Sales tax and affiliates
More and more states are looking for ways to collect money from e-commerce sites and the internet. The most recent approach is to start taxing companies who have even an indirect physical presence in that state, which affects companies like Amazon.com. Amazon has distribution centers in different states and consequently those states are wanting Amazon.com to collect sales tax for that state directly because of those distribution centers.
But there is an even newer strategy by many states that is now being implemented. Several states, like Illinois, are suggesting that a company that even has affiliates in their state also counts as a physical presence in that state and the sales contributed by those affiliates are hereby responsible for having to pay sales tax to that state.
That means that a company like Amazon.com which might not even have a physical distribution center in that state, but say just a blogger in that state who refers customers to Amazon would then be considered a physical presence. To me that’s a bit of a stretch. Mostly because people visiting that bloggers site could be coming from all over the world and not just that state. Plus, that bloggers hosting company might not even be in that state.
For companies like Wal-mart.com which do have a legitimate physical presence, then the sales tax really isn’t a problem, because they already have a physical store selling the same goods there and are already collecting and paying sales tax. But purely online stores, like Amazon.com are being sought after to pay individual sales tax just because of their affiliates.
For those who don’t know, an affiliate is kinda like a partner. In Amazon.com’s case, they pay 5 – 10% of any visitor being sent from an affiliates website which results in a sale for Amazon. For example, you can join the Amazon.com affiliate program for free, copy and paste some code they give you for a specific product onto your website and if someone were to click on that link (which takes them to Amazon.com) and they actually bought something, then you’d get a small percentage of that sale paid to you by Amazon. And if you had lots of traffic and lots of different affiliate product links, then that could add up to a significant amount and does for many bloggers and websites.
So what Amazon.com is now doing, among other affiliate companies, is simply not allowing any affiliates at all in those particular states. And I can really only see it hurting the smaller independent affiliates in those states and not so much Amazon.com which is well known at this point. What will have to happen though, is that those affiliates not allowed access to affiliate programs like Amazon.com because of the new legislation will probably switch over to companies like Wal-mart who already have a physical presence.
Ultimately, I would imagine that this just makes it harder for independent affiliates to generate income from affiliate programs as it removes a quality choice like Amazon.com from their money making options. It’s possible that a company like Amazon.com could start paying sales tax in that state, but I doubt that’s going to happen anytime soon, simply because they probably just don’t need to at this point.
