Internet Taxes Causing Havoc for E-tailers and Affiliates

You may have read recently that some states have joined new York in charging state sales tax on internet sales for e-tailers selling products even if they do not have brick and mortar operations in that state. This is causing a great deal of controversy since the federal law does not provide for taxation on inter-state sales of merchandise. It also causes a logistical nightmare for many e-tailers, especially those who do not have the technological capabilities of calculating the taxes based on different states tax rates.

Amazon.com has ended its business relationships with marketing affiliates in Rhode Island and in North Carolina to avoid having to collect sales tax in the state. Overstock.com is dropping affiliates in California, Hawaii, North Carolina and Rhode Island for the same reason.

Oh June 30th Amazon announced this: http://online.wsj.com/article/SB124630810805070105.html

On July 2nd OverStock made this announcement: http://online.wsj.com/article/SB124646193909080523.html

Evidently the retailer protests and boycotts made 2 states listen. On July 2nd the Internet Retailer reported:

Two states think better of imposing sales taxes on e-retailers

Threats by retailers to cut off affiliate marketing relationships in states that are trying to tax sales generated by affiliates have had an effect. The governors of California and Hawaii have vetoed legislation that would have imposed such taxes in those states.

The governors acted after such major online retailers as Amazon.com Inc., Blue Nile Inc. and Overstock.com Inc. began this week cutting off affiliates in states that adopted laws requiring collection of sales taxes by e-retailers with affiliates in those states.

This is a win for retailers! Read the full story here: http://www.internetretailer.com/dailyNews.asp?id=31028

Does this internet tax affect you? What are your feelings on this?

Remember that if you are unsure whether this tax applies to your business or affiliate program, contact your accountant or lawyer for counsel regarding this taxation issue.