Amazon Threatens to Leave the Affiliate Tax Jungle in North Carolina

by on June 18, 2009 · 18 comments

jungleWelcome to the jungle
We take it day by day
If you want it you’re gonna bleed
But it’s the price you pay

Amazon.com announced yesterday that it won’t be paying the price of affiliate advertising in North Carolina if the state uses it to assert nexus for sales tax collection. It will stop using affiliates in the Tar Heel state, which is what Overstock did when New York considered the affiliate nexus approach.

States are wrong-headed when it comes to asserting tax nexus just because some companies use a web-based network of affiliates to help advertise their products. As I’ve discussed before, affiliates are more akin to in-state advertisers, not sales reps.

Furthermore, states that pass these affiliate nexus bills really end up hurting in-state companies that rely on Internet advertising.  At a time when companies are struggling for ways to make money on the Internet, we think now is a particularly bad time to tax Internet marketing.

North Carolina should stay out of the affiliate tax jungle. It’s constitutionally messy, bad policy…and as Guns ‘N Roses mildly stated, it’ gonna bring you down – huh!

  • MikeRT

    If the summary is accurate, then Amazon is not quite being as innocent as its made out to be here. Assuming that all NC asked them to do was levy sales tax on NC-based businesses that use the Amazon affiliate network, all Amazon was being asked to do was help NC enforce its tax laws.

    The woman in the summary should already be paying sales tax to the state. If she isn't, then she should be fined or imprisoned. I am personally fairly sympathetic to blatant tax evasion on income and property taxes (especially property taxes), but sales tax is a non-issue. Especially at the rates that states like NC and VA charge.

    The alternative to weakening the sales tax is to strengthen income and property taxes, which a lot of people end up not paying. It's imperative for the purposes of limiting government that all citizens bear a similar tax burden.

  • bradencox

    It's the giant suck-in. NC would like to claim that because you use affiliate ads with NC businesses, then you must collect sales tax on everything sold to NC residents. It's very broad assertion of authority for a relatively small activity.

  • DB

    A similar proposal is being included in a slate of desperate revenue-generating measures in Sacramento. I'm finding it is an uphill battle to explain why this will neither achieve fairness nor generate revenue. It seems to me that placing an advertisement using Adwords would qualify under the bill's language as establishing nexus (because Google is based in Mountain View). If I'm an out-of-state company that wants to sell to California customers, but not be forced to collect sales tax, this seems like a fairly good reason to shift my advertising budget to Bing.

  • Maria Shapur

    That Braden Cox guy is hot. I'm dumping Governor Sanford for him. Then well “hike the Appalachian Trail”, wink, wink.

  • Maria Shapur

    That Braden Cox guy is hot. I'm dumping Governor Sanford for him. Then well “hike the Appalachian Trail”, wink, wink.

  • Maria Shapur

    That Braden Cox guy is hot. I'm dumping Governor Sanford for him. Then well “hike the Appalachian Trail”, wink, wink.

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