[Chuck Hamrick]

Article from the New York Times adds some details to how this effected actual affiliates: http://www.nytimes.com/2012/01/26/bu...ters.html?_r=3

[Convergence]

First part of the article I thought was pretty well done. Then the author started throwing in crap about "rigging the system" and "There's a lot of fraud". Neither has anything to do with the article's title. Once the author stopped blurting out quotes from others, which he obviously didn't understand but felt he needed some industry input for self-validation, the article got back on track...

[Chuck Hamrick]

The field is not without controversy. Some affiliates have been caught rigging the system by posting fake ads or buying Web ads that purport to be directly from the retailers they are advertising. And retailers often wonder if the sales they get from affiliates are sales they would have gotten even without them.

Mr. Wingo notes that his retail clients say that only about 5 percent of affiliate marketers have sites with content that adds value and increases sales. “Many retailers are decreasing the number of affiliates,” Mr. Wingo said. “There’s a lot of fraud. And some create channel conflict. They may buy search terms and compete with you.”

Still, that 5 percent constitutes a hardy industry, and while it is impossible to know exactly how many affiliate marketers and other businesses have been affected by the nexus laws, it is clear that the fight has had an impact.

I guess if you don't manage your program or pay a network to do it for you then you get fraud and deception. Its been years since I have had a chargeback due to credit card fraud and that was because the merchants departments didn't talk to each other. I monitor trademark myself and see more crap from dealers as affiliate have specific terms.

Guess it wouldn't be sound reporting if you didn't report something negative about the affiliates?

[affninja]

I talked to Mr. Mount during his research for the article (though was not quoted in the published version). He seemed genuinely interested in writing an unbiased piece on the negative impacts of the nexus legislation on affiliate businesses large and small across the country.

[tlemke]

But the article misses the central point -- if a state enacts an Internet sales tax, and amazon.com and other merchants terminate their affiliates, what has improved? The state still doesn't get any sales tax, and the affiliates get a reduction in their income -- and that's income on which they pay state income tax. This is illogical.

[Convergence]

Originally Posted by tlemke

This is illogical.

Correct.

Not only the loss of collecting income taxes (not all States have a State Income Tax) but it's simple economics - if an affiliate doesn't have the income, the affiliate can't go out and spend money within that State. Therefore, the local economies suffer from lack of tax revenue generated on sales, lack of job growth by B&M retailers and so forth.

Think they call that "Trickle down economics"...

[Chuck Hamrick]

Plus they may have to apply for unemployment and other government help so the cost of services go up. Since Internet Marketing is not a job classification you will not see it show up on any government report. Companies like Fatwallet move out of state with 50 people after building a $1M office complex. No line item for that loss.

[tlemke]

And now I understand. Apparently there is some big money behind the efforts on a state level to get legislation passed that will have some sort of impact on the online merchants who are not paying sales tax. Supposedly the money is coming from some of the big retailers who have brick and mortar stores. Do they really think they will shut down amazon.com? Of course not -- but they can harass them, and they can create turmoil, and keep this issue alive enough to possibly get federal legislation passed at some point. We're caught in the middle.

The big retailers win no matter what. If we kick and scream and make a fuss about this issue, it just keeps it in the press and in front of the legislators. If we lose, then the big retailers notch another win.

[AffiliateHound]

This is a KEY misstatement that helps to fuel the efforts to impose these taxes

Originally Posted by tlemke

...Apparently there is some big money behind the efforts on a state level to get legislation passed that will have some sort of impact on the online merchants who are not paying sales tax. ...

Legislators say and members of the public think that online MERCHANTS are not paying THEIR share of taxes.

The statement must always be "online merchants who are not COLLECTING sales tax".

The public needs to understand that one of the results of imposing the "affiliate" tax is that THEY would be the people paying it, not affiliates, not online merchants.

[Chuck Hamrick]

So if I have an online store here in Utah and decide to charge sales tax for any purchase regardless of where the purchaser is ordering from, what is keeping me from treating it like an in-store purchase. Why couldn't an eCommerce merchant just treat all purchases as if they were made in their headquarters and pay the taxes as if through a cash register? If that were the case then all eCommerce companies would be huge tax benefits in their locale!

[Herb Ô¿Ô¬]

Originally Posted by Chuck Hamrick

So if I have an online store here in Utah and decide to charge sales tax for any purchase regardless of where the purchaser is ordering from, what is keeping me from treating it like an in-store purchase. Why couldn't an eCommerce merchant just treat all purchases as if they were made in their headquarters and pay the taxes as if through a cash register? If that were the case then all eCommerce companies would be huge tax benefits in their locale!

I've seen a lot of audit clauses in these state online sales taxes.

[AffiliateHound]

Whether or not that is legal in the merchant's state, the fact remains that most states have Use Tax laws, and they require state residents who make purchases from out of the state to pay a use tax. Whether compelling payment through the fiction of an affiliate nexus or by some other method, such as a actual presence of the merchant in the state, what would result is double taxation. NY is still going to enforce their nexus tax law for online purchases and use their powers to collect the tax even if the consumer was charged and paid a Utah tax on a purchase made from a Utah merchant.

It could only be a solution if every state agreed, but why would NY or any other large state give up their revenue stream? NY or California would never agree to a system where their state residents would be paying a sales tax to Arkansas for purchase made online from Walmart.

I could also see a migration of major retailers to states that do not have sales taxes or have very low sales taxes. That could cause significant revenue problems in states that are dependent on giant merchants for employment as well as state revenue.