The NC Affiliate Tax Fight

Monday, June 22nd, 2009

Tomorrow the mgecom team, along with affiliates from around the state and other representatives from our industry will be spending the day at the General Assembly in Raleigh in an effort to show our elected representatives the egregious errors in SB202 regarding digital sales tax, nexus, and what is known as the “Amazon Tax” or “Affiliate Tax”.   We need your support in order to win the fight.  As such, here are the steps we need you to take.  If you live in North Carolina, the affiliate marketing industry in this state is now depending on you!

The Official Fight

1. Come with us to the General Assembly tomorrow in downtown Raleigh.  We currently have over 20 CONFIRMED meetings with State Senators and Representatives from this state.  We are meeting with committee leaders, voting members, Republicans, Democrats, and everyone else who has the power to influence this law.  We are meeting at 8:00 am in front of the GA building.  The address is:16 West Jones Street, Raleigh, NC 27601
2. If you are an affiliate, we need your testimonial.  Please fill out the Contact Us form and share with us how the tax law changes will affect YOUR daily life.  Will you have to move out of the state?  Will you not be able to pay for prescriptions?  Will you lose discretionary income that you otherwise would have spent in the local NC economy?  We need to hear your story.
3. Learn our approach.  This is what we will be telling lawmakers TOMORROW:
   • We understand that North Carolina is in a $4Billion+ budget deficit, and we appreciate that you need to make that up.  However, the language regarding internet sales tax in SB202 WILL force online retailers to do everything in their power to avoid meeting the definition of “nexus” which NC has created.
   • When similar legislation was passed in New York last year, a large number of online retailers DID remove affiliates from their program, as evidenced here: http://forum.abestweb.com/showthread.php?t=105869
   • Because of the above two facts, the anticipated $13.1Million in new tax revenue you are expecting will not be there.  In fact, you will lose the existing tax revenue you are currently collecting from individuals and small businesses across the state who will be forced out of business, or forced to move.
   • The tax law will create lost jobs.  As affiliate advertisers are removed from their programs, they will suffer huge income losses.  Unemployment in NC is already over 11%.  This tax law change will INCREASE the amount of people who are suddenly jobless in NC.
   • We must create a sense of personification in the eyes of the legislators.  They must understand that it is not the big corporations who are being hurt, but the individuals and residents of North Carolina.  This is why we need your stories, as mentioned above, via our Contact Us form.
   • Finally, North Carolina wishes to be viewed as a technology-friendly state.  This type of legislation is precisely what will force technology-savvy affiliates and advertisers out of our state.

Again, we need your help.  Please post a link to this blog post on your Twitter account.  You can use this shortened URL:  http://bit.ly/15g0Hk  Email your friends, family and colleagues.  The more exposure we have, the better.  Finally, sign our petition which can be found here: http://www.petitionspot.com/petitions/ncaffiliatetax/.

Thank you to everyone who attended the on-site meeting in our offices today.  Through working together, we have a chance to defeat the tax law which could put so many out of business.

This entry was posted on Monday, June 22nd, 2009 at 4:05 pm and is filed under Corporate News. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

3 Responses to “The NC Affiliate Tax Fight”

1. johnshaw Says:
   June 24th, 2009 at 12:31 am

   North Carolina is not planning to make any change in the taxing of Amazon affiliates.

   What NC wants to do is to require that Amazon collect sales taxes on the same basis as Barnes and Nobel and other companies that have a physical presence in NC.

   Is it fair for BN.com to have to collect sales tax but for Amazon not to collect sales tax? What is the logic?

   There are many “remote” (internet, mail order, etc.)retailers that sell products to NC residents. The only ones that have to collect sales tax on purchases are those that have some physical operation (call center, warehouse, store, etc.) in the state. The others do not collect sales tax.

   Why is that fair?

   Amazon.com should be on the same basis as BN.com. If one has to collect sales tax the other should have to collect sales tax.

