It's All Over for Minnesota Amazon Affiliates

"We are writing from the Amazon Associates Program to notify you that your Associates account will be closed and your Amazon Services LLC Associates Program Operating Agreement will be terminated effective June 30, 2013. This is a direct result of the unconstitutional Minnesota state tax collection legislation passed by the state legislature and signed by Governor Dayton on May 23, 2013, with an effective date of July 1, 2013. As a result, we will no longer pay any advertising fees for customers referred to an Amazon Site after June 30 nor will we accept new applications for the Associates Program from Minnesota residents"

Just received my email from Amazon. I saw a previous comment in this thread about selling digital products instead. Good suggestion, but that won't work either. MN's new sales tax law includes digital products. See Star Tribune article: Ringtones, digital books, business repairs will soon be taxed in Minn. _ with a few catches | StarTribune.com

They also just passed a gift tax law (second state to have one). The law excludes spouses giving gifts to each other. (Wasn't that thoughtful?) The gift tax also excluded political contributions. (Even more thoughtful.)

I love Minnesota, but it may be time to move.

How exactly did that all shake out? What was used as the reason to restore everything?

I'm in Minnesota and can probably expect to be dropped from other programs too now, correct? I've been checking for emails from other companies/networks but so far, I think Amazon is the first to officially drop me.

Essentially Minnesota State Legislature is finding nexus where there really isn't any. You are not required to collect sales tax where you have no physical presense. What they are saying is if you use affiliates those third party seller act as your agent and you have nexus. The next route will be for any manufacturer that also sells online to pay taxes since, selling in a retail store gives them nexus.

Speculating of course since I have not been in the board room but ask yourself why the entities such as Amazon.com, Sears, Walmart and National Retail Federation would be pushing for this? All of these companies have fully staffed tax departments whose only job is to file taxes, inside for sales and tax, outside for federal and others. I don't have a full time tax department and find it cost prohibitive and time prohibitive to file taxes in 48 tax jurisdictions.

Add on top of this, while Amazon, Walmart and Sears are complaining about level playing fields, they are all negotiating property and sales tax exemptions plus "retraining" funds for their company owned warehouses and facilities. No small seller, whether retail or online has these advantages, so yes, maybe I am speculating but history tells us if a large Fortune 500 company is pushing for something, someone is going to be hurt, most likely their competitors. Regardless of where you domicile the entity, it doesn't get away from the fact you will still have nexus in the state you live and work. The only possible route is an offshore entity theoretically but even companies like ADP that are domiciled offshore still have nexus in the states they work in.

Sure, because its the charging of the sales tax that is the issue. Wait a minute, that's an easy change, its the filing and payment of those taxes that takes time. Remember you still have to collect data from every one of your sales channels, parse out what state they belong to then go about figuring out the non-sense of a government form, file and pay. For my Hawaii Excise taxes it takes me a full day once a month to collect and file. If I have to add in 47 more states, I will either spend all my profits on accountants or all my time filing taxes.

And before anyone starts popping off about there being software available, what software there is, is limited and is integrated only with a few shopping carts. So no, it sounds great on paper but real life tends to be quite different.

Most news releases that tends to give Amazon lots of kudos will even admit, the only reason Amazon supports online sales tax is not only do they not need it anymore, but it gives them a competitive advantage since they will be building warehouses in most states anyway to provide 1 and 2 day delivery.

Here is just one story on Amazon today about the incentives states throw at them. Florida alone, not any tax break, could lure Amazon to Hillsborough | Tampa Bay Times

And another one: Behold: How Amazon wins the sales tax wars even when it loses — Tech News and Analysis

I am all for paying my fair share of taxes but when I ship to a state that I don't have nexus in, they are still getting money from me. Whether it be federal excise gas taxes, state specific gas taxes, Federal Highway and DOT transfers or tolls, I am not getting a free lunch.

I really don't have a problem with sales tax (a little off the topic of Amazon). The problem is knowing the correct sales tax to charge. Brick and mortar stores know exactly what to charge for sales tax at the location of their stores (state and local taxes).

If the sales tax applied is where the buyer is located, then it gets really messy.

MN taxes aren't even by zip code. There are multiple tax codes within a zip code. If You need to know the exact address of the buyer in order to charge the correct tax.

If it's a digital product, it makes it even more difficult since there isn't anything to ship. Maybe use the billing address of the credit card to figure out the location/tax?

Setting up a product with the correct tax with a payment processor like Paypal might be challenging since in some areas the taxes rates vary street by street and block by block, so it makes it really hard to charge sales tax upfront or to pre-program the tax rates.

It would probably be easier for the seller not charge tax to the customer upfront, then figure out and pay the total sales tax due from monthly sales reports. If a person uses multiple sales channels, then the workload increases.

There are other MN oddities that programs like Amazon would have to deal with. For example, some states charge sales tax on clothing, MN doesn't tax clothing (well, some clothing). If a person in MN buys a shirt it wouldn't be taxed, but if it had a sports logo on it, then it would be taxed.

I'll say it again. This tax stuff gets messy. There are services out there that receive quarterly updates from all the states and they will help with sales tax records. I'm not sure what they charge. Whatever happens, I'm guessing it will cost time and money to be compliant.

In 1992 Quill Corp. v. North Dakota, the Supreme Court ruled that a business must have a physical presence in a state for that state to require it to collect sales taxes.

However, the court explicitly stated that Congress can overrule the decision through legislation

Until the bill is passed by Congress or signed by the president, these bills are technically unconstitutional. The Supreme Court is the final decider in all these test cases.

The reason why Amazon compromised with California, is because the state is such a large market that Amazon wanted to build distribution centers there. They wanted to delay the start of the sales tax collection for a couple years once they build their centers there, but the compromise was a one year reprieve.

A bill will probably be passed by Congress by the end of the year ending this and changing how the system works. Until then, these bills really won't stand in Court, as Amazon has already won in other states over this.

The other thing Amazon has stated is they don't want to have to fight all 50 states over this so they rather a uniformed law that all states must follow versus each individual state.

For example, California has several counties, and each county has its own sales tax. I can drive 20 miles away in two different directions and pay different tax rates because of that.

Also expect somebody to sue the federal version of this law once it passes, either the Court will reaffirm there previous decision or overrule it. Unless it is a great injustice, rarely does the Supreme Court overrule its past rulings.

Yes, an SNL wannabe comedian, and a former wrestler for a governor. C'mon Minnesotans, we can do better than this!!!

Elections have consequences; pay attention!

For those looking at the likes of Viglink. I have experience with them. It's not all that bad, yes, they take a 25% cut, but, as they have so many sales on amazon, it's 25% of an 8 - 8.5% Amazon commission, so, just a little less than what most affiliates get, around 6%.

Viglinks is no longer an option, they dropped the nexus states as well.