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  1. #1
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    Any Tennessee Tax Updates for 2011?
    Are there just no updates for 2011 on this issue or are there just not any affiliates from Tennessee that have updates on this issue that participate on these forums?

    I read in the paper just yesterday that they were looking into several deals done in the last weeks of former Gov. Bredesen that were done on a handshake. One of these was apparently a deal with Amazon to not force sales tax collection.

    If Gov. Haslem somehow figured out a way to renege on the Amazon deal then Amazon would drop Tennessee affiliates, no?

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  3. #3
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    Update on TN Nexus Tax
    I'm brand new to this forum, and after reading about CA, and the Nexus tax, I wanted to check out what was going on in TN, as I remembered hearing something about Amazon.com and taxes a few weeks ago.

    I found that the Nexus Tax is DOA, since TN wants to attract businesses to the state.

    Source: Performance Marketing Assoc posted May 25th, 2011

  4. #4
    web dev with whiskers tn-morgen's Avatar
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    Give the Government time - they'll figure out a way to collect taxes on internet sales.

    If there was ONE sales tax that was collected regardless of location, that might be OK, but this mess is going to be more than most merchants want to deal with.

    Foster and Smith (LS Network) pulled out of affiliate sales about 18 months ago.

  5. #5
    OPM and Moderator Chuck Hamrick's Avatar
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    Gov. Bill Haslam said Wednesday that he would like to have questions about Amazonís tax status resolved by the end of the year, preferably with the online retailer collecting sales taxes from Tennessee consumers. Article here:
    I asked a friend who moved from North Carolina to Tennessee (no state income tax) to rejoin the Amazon affiliate program what his take was on this:

    The republicans control both senate and the house and the governorship. Also, I don't think they want to do anything to risk the distribution centers that are planned to be built in the state.

    The affiliate tax has come up twice and never made it out of committee.

  6. #6
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    According to the Tennessean (the biggest local newspaper), the Amazon sales tax issue in Tennessee is official, Amazon will start collecting sales tax from all Tennessee customers on January 1, 2014. However, at least one legislature has promised to continue to fight to have Amazon collect them immediately.

    My question now is, will Amazon kill affiliates here at that time? There's no reason for it to because the affiliate tax isn't the issue causing it to have to start collecting. I'm just asking for complete clarification.

    It doesn't look like Tennessee is going to pass an affiliate tax bill anytime soon so that's good, but Amazon is a significant portion of my business right now and I'm very interested in how it deals with locations where it has to collect sales tax anyway.

    Also, I was having a conversation with a tax attorney friend about this issue. I was telling him that there are "Affiliate Management" companies that are in states where there's no affiliate tax law that will become your "affiliate representative" even if you're in a state that does have an affiliate tax law. I told him that if it looks like Amazon will kill Tennessee affiliates, I would just start my own Affiliate Management company, say in Nevada, and become my only customer. He started arguing that that wouldn't work and I asked him why it was any different than some other Affiliate Management company and he said because they really were in Nevada. So then I argued that if that was his only point, I could take it to extremes and rent an office space in Nevada, get a bank account in Nevada, and rent servers in Nevada and form a corporation in Nevada and then the only role I, as a Tennessean, would play would be as a stockholder in that company that operated solely out of Nevada and had no employees. All the "business" of the company takes place on that server that is also located in Nevada...

    He seemed to agree with me. What's your thoughts? Has this been discussed already?

  7. #7
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    I just read several posts about the "entity game" and I stand by my argument above. Yes, I understand that if I am cancelled as an affiliate and then create an "entity only" presence in a non sales tax state but still "operate" my business the same, and then reapply, that probably ain't going to fly. However, I was suggesting this BEFORE you get cancelled as a preemptive action and that you actually do change how you operate your business.

  8. #8
    OPM and Moderator Chuck Hamrick's Avatar
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    Got this from an affiliate in TN:
    apparently the Gov. of TN worked out the same deal with Amazon as CA. Amazon gets a pass on paying taxes for the next two years. Meanwhile they are going to open up one or more fulfillment centers that will create thousands of jobs. So I guess that means there is no threat of cutting off affiliates.
    Haslam to announce Amazon tax deal today

  9. #9
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    That's the story (from a different source) I was alluding to in my other post. Thanks for the info on there being no threat of cutting off affiliates. I assumed but it's nice to know he thinks so as well.

    I'm still curious on thoughts on my "affiliate manager for self" plan though.

  10. #10
    OPM and Moderator Chuck Hamrick's Avatar
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    You could probably get away with it but if they were able to catch you is it worth the loss of your business? And a criminal record?

  11. #11
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    Criminal? Loss of business? What do you think is illegal in what I was purposing?

    Let me put it another way. What if I moved to Nevada (because a lot of people seem to think "moving" is magical in this regard), create an affiliate business that actively seeks out worthwhile affiliate websites, buys them and manages them and then at some point I go public. Then I move back to my home state to "reside" and leave the business as a going concern in that state.

    Are you suggesting that people buying stock in this company would create a nexus in their home state? Or that they would be doing something illegal?

    I'm not trying to just be argumentative here. I'm really trying to understand how "nexus avoidance" is turning into tax evasion or something criminal.
    Last edited by techstyled; October 7th, 2011 at 02:12 PM.

  12. #12
    OPM and Moderator Chuck Hamrick's Avatar
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    You are purporting to create a business entity with a phony address in NV while living in TN to avoid a tax nexus. I doubt that the state would catch you as they are not that sophisticated but it doesn't change the situation. If that was the case then FatWallet could have changed their corporation to Wisconsin, change the address to a P.O. Box in Wisconsin and stayed in Illinois.

