[jamuhn]

I've compiled a list of NC legislators involved with this bill (Senate Bill 202). You can e-mail or phone the following to let them know your opposition to Section 27C.2:
Linda.Garrou@ncleg.net; Charlie.Albertson@ncleg.net; Charlie.Dannelly@ncleg.net; AB.Swindell@ncleg.net; Doug.Berger@ncleg.net; Stan.Bingham@ncleg.net; Dan.Blue@ncleg.net; Julia.Boseman@ncleg.net; Don.Davis@ncleg.net; Katie.Dorsett@ncleg.net; Tony.Foriest@ncleg.net; Steve.Goss@ncleg.net; Edward.Jones@ncleg.net; Ellie.Kinnaird@ncleg.net; Floyd.McKissick@ncleg.net; Martin.Nesbitt@ncleg.net; Malcolm.Graham@ncleg.net; William.Purcell@ncleg.net; William.Purcell@ncleg.net; Tony.Rand@ncleg.net; Larry.Shaw@ncleg.net; RC.Soles@ncleg.net; John.Snow@ncleg.net; Josh.Stein@ncleg.net; Richard.Stevens@ncleg.net; Don.Vaughan@ncleg.net; David.Weinstein@ncleg.net; Jennifer.Weiss@ncleg.net; Pryor.Gibson@ncleg.net; Daniel.Clodfelter@ncleg.net; Harold.Brubaker@ncleg.net; Becky.Carney@ncleg.net; Pricey.Harrison@ncleg.net; Dewey.Hill@ncleg.net; Verla.Insko@ncleg.net; Marvin.Lucas@ncleg.net; Paul.Luebke@ncleg.net; William.McGee@ncleg.net; William.Wainwright@ncleg.net; Fletcher.Hartsell@ncleg.net; David.Hoyle@ncleg.net; Clark.Jenkins@ncleg.net; Bob.Atwater@ncleg.net; Joe.Hackney@ncleg.net; Larry.Womble@ncleg.net; Kelly.Alexander@ncleg.net; Van.Braxton@ncleg.net; Tricia.Cotham@ncleg.net; Bill.Faison@ncleg.net; Larry.Hall@ncleg.net; Sandra.Hughes@ncleg.net; Earl.Jones@ncleg.net; Bill.Owens@ncleg.net; Deborah.Ross@ncleg.net; Julia.Howard@ncleg.net; Danny.McComas@ncleg.net; Mickey.Michaux@ncleg.net; Alma.Adams@ncleg.net; Martha.Alexander@ncleg.net; Jim.Crawford@ncleg.net; Phillip.Haire@ncleg.net; Maggie.Jeffus@ncleg.net; Joe.Tolson@ncleg.net; Douglas.Yongue@ncleg.net; Hugh.Holliman@ncleg.net

You can find phone numbers for them here:
http://www.ncleg.net

As well, here is a place to contact the governor, maybe she can put pressure on legislators (you can use the links to find phone numbers for her staff):
http://www.governor.state.nc.us/eTow...estionBox.aspx

And, just for reference, here is a link for the bill:
http://www.ncleg.net/gascripts/BillL...ubmitButton=Go

Please do everything you can, contact everyone and let them know what they will be losing if they pass this section of the bill!

[mellie]

Originally Posted by IAmMe

I need some clarification...

I live in NC and will do what it takes to keep my business alive, so:

Can I incorporate out of state, and have my corporation hire me as an contractor, and I still live in NC?.. Is this a way around the law?

also..

Can I become a sole propietor in another state, but have my office be in NC? In other words, can I become a sole propietor in SOUTH carolina, and do all of my work from home in NC and be OK under this law?

Lastly, what happens if you simply change your mailing address at CJ, LS and SAS to say your business is now located at your relatives address in another state. Would anyone know?

Thanks..

Nexus is created if you live or work in NC. Incorporating in another state will NOT work. Using an out of state address to avoid being called a NC resident is fraud. It may also leave you open to state and federal charges and other legal problems. You may also be sued by any and all merchants and or networks that you partner with that suffer any tax problems as a result of your attempt to hide your true residence. Your relative or friend who permits their address to be used may also be subject to legal charges.

Most networks have probably instituted the same checks on address changes that they did with NY residents last year.

