Amazon drops Affs in Rhode Island

Rebecca Madigan, founder of the affiliate trade group Performance Marketing Alliance, estimates there are some 2,000 online affiliates in Rhode Island, who pay about $3 million in state income tax. "We're seeing small businesses being hit. They are the collateral damage through all of this legislation, which inaccurately classifies affiliate marketers as sales agents" rather than advertising channels, she said.

The Rhode Island termination follows a similar move by Amazon last Friday to end its relationships with affiliates in North Carolina as the state approached passing a similar law. Cash-strapped states across the country have looked at similar legislation to boost revenue. Such a law went into effect in New York last year.

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Article: http://online.wsj.com/article/SB124630810805070105.html

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Hawaii lawmakers send governor bills to tax Internet transactions

One bill would allow Hawaii to join 23 other states in the Streamlined Sales Tax Project to simplify state tax laws and encourage retailers like Amazon.com to collect and pay state sales and use taxes. States that have signed up for the project are unable to require retailers to pay the taxes, however, until Congress passes federal legislation clarifying it is not a burden on interstate commerce.

Article: http://www.honoluluadvertiser.com/article/20090622/NEWS01/906220341/Hawa...

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Hawaii also has this bit of stupidity in the works: Internet general-excise tax (HB1405 HD2 SD2 CD1) — Imposes the state's 4 percent general-excise tax on Mainland retailers that establish an economic nexus in Hawaii through local Web sites.

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Point: This of course will cause webmasters located in Hawaii to lose a source of advertisement revenue.

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California Anti-Nexus Lobby Day 3

Article: http://www.revenews.com/brookschaaf/california-anti-nexus-lobby-day-3/co...

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From Article: http://www.newrules.org/retail/rules/internet-sales-tax-fairness

{The above article in no way reflects my point of view and is written by someone who does not understand that in fact many small retailers do sell online and some comment in the article makes the foolish statement that most online retailers are not even licensed. That is bullshit. The above article has a clear bias against online retailers but it does provide an understanding of the issue even if written from what I consider the wrong side of the issue.)

In a 1992 decision, Quill v. North Dakota, the U.S. Supreme Court ruled that retailers are exempt from collecting sales taxes in states where they have no physical presence, such as a store, office, or warehouse. (The legal term for this physical presence is "nexus.") Although the case dealt with a catalog mail-order company, the ruling has subsequently been applied to all remote sellers, including online retailers. The Court said that requiring these companies to comply with the varied sales tax rules and regulations of 45 states and some 7,500 different local taxing jurisdictions would burden interstate commerce.

In its ruling, the Court specifically noted that Congress has the authority to change this policy and could enact legislation requiring all retailers to collect sales taxes without running afoul of the Constitution. "Congress," the Court declared, "is … free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes."

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This article then tries to make the case that dealing with 7,500 different local taxing jurisdictions wouldn't be complicated at all. They say that Amazon uses software to do exactly that for Target which of course has physical stores in many states. In truth, Amazon knows from that, that it is complicated and dealing with tax offices in the 50 states where errors happen is beyond a simple legal burden. It is a potential legal nightmare.

I disagree with the Supreme Court Ruling in saying that Congress has the right to allow states to interfere with interstate commerce. I do not think Congress has the right to say that Hawaii has the right to tax a business in Florida for a sale to Hawaii. That would be the same as an illegal tariff or duty. I think Hawaii has the right to put a sales tax on all sales made in Hawaii regardless of where the product is shipped. That would be simple. That would be fair. How would Hawaii like for all their stores to have to collect sales tax for all states and nations where their tourist come from and send the money back to those states and nations. It would be insane. In those cases Hawaii is more than happy to keep the sales tax for themselves and that is the approach that needs to applied in that regardless of where the product is shipped, the sale happens in the state where the business is located and that state has the right to tax the sale regardless of where the product is shipped or where the consumer lives.

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Anyway, hopefully, Georgia where I live will stay sane.

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But if the nexus notion is upheld by the courts based on where affiliates are located, it may change the face of how advertising is done online. Commission based advertising may vanish and be replaced by ad purchases or pay per click or pay per impression programs where the case is much more difficult to make that online advertising is anything other than online advertising and so that a nexus can not be alleged.