'Net Features : amazon tax

Merchants Can Rest Easy About New Tax Laws

Linc Wonham — Mon, 18 Jul 2011 19:00:00 GMT

As most everyone knows by now, earlier this month California became the latest of several U.S. states to have passed a law requiring sales taxes to be applied to online purchases. The legislation is commonly referred to as the affiliate nexus tax or the Amazon tax because the e-commerce giant is tied up in several lawsuits throughout the country challenging the constitutionality of the new laws.

Understandably, the e-commerce industry is somewhat on edge and will most likely remain so until the issue winds its way slowly through the federal legal system. While the affiliate marketing industry has a legitimate cause to worry, online merchants can rest much easier as far as this is concerned. The reason being that, taxes or no taxes, consumers will shop on the Web regardless of the final outcome.

Here are five reasons why:

Convenience
E-commerce currently accounts for approximately 4.5 percent of all retail sales in the U.S., and that number will continue to climb as our lives continue to become busier. A larger portion of the American population is finding they have less and less time to do their shopping the old fashioned way, and most online shoppers do so for the convenience it offers with little regard to whether or not they are paying sales taxes. The small percentage of those that do factor in the absence of sales taxes into their decisions to shop online may want to consider the price of gas it takes to get to and from their favorite brick-and-mortar stores.

Selection
Speaking of the price of gas, how many stores would one have to visit and how many miles would they have to drive to find the kind of product selection available on the Web? Thirty minutes of Internet research probably amounts to thirty trips around town and the surrounding areas, depending where you live. Most Web shoppers go right to their computers when they get the hankering for a new pair of shoes, and whether they buy online or offline makes little difference if they decide to buy your brand or from your establishment.

Discounts
Every savvy online shopper knows how to find a great deal on the Web, but the days of haggling over price in person with store proprietors went out with the horse and buggy. Discounts are a huge draw for Web shoppers and the most successful merchants know exactly how to make them work to their advantage. If a consumer can find that pair of shoes for 20 percent less on the Internet than at a physical store, what difference will a few dollars’ sales tax make anyway?

Price comparisons/User reviews
Back to the price-of-gas thing. How many stores would one have to visit for a thorough price analysis of all the shoes under consideration for this particular purchase? Online shoppers can zero in on the brand and style they want and then, with the click of a single button, see how they compare in price on a dozen different websites and store locations. Better yet, they can find out how other shoppers rated each product and factor those reviews into their decision-making.

Mobile
As smartphone adoption increases in the U.S. and mobile commerce approaches the crest of what will be the biggest wave in the industry’s history, the potential of instant gratification will be too much for consumers to resist. While shopping online once offered the convenience of shopping from home at any hour of the day, mobile shopping makes it possible to purchase things anytime, anywhere. The lure is just too strong for most Americans to give up this kind of power based on a new sales tax law that’s passed in the retailer’s state.

Are these new laws fair? Will they bring more revenues to each state? Will they complicate lives for online retailers? I can’t assuredly answer any one of the three, but what I do know for sure is that the e-commerce industry will continue to grow at its currently impressive pace regardless of any new tax laws.

PMA Sues Illinois Over Affiliate Tax

Mike Phillips — Fri, 10 Jun 2011 18:40:00 GMT

For the first time, the affiliate nexus tax (Amazon tax) is being challenged by a lawsuit. The Performance Marketing Association (PMA) has filed suit against the State of Illinois claiming the new law unconstitutional. We get the details from PMA's Executive Director, Rebecca Madigan.

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PMA Sues Illinois over Affiliate Nexus Law

Pete Prestipino — Wed, 01 Jun 2011 18:25:00 GMT

The Performance Marketing Association (PMA) filed a lawsuit against the Illinois Department of Revenue today, challenging the constitutionality of its recently passed law which aims to extend the state’s tax nexus to include a retailers affiliates (publishers) should there be no physical presence for the retailer in that state.