2. Matt Enders Says:
   June 24th, 2009 at 10:01 am

   John, thanks for your comments. I can certainly understand and appreciate your point of view. It is nice to have an opinion posted here which is in opposition to what we are pushing for.

   Let me begin by saying that I DO believe that ALL online retailers should be required to collect sales tax on the products they sell. As a national group of consumers, we have been enjoying the perk of tax-free online shopping for quite some time. E-Commerce as a whole is a relatively young industry. Of course, as the industry matures and evolves, the governments will regulate it more and more. This means beginning to tax internet sales. Again, I am in agreement with this move. Online and B&M retailers should all be subject to collecting and remitting the same percent of sales tax for their products sold.

   What we and the affiliate industry in general are AGAINST is the piece-by-piece approach that individual states are taking. When one state at a time enacts such a law, many online retailers find it easier and more convenient to cut out their affiliates in a given state, than to redesign their sales process, shopping cart, and accounting system. This approach kills jobs, businesses, and our industry as a whole in the state. If affiliates in NC (or any other state) are removed from the programs they rely on to earn their living, they will have no other option than to close their businesses or move to a more affiliate-tax friendly state. That means higher unemployment in our state, no increase in taxable online sales, and less collection of property and income taxes from the individuals who moved out of state.

   So what is the solution? A universal standard needs to be applied from a national or federal standpoint. Movements such as the Streamlined Sales Tax Project (www.streamlinedsalestax.org/) are working on this.

   To recap:
   Yes, it is unfair to B&M retailers that internet retailers do not have to collect sales tax.

   The current state-by-state approach WILL kill jobs and potentially a state-wide industry.

   There needs to be a national level solution.

3. johnshaw Says:
   June 25th, 2009 at 11:17 am

   Matt,
   Thanks for your reply. However, I disagree with some of the points in your reply.

   While the use of the Internet for placing orders may be relatively new, remote sales are far from new. Sears, JC Penny, and many others have been in the business for years. The sales tax problem is just as old as those businesses. If a business has nexus with NC, they must collect and remit NC sales tax. Sears, Pennys, and others have been doing that. Other merchants that do not have nexus have not been collecting sales tax.

   This is not just in inequity about Internet vs. brick and mortars stores. If a remote retailer has a call center, warehouse, or other operation in NC they collect sales tax. If not, they do not.

   In the case of Amazon, they compete with Barnes and Noble’s Internet operation. (I am an affiliate of both). Barnes and Nobel collects and remits sales tax on Internet purchases; Amazon does not. Why should Amazon have that advantage?

   Many legislators did hear from Amazon affiliates this week. They also heard from Amazon affiliates and others asking them to include the remote tax in the budget package.

   This should not be a federal or national issue. Like most states, NC has a state sales tax and collects tax from many remote sellers. That tax is set by the state, not the federal government. We should be able to set the tax rate and determine what items are taxed ourselves, without a need for national decisions. We have been doing that with many remote retailers without problem.

   This will not kill jobs. It will not jeopardize a state wide industry. If Amazon does not want to have affiliates in NC, B & N does want affiliates. (Amazon does, by the way, still has affiliates in New York state).

   With the current budget shortfall NC will have to lay off state employees, including teachers and prison workers. At this time there is a strong possibility that the state school for the blind in Raleigh may be closed. Even if this will cause some Amazon affiliates to lose some income (and I don’t think it will), are those affiliates more important than teachers who will lose their jobs? I don’t think so.

   I will also point out that any resident of the state who purchases a book from Amazon owes the state sales and use tax. There is a place on the NC income tax to declare the sales tax owed. Failure to declare the sales tax owed is a crime. It should be enforced.

   Also, according to discussion I had with legislators and others this morning, it is likely that the NC Department of Revenue already has the power to enforce the sales tax law and require Amazon to report their sales and pay the sales tax to the state. I have urged the Secretary of Revenue to pursue this and to use criminal charges if necessary.