[delsol]

In a nutshell here are the dynamics at play.

1) Why this happens:
People are angry at big corporations abusing the tax loophole.
The states have huge deficits.

This lead to usually democrats looking at the "NY nexus" and saying lets do the same to start collecting money from internet sales.

2) How you fight it:
The only thing they care about is money (which is totally understandable give the deficits). Forget about saying you would move to another state, they don't care about that. They don't like lobbyist. Give then the raw truth, with real people (big super mega affiliate making millions + the little work at home emotional mom) and the real consequences this would have on you and your business

2 key points:

2.1) Collect nothing:
This bill will collect zero since merchants will drop affiliates.
They have a difficult time understanding this simple truth because they think this is a partisan argument. If this point is hammered enough this should lead to them trying to understand what an affiliate is. At which point you are just a few inches away from them understand how indeed merchants will drop rather then collect.

2.2) Hurt to the state:
Since this will destroy the affiliates of a given state they will hurt their state in two ways:
2.2.1) Job lose (forget about saying you would move...they care about the unemployment of their state). Specific numbers if possible.
2.2.2) Lost of state income tax: If you have big affiliates have them give specific numbers. Like, my business generated XX millions last year and xx% of that would be instantly lost. Maybe if you are doing well share that information with the representative.

The goal is to explain this so each representative truly understands the issue.

---that's it ----


Now some side noise items/issues:

- Usually this appears to follow party lines so the focus should really be on democrats.

- This is perceived by the general public as the "amazon loophole tax"

- Rally the troops for the hearing (this might get their attention. They deal with a lot of boring issues you need to get their attention). But be careful don't have to many testify and start repeating the same arguments (prepare). A lot of these people are very smart just a little asleep. A large crowd of their constituents should get their attention.


- Many, like me until a few weeks ago, do not understand the concept of "tax nexus". In other words the common person thinks anyone selling in any state is really abusing a tax loophole if they do not collect sales taxes. This is not really true. To be able to force a company to collect the sales taxes of a state you need to establish a tax nexus. It appear Amazon decided to pay NY sales taxes so they could have a court case. They will probably go all the way to the supreme court to argue that they do not have a tax nexus simply because of internet affiliates. Think about this, should a large English merchant pay taxes in Colorado simply because it has affiliates in Colorado? What about a large US merchant, selling with affiliates in Spain should it collect the Spanish taxes? Not a trivial issue. In fact Amazon has a really good case if they make it to the supreme court. I would speculate that the judicial system has to make a call on this "new internet age" issue. This should really be a legislative issue but because the sales tax are local/state (ie not federal) we in America do not know how to proceed. We are sort of stuck.

- Amazon dropped affiliates from the next two states to have implement similar NY Nexus bill (they got their court case with NY don't need to do this with the next states)

- Both governors of California and Hawaii (both R) have vetoed similar bills. California it appears because the governor realized affiliates would be fired. During his speech he explicitly talk about "Overstock re-instating affiliates as I speak to you". Hawaii is very interesting. It appears the governor there realized that the University of Hawaii? would lose a very large amount it was making as an Amazon affiliate. This one amount was so large that it even questioned their fathom tax gain?

[ladidah]

Thanks delsol.

You presented the information very well in an easy layman's terms and explanation.

Great tips and actionable points to remember.

[Working Mom]

Outstanding summary delsol. This is a keeper.

[Kevin]

Well done, DelSol. Thank you.

[Rollerblader]

Exactly on point. Talk to them about numbers. Many of my friends work on the hill in DC. All they care about is re-election. If you show the number of shoppers in their district that will be effected that you reach, how many small business owners they will destroy and unemploy and other things that matter to a politician, that gets their attention. Great points!

It's time to start rallying up support in VA. Michael, can we get a VA subforum? I want to put in a post for Mid Atlantic Affiliates and Media Companies since this will effect Newspapers, Media Buying Companies, Department Stores, Grocery Stores, etc...

[mailman]

How do State Taxes work ? As a Canadian this has yet to become an issue. EG. A customer buys a product from an affilate website in New York. The product is shipped out of state by a Merchant to the customer via mail. Does the Merchant collect the tax at his end where there is no tax? Does the affilate collect the tax because the sale aridginated on his site in New York? Or does the USA mail or UPS collect the tax?

[Herb Ô¿Ô¬]

Originally Posted by mailman

How do State Taxes work ? As a Canadian this has yet to become an issue. EG. A customer buys a product from an affilate website in New York. The product is shipped out of state by a Merchant to the customer via mail. Does the Merchant collect the tax at his end where there is no tax? Does the affilate collect the tax because the sale aridginated on his site in New York? Or does the USA mail or UPS collect the tax?

(a customer in NY buying something via a link on a NY affiliate's site, from a non-NY merchant)

the merchant is required to collect the tax and remit it to the state.

[mellie]

Thanks for the update.

