Recent changes to Internet sales tax laws are having an impact on some affiliates. When it comes to collecting and remitting tax, the location where an affiliate hangs his or her hat matters in some states. Anyone involved in selling online should be aware of these important laws for affiliate marketers.
Sales Tax Collection and Online Merchants
Under the new laws, online merchants are required to collect sales tax if they have local affiliates in certain states. Currently, California, North Carolina, Rhode Island, and Hawaii are on the list of states affected by these changes. Other states are expected to follow suit, though.
Merchants, like other business owners, are required to collect and remit sales tax from their customers located in their own state. This rule applies to online, off-line and mail order sales. The new laws require these merchants to keep track of where their affiliates are located and collect sales tax there as well. The logic behind the change to the legislation is that having an affiliate in a certain state is the same thing as having a physical presence there and that sales tax needs to be collected and remitted on that basis.
Affiliate Marketers Take Action
Affiliate marketers have not taken this new legislation lying down. Some of them have decided to drop affiliates located in the states which have already passed these sales tax laws. Keep in mind that these affiliates are already presumably paying taxes on the money that they are running on sales, and for the states to come back and ask that the parent company pay sales tax as well seems suspiciously like double dipping.
Two of the Internet’s major retail companies, Amazon.com and another have decided to file lawsuits against the state of New York. In the meantime, one has dropped its affiliates who live in New York State. Amazon has taken a different approach and is paying the sales tax on revenue generated by its New York affiliates until the lawsuit can be settled.
Affiliate Marketers in Other States
Simply because not all states have adopted the new sales tax laws, it doesn’t mean that affiliate marketers everywhere should not be concerned about this development. People who were affiliates in the affected states may have been terminated without notice from the programs they were working with. Those affected have seen their income drop and in some cases, the economic impact was severe.
While it is important to be aware of these important laws for affiliate marketers, it doesn’t mean that all states will adopt similar laws or that existing ones will remain in place over the long term. People who live in the affected states will want to take measures to find alternative ways to make money online, such as selling their affiliate sites to someone in another state, monetizing their site with AdSense or findings independent merchants that they can work with for the time being. Perhaps the best lesson to be learned from these changes is that being flexible is an important component to online success.