[mellie]

Originally Posted by IAmMe

Thanks for that link, Rich..

I wonder if this scenario would work:

I incorporate outside of NC. I hire a contractor outside of NC to maintain my websites. The only thing I do is collect the profits as the owner of the corporation (I continue to live inside NC).

Would this be a legitimate way of avoiding this law?

Your residency creates a nexus, assuming the other nexus conditions are met (ie the sales threshold as stated in the law).

Remember with all of the legislation that is proposed there is the ability to rebut the presumption of nexus. How that can be done needs to be clarified in each state. Although the laws are similar interpretation may/will vary.

BTW, it is a good idea to avoid using the phrase "avoid the law"; we want to work with the law.

[Rich Owings]

So even if we incorporate outside NC, we can't have any employees in NC?

[mellie]

Originally Posted by Rich Owings

So even if we incorporate outside NC, we can't have any employees in NC?

According to the definition of nexus, employees creates nexus.

(Remember, I am not a lawyer, I only give my opinion and understanding of the law. The definitions of nexus are pretty clear on this, have employees, live or work even part time in a state can creates nexus.)

[IAmMe]

Thanks for the info Mellie. I hate what I'm hearing. It's looking more and more like I might need to pick my family up and move out of NC. Not something I want to do..

NC would be the biggest loser.. Last year I paid mid 5 figues in state income taxes.. All of that will leave with me..

[Rich Owings]

We're pretty freaked out, and are looking at the same thing -- moving.

[ewchaisson]

One thing to do is to make sure that you do not directly target NC residents or citizens with your advertising efforts (i.e. no geo-targeting to NC, or no greatproductsforNCresidents.com sites). This meets the following requirement for rebuttal:

"This presumption may be rebutted by proof that the resident with whom the retailer has an agreement did not engage in any solicitation in the State on behalf of the seller that would satisfy the nexus requirement of the United States Constitution during the four quarterly periods in question." (NC S202, pg 269 line 14-18)

Or at least that's how it reads to me (also, not a lawyer). However, the problem here would be getting advertisers to allow you to stay in the program in the first place. With many advertisers having a "knee-jerk" reaction to the law, publishers won't get the chance to tailor their campaigns to allow for this rebuttal before they are dropped from the affiliate programs.

Also, this will be a lot of work keeping screen caps and records of your sites to deliver as proof that you did not solicit within the state.

Another thought as I write this though, does the "solicitation in the State" line refer to physical presence or virtual presence online? Anyone know? If it refers to physical presence, completely disregard the earlier part of this post...

[IAmMe]

I still wish someone could answer the following:

If I'm simply a shareholder in a non-NC corporation that has no NC employees, is it still nexxus?

ALSO:

My websites are easily duplicated.. Could I help a relative, outside of NC, set up and run a website just like mine. They would own and run everything. They would simply pay me a consulting fee.. Is this legal?

[mellie]

Originally Posted by ewchaisson

One thing to do is to make sure that you do not directly target NC residents or citizens with your advertising efforts (i.e. no geo-targeting to NC, or no greatproductsforNCresidents.com sites). This meets the following requirement for rebuttal:

"This presumption may be rebutted by proof that the resident with whom the retailer has an agreement did not engage in any solicitation in the State on behalf of the seller that would satisfy the nexus requirement of the United States Constitution during the four quarterly periods in question." (NC S202, pg 269 line 14-18)

Or at least that's how it reads to me (also, not a lawyer). However, the problem here would be getting advertisers to allow you to stay in the program in the first place. With many advertisers having a "knee-jerk" reaction to the law, publishers won't get the chance to tailor their campaigns to allow for this rebuttal before they are dropped from the affiliate programs.

Also, this will be a lot of work keeping screen caps and records of your sites to deliver as proof that you did not solicit within the state.

Another thought as I write this though, does the "solicitation in the State" line refer to physical presence or virtual presence online? Anyone know? If it refers to physical presence, completely disregard the earlier part of this post...