Just one small point of clarity regarding Hawaii. The Governor of Hawaii was in full support of the new nexus law. She was forced to veto because of a technical flaw in the bill title and in the law itself. (The actual flaw was that 2 issues were addressed and Hawaii standards are that only 1 issue can be addressed per act) Hawaii was not won because of any lobbying efforts, it actually lost. I only share this because it is important to know where the Governor and legislators really stand.

[mailman]

Herb. Thanks. So merchandise coming out of Canada does not apply? How does NY expect to police out of state merchants? It's hard to collect taxes when merchants ship via mailordering is it not?

[delsol]

mainman
If like Colorado they would have the power to subpoena ordering records. Which one representive did not like and said that for some medical products it might even be illegal.
----------------------------
Mellie thank you for the clarification. However that appear in direct contradiction with what I have read the governor Lingle as saying:

"I am vetoing this bill immediately to help ensure Hawai'i is not economically hurt by legislation that was not well thought-out and would have negative consequences for non-profits such as the University of Hawai'i bookstore, and businesses throughout our State," Governor Lingle said.
"I am hopeful by vetoing this bill that mainland-based companies will promptly restore their relationships with our State."

Source:
http://www.webpronews.com/topnews/2009/07/02/hawaii-governor-vetoes-amazon-tax-law

[mellie]

Running out the door but here's more on the actual reason :

The Attorney General found that HB 1405 HD2 SD2 CD1 may be legally defective in that it may violate Article III, Section 14 of the Hawaii State Constitution. This Article provides that each law shall embrace only one subject which shall be expressed in its title. The scope of HB 1405 may be broader than its title indicates and thus the legislation may not meet the constitutional test.

“We are hopeful the Legislature will recognize this legal flaw and not act to overturn my decision to veto this measure,” Governor Lingle added.

[Daniel M. Clark]

One thing I wanted to touch on before heading to bed - I was surprised today, because I'd been hearing that it's been the Democrats that have been pushing all these bills, yet in New Mexico, both parties were pretty much united against it (or, at least united in not necessarily being for it). It may have been a Democrat that introduced it, but the committee tabled it with agreement on both sides. I disagree with the assessment that Democrats should be focused on. All committee members have a vote, all need to be focused on.

[delsol]

Originally Posted by Daniel M. Clark

One thing I wanted to touch on before heading to bed - I was surprised today, because I'd been hearing that it's been the Democrats that have been pushing all these bills, yet in New Mexico, both parties were pretty much united against it (or, at least united in not necessarily being for it). It may have been a Democrat that introduced it, but the committee tabled it with agreement on both sides. I disagree with the assessment that Democrats should be focused on. All committee members have a vote, all need to be focused on.

Every state might be different. Response from a Colorado Rebublicain senator:

Yes, I get it. I will oppose this bill as will every Republican at the capitol. However, Ritter and the Democrats are in charge, as you probably found out.

[Daniel M. Clark]

You mean a Republican congressman is blaming the Democrats??? That's impossible!!! There are more factors involved here than simple party lines. If it were nothing but party lines, they could all just stay home and whatever legislation a Democrat introduces could be automatically passed. Don't discount the desires and intentions of individuals, that's all I'm sayin'.

[delsol]

On this issue it's party lines SO FAR. I did phone every single dems (all 64) to tell them this bill was a mistake. So I certainly hope they will take 2 minutes to understand this bill and realise it's will create a further financial lose for Colorado. The scary part is that they are so busy right now and the bill (1193) was sponsored by a dem so if they "blindly" vote, they will vote for it.

[delsol]

This first video (from a Colorado affiliate) attemping to explain the "affiliate tax":
http://www.youtube.com/watch?v=o6SlGca79nQ

Could help affiliates in other states...

[mr_jones]

That's a great video presentation the Delsol just linked to. Well worth passing it on to your Representatives and Senators.

[Rexanne]

Originally Posted by delsol

This first video (from a Colorado affiliate) attemping to explain the "affiliate tax":
http://www.youtube.com/watch?v=o6SlGca79nQ

Could help affiliates in other states...

Excellent! Thanks for posting the link and for your concise and comprehensive explanation about this tax nonsense, Delsol!

[batteryready]

That's great, well done. go go go ....

[TxJackie]

Wow, I was just getting ready to launch an affiliate program on ShareASale and found out about this. BUMMER!

Yes, as a merchant, I could "just pay the sales tax" but the problem is when you do, then you open yourself up for an AUDIT by each and every state. In addition to the IRS of course. Let's say I pay sales tax in all the states which require it. And 2 or 3 of them demand an audit of my accounting in one year. That instantly increases my costs and takes a lot of time.

I can see why some merchants are just dropping affiliates in the states which require sales tax be paid. The liability and chance of an audit is too high. It is very very unfortunate for the merchant and the affiliates.

I'll do everything I can do FIGHT these ridiculous laws. I don't want to restrict commerce in any state.