The law (often called the Amazon Tax or the Mainstreet Fairness Bill) requires out-of-state retailers who use Internet-based performance marketing (affiliate marketing), but not other forms of advertising, to collect Illinois state sales and use tax. The result in Illinois has been well publicized – losing a few high profile web properties to neighboring Wisconsin. The PMA’s complaint aims to demonstrate how the Illinois law discriminates against Internet-based performance marketing, in violation of the federal Internet Tax Freedom Act.

“HB 3659 is a calculated assault on the burgeoning performance marketing industry and a misguided attempt by the state legislature and Governor Quinn to shore up the state’s budget deficit on the backs of small business,” said Rebecca Madigan, Executive Director of the PMA. “We’re striking back at a law that not only unfairly targets our industry but also would arbitrarily broaden the state’s definition of nexus. That’s a direct violation of the Commerce Clause and flies in the face of decisions already established by the Supreme Court.”

According to the PMA, Illinois-based affiliates number at least 9,000. In 2010 these affiliates generated $744 million in advertising revenue. The PMA is arguing that if HB 3659 takes effect on July 1 as scheduled, Illinois affiliates will be in jeopardy, as will the $22 million in state income tax they generate annually.

The reason is that out-of-state retailers may avoid the new affiliate nexus tax by terminating their relationships with affiliates. In fact, since the law was enacted in March, many retailers, including Amazon.com and Overstock.com have already severed their relationships.

Illinois Governor Signs Internet Sales Tax Law

Mike Phillips — Thu, 10 Mar 2011 21:11:00 GMT

Illinois Governor Pat Quinn today signed into law the Internet sales tax, or "Amazon" tax. Like other states before Illinois, many sizable businesses have dreaded such a move ever taking place. In fact, two prominent Illinois Internet businesses previously made threats to leave the state if the law were enacted.

Tim Storm, CEO of FatWallet.com previously said, ""I started (my business) in Wisconsin, but moved to Illinois because it is home. I can literally see Wisconsin from my window – it’s five miles away. If I have to move, I will."

Storm was joined by CouponCabin CEO Scott Kluth in saying, "We’ve grown 100 percent year over year in the last 7 years in revenue, we’re anticipating 54 percent this year. I can’t lose a third of my business and continue to grow and walk away from that growth."

Of course, Illinois can expect Amazon to sever ties with businesses in the state, as they have done in other states that have passed similar legislation.

Michael T. Carrigan, president, Illinois AFL-CIO had this to say, "The Illinois Internet tax represents much needed revenue for our state. Most states require sales tax on internet transactions. It levels the playing field for retailers who have permanent operations in our state and must charge sales tax.

"Labor has worked closely with business to address this problem in our state, to help protect jobs and grow Illinois’ economy. We were very disheartened at the attempts to stop this legislation by amazon.com who threatened businesses and working men and women at a time when jobs are precious."

Many argue, however, that the legislation does not actually increase revenue in the state but causes a loss of jobs and an overall decrease in total sales.

Illinois To Get Hit With "Amazon Tax"?

Affiliate Insider : feature — Fri, 07 Jan 2011 14:54:00 GMT

Illinois Amazon affiliates received an unwelcome email last night. Illinois, it seems, is positioned to pass the so-called "Amazon Tax." And Amazon is holding nothing back in voicing its opinion on the matter. The email begins: We regret to...(read more)

Affiliate Tax Battle Heats Up in Colorado

Mike Phillips — Wed, 03 Feb 2010 21:30:00 GMT

The affiliate tax (or Amazon tax) just gained some momentum in Colorado, passing through the House. The bill (HB-1193) is now moving to the Senate. The argument against the tax is the same - that taxing out-of-state retailers who use Colorado-based affiliate advertisers will destroy businesses and result in less overall revenue for the state.