I have mentioned several times that the presumption of bnexus may be rebutted. If you look at the solution we utilize in NY, you will see that it entails a 2 step process. The details of that solution will have to be adjusted to fit different states because although all the laws are similar every state will interpret the law differently. Different states will have different standards, and require different proof. In NY a merchant need only have affiliates agree to the conditions and then submit a yearly affidavit; and both documents must be accepted by merchant with a degree of faith. The challenge with the solution, and with any solution, is to get merchant willing to listen and adopt.

Education of the law is the key. Many merchants who do not even approach the $10,000 threshold dropped NY affiliates last year because they were misinformed or uneducated.

Rebutting the nexus is possible, continuing to work with affiliates is possible, it is a matter of wanting to and being able to.

[mellie]

Originally Posted by IAmMe

I still wish someone could answer the following:

If I'm simply a shareholder in a non-NC corporation that has no NC employees, is it still nexxus?

ALSO:

My websites are easily duplicated.. Could I help a relative, outside of NC, set up and run a website just like mine. They would own and run everything. They would simply pay me a consulting fee.. Is this legal?

You need to consult a knowledgeable, ethical sales tax attorney, but our attorney had told us incorporating in another state is not an answer. Your second idea to me is crossing over into questionable practice that may or may not avoid nexus. Personally, I would not do it, but again, consult a sales tax attorney. They are the only ones who can give you a yes or no.

[Matt Enders]

Originally Posted by IAmMe

I need some clarification...

I live in NC and will do what it takes to keep my business alive, so:

Can I incorporate out of state, and have my corporation hire me as an contractor, and I still live in NC?.. Is this a way around the law?

also..

Can I become a sole propietor in another state, but have my office be in NC? In other words, can I become a sole propietor in SOUTH carolina, and do all of my work from home in NC and be OK under this law?

Lastly, what happens if you simply change your mailing address at CJ, LS and SAS to say your business is now located at your relatives address in another state. Would anyone know?

Thanks..

I talked to my accountants about this a few months ago and had them look into the law. From what they were able to find, the nexus clause is based on your physical location. Incorporating out of state will not get you around the laws, because you physically live in NC and operate the business from here.

That being said, you could always incorporate elsewhere, change your mailing address with all the networks, and never let the networks know that you live in NC. This would allow them to claim ignorance on where you actually are, since you changed your contact info. This of course is a huge risk if you would ever get audited. I'd recommend against this approach, but I'm sure others already have don this, or are in the process of "moving" their businesses.

[Matt McWilliams]

jamuhn, thanks for posting the emails and links.

What is sad is that I know a handful of the legislators: Julia Howard, Danny McComas, and Harold Brubaker specifically, and at one time, years ago, they were vocal anti-tax legislators across the board. Now, they are like so many elected officials; just eager to get more control over our money.

As I read section SECTION 27C.2, I am utterly amused at the language used. It's as though the original draftee has never used a computer before, and certainly not to buy something. Unfortunately, someone who has must have got to them and now it actually all makes sense...and it is not good.

[markwelch]

In every discussion thread about the "Amazon Tax," two issues come up:

(1) Can I avoid the effect of this law by using some legal trickery (such as incorporating my company in another state), even though I will continue to live and work in this state? The answer is always no.

(2) Can't I just hide from this law by using a mail-drop address in another state? They're not very likely to catch me, are they? Breaking the law is not a solution. If you are caught, you won't face the worst immediate impact -- the merchant will (but the merchant will probably turn around and sue you for fraud).

If merchants have any reason to believe that their affiliates are playing "address games," then the merchants would need to seriously consider ending the affiliate program entirely unless they are willing to collect sales taxes on behalf of every state with an "Amazon Tax."

Probably the most interesting question was the one in which the web publisher chooses to cease all involvement in the business, and instead becomes a "mere shareholder" in an out-of-state web-publishing corporation whose operations and employees are in another state. In theory, this might prevent application of the law (since there is no in-state presence engaged in 'soliciting' in-state customers), but only if your claims of complete independence are accepted -- and this seems quite unlikely. (Trying this strategy is likely to generate lots of legal fees.)

[jamuhn]

Here is another hypothetical situation. What if you were to rent an apartment in another state while still keeping your previous address? Then, you claim residency in that new state. Does the mere fact that you own a house in a state mean you are a resident there?

