Nexus Tax Hurts More Than it Helps

Allison Howen — Wed, 07 Sep 2011 20:30:00 GMT

A recent survey confirms that a nexus tax would absolutely harm affiliate marketers and small businesses.

The study was conducted by the Performance Marketing Association, Inc., (PMA) of California’s online Affiliate Marketing industry, with a sample size of 500 affiliate marketers in California.

“Unfortunately the survey results have confirmed what we knew all along; an affiliate nexus tax immediately reduced the income of these small California companies, forcing them to make tough business decisions such as hiring freezes, laying employees off, or moving out-of-state,” says Rebecca Madigan, executive director of the PMA. “The survey uncovered some dire outcomes for these businesses: 37 percent lost over half their income; 22 percent closed their affiliate businesses; almost 32 percent have moved or are planning on moving.”

To further prove that a nexus tax would not generate additional sales tax revenue for California, George Runner, a Board of Equalization member, claims that no online retailers have registered to collect sales tax because of ABX1 28.

“Learning from history, we know ABX1 28 will not persuade out-of-state retailers to start collecting sales tax,” says Madigan. “We know this because other states that attempted to pass similar laws arrived at the same results, no new sales tax revenue materialized. It is our hope that this empirical data will compel members of the Legislature to reflect upon this issue and create a win-win situation for the state. Because right now all we have is a dramatic decline in the incomes of 25,000 small businesses, companies leaving the state, and no additional sales tax being collected.”

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.

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Nexus Tax Hurts More Than it Helps

Merchants Can Rest Easy About New Tax Laws