affiliates in the state are deemed to have a local “physical presence”, and therefore must collect state sales tax on all purchases made by state residents.
For Amazon the decision, while regrettable, is clearly the lesser of two evils. Perhaps the more critical question is, what will other companies do? Will they bow to local laws and collect the tax? Or will they follow the lead of the world’s largest online marketer and abandon their local affiliates?
Considering the cost/benefit equation set by the law, it’s unlikely they will do the former, spelling a dire situation indeed for North Carolina affiliates. So what should these unfortunate individuals—as well as others throughout this industry—do in response?
It’s important to note that this controversy will likely drag out in the courts. In New York, where a similar law was passed, Amazon is currently appealing a lawsuit it lost to block passage of the law. Some precedent has been set supporting Amazon’s position—in 1992, in fact, the U.S. Supreme Court denied a similar “physical presence” test imposed by North Dakota (Quill Corporation v. North Dakota).
In the meantime, if you’re in a state moving toward such a law—and even if you’re not—it’s critical that you lobby your legislators NOW. Lawmakers need to understand that their drive to provide fairness for local tax-paying brick-and-mortar retailers (as well as their drive to generate additional state income) threatens the earnings of thousands of their constituents. The loss of income tax paid on such earnings could equal, if not exceed, any sales taxes collected.
And what about affiliates in North Carolina, New York or other states who are victims of such draconian laws? If this is you, consider your options. It’s possible to exclude your state in your online marketing campaigns, and while it may be difficult finding advertisers who don’t do business in your state, they do exist. The Internet is the ultimate global connection, and you can be of value to, and generate revenues for, regional or foreign marketers. Another option is affiliate networks like Epicenter Network, Commission Junction and Clickbooth, who may be able to structure suitable relationships.
Finally, regardless of where you live, continue to educate yourself on this issue and others that impact your livelihood. External influences abound in business—if you anticipate those circumstances and your alternative courses of action, your business will always have a better chance of surviving.
Last week, Amazon announced that barring any last minute reprieve, it will be forced to sever ties with its North Carolina affiliates once that state’s new sales tax law is passed. The law—not unlike ones being debated in other statehouses around the country—declares that online marketers with affiliates in the state are deemed to have a local “physical presence”, and therefore must collect state sales tax on all purchases made by state residents.
For Amazon the decision, while regrettable, is clearly the lesser of two evils. Perhaps the more critical question is, what will other companies do? Will they bow to local laws and collect the tax? Or will they follow the lead of the world’s largest online marketer and abandon their local affiliates?
Considering the cost/benefit equation set by the law, it’s unlikely they will do the former, spelling a dire situation indeed for North Carolina affiliates. So what should these unfortunate individuals—as well as others throughout this industry—do in response?
It’s important to note that this controversy will likely drag out in the courts. In New York, where a similar law was passed, Amazon is currently appealing a lawsuit it lost to block passage of the law. Some precedent has been set supporting Amazon’s position—in 1992, in fact, the U.S. Supreme Court denied a similar “physical presence” test imposed by North Dakota (Quill Corporation v. North Dakota).
In the meantime, if you’re in a state moving toward such a law—and even if you’re not—it’s critical that you lobby your legislators NOW. Lawmakers need to understand that their drive to provide fairness for local tax-paying brick-and-mortar retailers (as well as their drive to generate additional state income) threatens the earnings of thousands of their constituents. The loss of income tax paid on such earnings could equal, if not exceed, any sales taxes collected.
And what about affiliates in North Carolina, New York or other states who are victims of such draconian laws? If this is you, consider your options. It’s possible to exclude your state in your online marketing campaigns, and while it may be difficult finding advertisers who don’t do business in your state, they do exist. The Internet is the ultimate global connection, and you can be of value to, and generate revenues for, regional or foreign marketers. Another option is affiliate networks like Epicenter Network, Commission Junction and Clickbooth, who may be able to structure suitable relationships.
Finally, regardless of where you live, continue to educate yourself on this issue and others that impact your livelihood. External influences abound in business—if you anticipate those circumstances and your alternative courses of action, your business will always have a better chance of surviving.
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