Currently, nine states have affiliate nexus tax (or as some call them “Amazon tax”) laws in place. These are: Arkansas, California, Connecticut, Georgia, Illinois, New York, North Carolina, Pennsylvania, and Rhode Island. In addition to these, numerous other states (like Indiana, Florida, Minnesota, etc) are considering going the similar route.
Basically, these laws prescribe for out-of-state merchants/advertisers who in any given year exceed $10,000 sales threshold to customers residing in the tax law state in sales which have been referred through affiliates residing in the same state to collect a sales tax.
More often than not, instead of collecting the tax merchants choose to terminate relationships with affiliates (residing in nexus law states) — to avoid the prospect of collecting the tax altogether. As a result, this causes negative effects on the businesses that these affiliates run. To date, over 75,000 small businesses have been affected.
Time and again, numerous affiliate marketers (including yours truly) have mentioned that the only way to put an end to this is a federal solution to the problem.
Finally, on February 14, 2013 (thank you for the love, Congress!) the Marketplace Fairness Act has been introduced to Congress!
The Performance Marketing Association wrote this in their blog yesterday:
Best Valentine’s Present for the Performance Marketing Industry!
Today the Marketplace Fairness Act of 2013 was introduced into Congress. This bill, when passed, will essentially reverse the Affiliate Nexus Tax laws that have passed in 9 states and devastated the incomes of 76,000 affiliate marketers…
We have high hopes this bill will pass in 2013!
Many thanks to the bill sponsors and supporters, Senators Dick Durbin of Illinois (and winner of this year’s Affiliate Summit Industry Advocate of the Year award), Mike Enzi of Wyoming and Lamar Alexander of Tennesseee, and Representatives Steve Womack of Arkansas and Jackie Speier of California.
Should the Marketplace Fairness Act pass, it will “grant states the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction” [more here], regardless of the source/marketing channel through which the consumer has arrived to their (online or offline) property. In such a scenario there will, basically, be no reason for any online retailer to have no business relationships with affiliates residing in any state.