As expected, both retailers and affiliates are working to keep this bill off the books. Overstock.com recently sent a note to its affiliates, stating they will be forced to terminate relationships of Colorado-based affiliates should the bill pass into law. Overstock has already implemented this measure in states where the bill has become law - New York, North Carolina and Rhode Island. And while Overstock is the most outspoken on the issue, it won't be the only online retailer to shut down local affiliates.

Rhode Island presents an interesting case as it pertaines to the affiliate tax. The Providence Business News reports that Rhode Island has yet to collect any taxes as a result of the tax law. In addition to the lack of collection, less taxable income is being produced in the state. Amazon has already dropped their affiliate operations from Rhode Island.

Genral Treasurer Frank T. Caprio, who is running for governor of Rhode Island said, "The affiliate tax has hurt Rhode Island businesses and stifled their growth, as they’ve been shut out of some of the world’s largest marketplaces, and [it] should be repealed immediately."

David Asseoff, CEO of Denver-based internet marketing company Adperio (who generates $35 million per year in revenue) said, "It's going to kill jobs, there will be no incremental revenue the bill is flawed from the get go and unfortunately businesses like ours and our industry are going to suffer we anticipate over four thousand jobs," said Adperio CEO David Asseoff, "Affiliates, many of them small moms and pops are going to lose their business."

This will be an interesting battle to watch in the coming days and weeks. To stay up-to-date on developments, check out this forum at ABestWeb, this Facebook Group and use the #advertisingtax hashtag on Twitter.

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Amazon Tax: Developments and Implications

Pete Prestipino — Mon, 21 Sep 2009 16:29:00 GMT

One of the biggest hot-button issues of online retail goes by many different names but it's most commonly called the “Amazon Tax” because of Amazon.com’s involvement in fighting it in New York and beyond. There is a fundamental lack of understanding on the issue in many circles yet legislation is being passed. Are you ready for what is to come?

Read more on the developments in and implications of the Amazon Tax by Geno Prussakov

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Internet Tax Battle Continues

Pete Prestipino — Wed, 09 Sep 2009 17:11:00 GMT

The Performance Marketing Alliance today announced the filing of a motion seeking leave to submit an amicus brief in support of Amazon's appeal, which argues that the law requiring Amazon and other Internet retailers to collect use taxes on sales in New York (N.Y. Tax Law § 1101) based on their relationship with affiliate marketers is unconstitutional under the Commerce Clause of the U.S. Constitution (U.S. Constit., Art. I, § 8).

Editorial Note: Last month, Website Magazine professional-level monthly edition featured an article from Geno Prussakov on the affiliate/Amazon tax. Upgrade your account today to view the digital version of that article.

The PMA is taking issue with the New York law’s classification of affiliates as creating a “physical presence” in the state for online retailers like Amazon, requiring retailers to collect use taxes on sales made through the advertising displayed on affiliate Web sites. Affiliates are individuals and businesses who agree to display advertisements on their Web sites for a given online merchant. They are paid when users click on those advertisements and take an agreed-upon action, such as a registration or a purchase

The brief explains that affiliates provide a form of Internet-based advertising that is closely analogous to traditional print advertisements distributed by a catalog retailer, and do not constitute a physical presence for an ecommerce merchant in any state. Affiliates sell no products, collect no payments from buyers and make no deliveries. They have no further involvement in the sales and marketing process beyond posting the advertisement.

“Since its creation, the PMA has spearheaded efforts to persuade state legislatures not to adopt statutes like this discriminatory New York law, which threatens the livelihood of thousands of individuals and small business owners and has the potential to strangle ecommerce with invalid regulation,” said PMA director Rebecca Madigan.

The brief maintains that the statute harms the public interest by punishing performance marketing, a highly efficient approach to advertising which has allowed thousands to make a living through electronic advertising on the Internet. Further, the revenue stream generated from performance marketing has allowed many small businesses and individuals to accelerate the development of their Web sites, facilitating the more rapid diffusion of free information to the public that is the hallmark of the Internet.