    When I formed my LLC I talked to a CPA, he said clearly that you owe taxes in the state you live in no matter whether you file the letter of incorporation in Nevada, Delaware or Wyoming.

  13. #13
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    My tax attorney told me this too, until I suggested that I actually create a legitimate business, that "resides" in NV, does business _entirely_ within NV, but it's major stockholder resides in Tennessee.

    I guess it comes down to your definition of "conduct business" but _my_ tax attorney said that if all the business activity took place in NV, I was covered.

    EDIT: I'm _not_ suggesting merely creating a "fake" company that is name-only in NV.

  14. #14
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    Quote Originally Posted by Chuck Hamrick View Post
    When I formed my LLC I talked to a CPA, he said clearly that you owe taxes in the state you live in no matter whether you file the letter of incorporation in Nevada, Delaware or Wyoming.
    As an individual, yes, as a "foreign corp", maybe not.

    Read this excellent article:

    Multistate Taxation & Your Nevada Corporation - Need To Know Concepts On Business Taxation

    IMO, the area of Public Law that refers to "technical assistance" would be troublesome but there are a LOT of ways to solve that too.

    And again, I'm purposing _legitimate, legal_ solutions. I'm NOT suggesting simple tax evasion. For some reason, when big corporations use tax _avoidance_ techniques it's taken as par for the course but when individual entrepreneurs suggest it, it's supposedly some shady criminal activity.

  15. #15
    Newbie DeeCee's Avatar
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    Quote Originally Posted by techstyled View Post
    As an individual, yes, as a "foreign corp", maybe not.
    Assuming you are a small-business (not a multi-state large corporation with attorneys on retainer), I would advise great caution..

    Your foreign state corporation would have to have registered member(s) and agents, that are legally working for the corporation. (Different from the Agent, who can simply a local attorney's office).

    I would assume you would be one such "member" or "manager", if you want to have control over the company you register. The individual states how their own rules for how they include the foreign entity depending on its status. Not sure about Tennessee, but California for example define it as below

    California defines doing business as "actively engaging in any transaction for the purpose of financial orpecuniary gain or profit" (R&TC Section 23101(a)). In addition, LLCs are considered "doing business" in California if:

    • It is a nonregistered foreign LLC that is a member of an LLC that does business in California.
    • It is a general partner in a partnership or limited partnership that does business in California.
    • Any of the LLC's members, managers, or other agents conducts business in California on behalf of the LLC.

    I would contend that you as the foreign entity "owner" and "member"/"manager" might have a hard time being able to distance yourself enough from the connection you are trying to sever. In any legal fashion or not.

    I fortunately live in Texas. Not yet trying to capture this type of side-business. They even a month or two ago put a clear new law on the books, that clarified confusion over whether using a hosting company located in Texas for your business also meant that you were considered as doing business in Texas. Answer: NO. if you do not do other business in Texas, but only buy web-services you are not liable.

    Helped quite a few companies from other states that had bought web-services from Texan hosting companies, and might otherwise be at risk.

    What that also should remind everyone of is that they need to watch the laws in other states if they host their web-sites there.

    For example, anyone using Godaddy to host sites should watch out for Arizona laws, as this is where their "company" owned sites are then hosted. (US based hosting) If Arizona suddenly invented a law ruling the opposite to the new Texas law, instead linking physical hosting and tax presence, they could be in trouble. Suddenly needing to file income- and sales taxes in Arizona.

    Similar if you are hosting with other services. Watch their data-center locations and the changing state tax-rules for that location..

  16. #16
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    My home state is still nexus friendly in this regard but even by California's rule, and assuming I'm forming an LLC instead of a C or S Corp, "any of the LLC's members, managers, or other agents conducts business in California on behalf of the LLC" could be interpreted a lot of different ways. And of course I realize California is going to try to interpret it as beneficial to California as it can.

    However, considering I have a software platform that runs itself (or even have a licensing agreement with a company that provides me improvements to that software when necessary), just what business would be conducted in California by me as a member? I'm not going to meet with anyone, I'm not going to make any calls. I'm not going to do any marketing. Everything is handled by the software platform for me.

    I will admit I'm uncomfortable enough in the "member managed" issue that I'm forming a corporation. However, I would still argue that, given my scenario above, California would have a hard time proving "minimal connection" under Due Process. Not that I would expect that to stop them from accessing the taxes either

  17. #17
    Newbie DeeCee's Avatar
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    Quote Originally Posted by techstyled View Post
    just what business would be conducted in California by me as a member?
    Managing the company,filing documents for the company, responding to questions on behalf of the company, taking share in the profits, attending "meetings" if a state that requires annual meetings, writing the minutes for those meetings, ..., ..., ...

    I would assume that anyone trying to grab your money would consider those and many other small items as conducting business on the company's behalf.

    Not sure, but I don't think anyone listed as a owner/manager/member can ever distance themselves from doing business on behalf of the company. If that was the case, having a list of those "persons" would have absolutely no meaning. You might as well list "Donald Duck" then.

  18. #18
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    I agree what you mention is a concern. However, it's not a foregone conclusion for every state. Yes, there are some states that if they connected the dots on you being a member manager or majority stockholder would assume substantial nexus no matter what.

    However, my point is simply that there ARE scenarios where a single person operating a web based business in a state other than where they reside should NOT have to registered as a foreign corp in their home state. Furthermore, that doing so doesn't automatically constitute criminal behavior.

    Yes, I realize it's a challenge. But I would argue that the _intent_ of the "minimal connection" section of the Due Process clause was to keep these greedy states from imposing taxes simply because you are a single member manager (and of course I'm assuming here that registering as a foreign corp would equate to taxation).

    You do realize that a C corp can own another C corp. An LLC can be owned by a trust. Etc. In fact, like I said, this kind of avoidance happens on a larger scale every day.

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