[mellie]

Minnesota Affiliate tax pending legislation will be in heard in Senate this Thursday the 26.

I am a little pressed for time right now (son has to have MRI on shoulder) so I am copying from my blog post earlier this morning.
The Minnesota Affiliate Sales Tax bill in the Senate is SF 282 and it is modeled after the NY law. I mentioned a while ago about several states with pending legislation. I want to make it clear that Minnesota Affiliates need to get ready as the next hearing date on their pending legislation is to be held on Thursday, March 26, 2009 at 08:30 AM in Room 15 Capitol.


As I read through the analysis provided to the Committee it appears that Minnesota estimates increased revenue of around $22 million. That increased revenue plus their observations of the impact of the NY nexus ($60 million in revenue?) leads me to believe that Minnesota will pass this bill.

I have no idea how many affiliates live in Minnesota but I believe that the Minnesota bill is probably as critical as the legislation pending in many other states. Minnesota is further ahead in the legislative process than California. As we have been saying for almost a year, states will follow NY. If the legislation passes in Minnesota, passage in California and other states becomes even more likely.


Link to Minnesota Bill https://www.revisor.leg.state.mn.us/bin/bldbill.php?bill=S0282.0.html&session=ls86

Sorry for the cut and paste, I'll be back later this afternoon if I can help answer questions.

I do suggest affiliates from Minnesota take proactive measures as I suggested for Ca affs. Pretty sure I've posted them here, otherwise they are on my blog http://nyaffiliatevoice.com/2009/03/how-california-affiliates-can-prepare/. I will make sure I have added them here when I get back.

[Kevin]

We might need a forum called affiliatetax.com.

Going to happen quick......

[Bill]

It appears the snowball is beginning to roll down the hill. When I read the first announcement about the NY tax I knew this was about to happen. There are 45 states with a Sales & Use tax on the books. Just last week I got "stung" and had to pay the Maryland (6%) Use Tax on an Airplane I bought last fall in New Jersey.

Fortunately our new Delaware corporation was (finally) formed just this week.

[OICUAM2]

Can someone explain how this tax is applied?

Is it a tax that affiliates have to pay on their affiliate commissions in addition to normal income tax?

From a quick read, it seems to me that it is an online sales tax being applied on a state by state basis.

I think the term "affiliate tax" is what is confusing me.

[AffiliateHound]

Is it a tax that affiliates have to pay on their affiliate commissions in addition to normal income tax?No.

Simplest version: It is sales tax that merchants must collect when they sell products to residents of the subject state (NY, and Cal and Minn (others?) pending) if the merchant has affiliates who are residents of that state.

[Haiko de Poel, Jr.]

We might need a forum called ...

Actually affiliatetaxlaw.com (http://affiliatetaxlaw.com)

[La_Valette]

This madness is getting way out of hand...

Where are all these moron lawmakers getting their projected revenues from? Those figures will never materialize. These bills will actually end up losing the states that enact them big money if affiliates flee to more friendly locations, or if merchants refuse to do business with affiliates that don't (as happened in NY).

[loxly]

There won't be any states left for affiliates to flee too... merchants will have to collect and pay or drop programs entirely.

[flamingoworld]

I will be attending the meeting on Thursday.

[Teesed]

There won't be any states left for affiliates to flee too... merchants will have to collect and pay or drop programs entirely.

That's about the only silver lining I can see here - either they drop their affiliate programs or start collecting sales tax. And I'm not sure how thick that silver lining is...

[mayfly]

Fortunately our new Delaware corporation was (finally) formed just this week.

There will be more and more Delaware corporation formed by affiliates, I guess.

Does it matter if you have a Delaware corporation but still have your affiliate business run in NY, CA, or MN?

[Haiko de Poel, Jr.]

mayfly,

Law of domicile (or in this case where your company is physically located) is what matters.

[Markiphone]

Forming a Delaware or Nevada corporation provides no benefit to affiliates faced with exclusion due to the affiliate's residence. To avoid being excluded you would need to physically move to a state with no "Amazon tax" (which might mean looking for states with no sales tax).

If affiliates in an "Amazon tax" state merely change their mailing address (but not their residence and work locations), they could end up being prosecuted as tax evaders (really unlikely; more likely, they'll trigger the tax for merchants who sought to avoid it, and may be sued by the merchant for fraud).

Don't play games with your business.

[simcat]

Affiliates can move to a tax free state, but it wont do them any good if the affiliate programs close due to steady reduction in the pool of available affiliates.

Some of these tax free states also may have budget crunches & try to tax internet sales. Tried before & failed.
http://www.crn.com/it-channel/18831192

[Kevin]

Actually affiliatetaxlaw.com (http://affiliatetaxlaw.com)

Thanks H, as always.

[Chuck Hamrick]

I am going to play devils advocate here. If I am an affiliate in one of these states where the law passes how does the state find out that I made sales for a merchant in that state? Who will be liable to report that transaction back to the state. These states have smaller budgets with less people doing more work. Don't they have to go after the merchants for the information and get them to pay the state sales tax? I understand the premise that the affiliate creates a nexus for the merchant but how does the state find this nexus?

[Kevin]

I am going to play devils advocate here. If I am an affiliate in one of these states where the law passes how does the state find out that I made sales for a merchant in that state? Who will be liable to report that transaction back to the state. These states have smaller budgets with less people doing more work. Don't they have to go after the merchants for the information and get them to pay the state sales tax? I understand the premise that the affiliate creates a nexus for the merchant but how does the state find this nexus?

If I'm a merchant, I'm not sure that's a chance I'm willing to take. And if I knew a merchant that I was an affiliate of was cheating on this, how would I feel about my commission report?

I get your question, Chuck, and your intent as devil's advocate, but I don't see it having any real application.

[Chuck Hamrick]

For New York did the state contact merchants to declare the identification of the nexus via the affiliate? I know that Overstock, Amazon and Ebay proactively got involved but I manage programs for a fifteen different companies and have yet to be asked about this. Not to mix this conversation on Minnesota with New York but has one merchant been contacted by New York about the tax issue that has gotten back to an AM or OPM? (Haiko feel free to clip this to the NY thread if appropriate)?

[Teesed]

Chuck I imagine their department of revenue will be looking into it, and if I'm a merchant, the threat of a fine is going to make sure I report as I'm supposed to.

[Chuck Hamrick]

So how many of your merchants have contacted you about any of these tax issues? The state would need to solicit the information from the network to find out which affiliates are making sales in those states. Has anyone talked to a network and been told that their merchant is investigating this? Its one thing to have an Overstock boot you from a program but talking about moving as an affiliate seems to be throwing yourself on the sword at this point.

I have a merchant on LinkShare and both are in New York. Neither could care less about the New York tax issue.

[Teesed]

I have a merchant on LinkShare and both are in New York. Neither could care less about the New York tax issue.
Then aren't they already collecting sales tax since they have nexus in New York?

[Chuck Hamrick]

Point well taken, go ahead of myself there.

[MDApache6]

The information about the 3-26-2009 meeting on the State site is gone now; does anyone know if it is still on? I called my senator but haven't heard anything...

[mellie]

Update on hearing is here http://forum.abestweb.com/showthread.php?t=117667