[markwelch]

> "What if you were to rent an apartment in another state while still keeping your previous address? Then, you claim residency in that new state. Does the mere fact that you own a house in a state mean you are a resident there?" <

You've just described a scenario that causes you to be a resident of two states at the same time. You will then be subject to all tax laws of both states (meaning you'll file income taxes in both states, among other things).

Stop trying to think up "tricks" or "address games." If your state enacts an "Amazon Tax," then the only way you can retain your status as an affiliate (of any merchants who choose to exclude web publishers from your state in order to avoid collecting sales tax) would be to move OUT of your state, into a state from which the merchant accepts affiliates -- but of course the law is being

[jamuhn]

Yes, that is what I am saying, to move out of one state (e.g. become a resident), but to retain my property there. I don't really consider that a trick or game.

[markwelch]

If you cease to reside in a state, but continue to own property there (for example, if you decide to keep it as an investment property and rent it out to a non-relative), then it's possible that you would no longer be considered a resident of the state for some purposes. You would still need to file and pay taxes on the rental income, and again it's possible that the "old" state might argue later that it was all a sham and you continued to be a resident.

I didn't finish my sentence in the last post because I received word of Amazon's California letter. What I intended to write was:

... of course, the (Amazon Tax) law is being considered in many states and is likely to appear without warning in other states' budget bills. So even if you move, you might end up in another state which also has an "Amazon Tax" law in effect even before you unpack your moving truck.

[TimCaspersen]

Can someone keep us updated? My company is located in NC, so this law is catching us off guard like many of you. We're looking at leaving NC eventually anyway, but I'd hate to do it 6-8 months before planned. If people are getting together, myself and a coworker will join in even though Raleigh is about two hours away.

[Matt Enders]

Tim,

We are meeting tomorrow morning outside of the General Assembly in downtown Raleigh, at 8:00 am. We will be there all day and have lots of face to face meetings scheduled. Please email me if you would like to join us: matt.enders (at) mgecom.com.

[Matt McWilliams]

Originally Posted by Matt Enders

Tim,

We are meeting tomorrow morning outside of the General Assembly in downtown Raleigh, at 8:00 am. We will be there all day and have lots of face to face meetings scheduled. Please email me if you would like to join us: matt.enders (at) mgecom.com.

Matt, I used to spend a lot of time at the GA. I wish I could be there. I am positive he is on the right side of the issue, but how are the following Reps. coming down on this? I know them and would love to help if I can:

Jamie Boles
John Blust
Paul Stam
Laura Wiley

[Matt Enders]

We have called and emailed all of their offices, but have not yet been able to secure a set meeting time with anyone you listed there. We will be trying to catch each of them in a walk-in time slot though.

[IAmMe]

Where can I get a list of merchants that dropped NY affiliates once the law took effect? I'd like to know which merchants will likely drop me as an NC affiliate..

Can anyone make a guess as to what percentage of merchants, say on Commission Junction, would drop an affiliate because of this issue?

Can I assume that eBay would not drop an affiliate because of this issue?

[mellie]

Originally Posted by IAmMe

Where can I get a list of merchants that dropped NY affiliates once the law took effect? I'd like to know which merchants will likely drop me as an NC affiliate..

Can anyone make a guess as to what percentage of merchants, say on Commission Junction, would drop an affiliate because of this issue?

Can I assume that eBay would not drop an affiliate because of this issue?

Any online merchant that does not currently collect sales tax (on items that are taxable) can be considered vulnerable. You should go through your list of merchants immediately and identify merchants that do and do not collect tax. If you search through these tax forums here I have posted what to do to prepare. I suggest every affiliate (in a state with a sales tax) take these steps.

I"ll post another summary of steps here in a moment but you can also find info at the these 2 posts on my blog:
http://nyaffiliatevoice.com/2009/03/...s-can-prepare/
http://nyaffiliatevoice.com/2009/03/...nd-affiliates/


Do not assume your relationship with any merchant is safe. Many NY Affiliates were stunned by some merchant terminations.

[IAmMe]

For the people that have had their lawyers/accountants look into this:

Can you answer WHY being a "mere shareholder" in a NON-NC Corporation would cause nexxus?

If I were a large public company, with no employees/contractors in NC, why would nexxus be an issue if one of my shareholders happens to live in NC? A publicly traded company can't stipulate that people from a certain state can't own shares in the company...