Affiliate Program Taxes?
Posted By Jack Burke - June 14th, 2009
What a lot of people are beginning to talk about is the tax issue that could be in place for affiliate marketers. The root of this tax issue is simply physical location -or nexus (nerdage alert). Each state is attempting to make virtual storefronts taxable. If you own a small business in Chicago, you must collect sales tax on all purchases. The consumer is the one that owes the tax to the state, but merchants simplify this and collect the tax and give it back to the state. Merchants don’t “pay” the tax, they just ‘collect’ it.
Now when you bring this model to the online world it get a little bit more tricky. There are no physical store locations, so you would only collect taxes from consumers who live in the same state as you. If your company is based in Chicago, and a shopper from Chicago buys something, you must collect the tax from them. You are not required to have to collect tax from any other consumer from anywhere else on the planet.
Since you are based in Illinois, you have a physical presence there. If you have an office in California, and a warehouse in Maine, then you have a physical presence in those two states as well. Tax would be collected from consumers from all three states.
We all know (especially here in California) that every state needs money, and now they want to collect sales tax from their residents who shop online who technically owe sales tax on the purchases they make anyways. The thing is, to get this tax payment - it would have to come from the merchant. Either way, this tax is not something the consumer or the merchant want to have to deal with. With our current economy, consumers don’t want to pay more when they shop online.
As a merchant, you want to be prepared for something like this. You need to be able to collect this tax from residents of more state than you may have previously planned for. This is something you don’t want to let blindside you.
Currently, the anti-affiliate legislation bill would have to pass on a per state basis. So far, according to the PMA, it has passed in Minnesota and Rhode Island. To do your part to campaign against this tax bill, you can send in letters to your state representatives and help to make a difference. You can also post warnings about the legislation on your blog or send e-mails to your fellow affiliates in the state warning them. You want to do whatever you can to spread the word.
The affiliate community, and some other anti-tax groups opposed to this and have been keeping up a good fight. As affiliate marketers, you want to make sure that you keep a watchful eye on legislation and make sure that this doesn’t make its way into the affiliate marketing community.
For updates on your state on anti-affiliate legislation, click here
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