May 3, 2011
Kaumaha news from Hawaii
We’ve just learned that the word for “sad” in Hawaiian is “kaumaha.”
We learned this word because we just found out that two sales tax–related bills, one to join the Streamlined Sales and Use Tax Agreement (SSUTA) and one to enact an affiliate nexus law, have died in committee in Hawaii.
Although we are glad that in-state affiliates won’t be hurt by an affiliate nexus law, as has happened in so many other states, it’s too bad that the bill to join SSUTA also failed to make it out of conference committee.
SSUTA’s purpose is to make it easy for multistate retailers to collect sales tax. There’s just one sales tax return form for every SSUTA member state, and SSUTA’s guidelines simplify sales tax regulations so that a retailer knows item are taxed the same way in every SSUTA state.
Twenty-four states are currently members of SSUTA. For multistate retailers that sell in Hawaii, it’s too bad that Hawaii won’t have a chance be the twenty-fifth (until next year).
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Federal Legislation, State News | Tagged: affiliate nexus legislation, affiliate tax, amazon affiliates tax, online sales tax, sales tax, SST, SSTP, SSUTA, streamlined sales tax | 
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Posted by FedTax
April 29, 2011
We were interested to read this article, written for an audience of affiliates, that offers advice for writing to legislators to advocate against affiliate nexus laws.
We certainly understand why affiliates would want to try to stop affiliate nexus laws—they threaten their livelihood—and we agree, affiliate nexus laws are not a good solution. (We’ll suggest a better one in a moment.) But the problem they are intended to solve is real: Shoppers are not paying the sales tax they owe on their online purchases, and online retailers don’t have to collect that sales tax at the point of sale. It’s causing serious problems for the states and communities that rely on sales tax revenue to fund police, parks, libraries, road maintenance, and more. It’s also hurting local retailers, which cannot compete with online retailers that don’t have to collect sales tax. These local retailers are seeing their customers browse their shelves and talk to their clerks only to say “Thanks, I’ll go order it online.”
Given these facts, plus the severe budget shortfalls facing states, we think some kind of legislation on online sales tax is inevitable. Right now, the only option getting much media attention is “affiliate nexus” or “Amazon tax” legislation—although it’s far from ideal, it is a creative attempt to allow them recoup some of the $10 billion in sales tax on online purchases that goes uncollected each year. Five states have now adopted affiliate nexus legislation (and quite a few are considering it). Without action from Congress, states are limited by two Supreme Court rulings, from 1967 and 1992, that say out-of-state retailers are required to collect sales tax only for states where they have a physical presence. All states can do under this limitation is try to change what counts as a “physical presence,” which is why they’ve targeted affiliates—they can make the argument that the presence of affiliates in a state counts as a physical presence, and therefore retailers with affiliates in the state must collect sales tax.
So by now, hopefully you are asking yourself: “Is affiliate nexus legislation the only way states can solve this problem?” Let us borrow from the immortal words of Yoda to answer that:
No. There is another.
Despite all the media attention around affiliate nexus legislation, 44 states have been working on a different solution since 2000: it’s called the Streamlined Sales and Use Tax Agreement, and it solves the internet sales tax issue cleanly and easily. In fact, 24 states have already adopted the simplification procedures of the agreement!
All Congress has to do now is pass a law enabling states (that have implemented the simplification measures of SSUTA) to require online retailers to collect sales tax, and suddenly affiliate nexus legislation becomes unnecessary. And at the same time, all those vital services that sales tax revenue helps pay for, such as police, schools, and libraries, will have much more funding, and online retailers will no longer have an unfair advantage over local retailers.
The Main Street Fairness Act is a bill that would do this, and it’s expected to be introduced in Congress soon.
If affiliates want to help put a stop to affiliate nexus legislation, we suggest they write to their legislators in support of the Main Street Fairness Act. If some kind of legislation is inevitable—we think it is, and the recent popularity of affiliate nexus laws bears witness to states’ urgent desire to pass some kind of law on the issue—then it’s best to pass a law, like the Main Street Fairness Act, that doesn’t hurt affiliates by singling out retailers that have affiliate relationships.
Leave a Comment » | Federal Legislation, Issues | Tagged: affiliate nexus legislation, affiliate tax, amazon affiliates tax, Internet Sales Tax, Main Street Fairness, online sales tax, sales tax | Permalink
Posted by FedTax
April 28, 2011
Illinois Statehouse News
An article in the Illinois Statehouse News highlights local retailers’ take on legislation that would require online retailers to collect sales tax:
Smaller, brick-and-mortar stores, however, say the new state law — and the proposed federal initiative — will make it easier to compete.
“We know it’s a competitive environment. We have to compete to be viable, but we should be on a level playing field with our online sellers,” said Bob Thompson, owner of BikeTek, a bicycle shop in Springfield.
Lamsargis, owner of Springfield Running Center, an athletic apparel and shoe store in Springfield, said he’s had customers come into his store asking him to match prices they found online without the sales tax.
“Even though we give a little bit of a discount to locals, we cannot match the discounts given by the big companies that don’t have the bricks and mortar,” Sargis said.
Some small online retailers are concerned, however, about their ability to collect sales tax:
Brandi Tolley, who runs a men’s apparel eBay store, called the measure a “desperate” way for states to pull in revenue. Her store earns about $35,000 in sales annually, Tolley said.
“A lot of us are small businesses. We don’t have huge brick-and-mortar stores. We’re just tiny businesses trying to make it,” Tolley said.
But the truth is, it’s not difficult for a retailer of any size to collect sales tax online. FedTax.net was founded to provide a solution for retailers, and TaxCloud has been designed to be easy to use for even a single person operating a sole proprietorship.
It’s also important to note that the store owner quoted is an eBay store owner; the same article includes a quote critical of the legislation from an eBay executive. But we find it odd that eBay is so opposed to the Main Street Fairness Act. EBay manages not thousands but millions of live auctions every day, so it’s hard to believe that they really would find collecting sales tax too complicated.
It seems that eBay should be able to offer sales tax collection as a service for its users, just as many shopping cart services do. In fact, TaxCloud has been integrated with several shopping carts, and we’d welcome the opportunity to integrate with eBay, too—it would make collecting sales tax easy for even the smallest eBay store owner.
Leave a Comment » | Issues, State News | Tagged: affiliate tax, Internet Sales Tax, Main Street Fairness, online sales tax, TaxCloud, The Federal Tax Authority | Permalink
Posted by FedTax
April 15, 2011
Forbes
This Forbes column by Robert W. Wood presents a terrific summary of the history of online sales tax and the issues involved. We particularly like how it defines and illustrates “use tax,” but the entire article—which is brief—deserves a read.
The only thing we’d also have liked to see is a definition of affiliate nexus legislation. Although Wood does mention Amazon at the end, he doesn’t explain that states are increasingly passing laws that say having affiliate marketers in a state is enough to create nexus there, and that this is what Amazon objects to.
We’re looking forward to the day when there is federal legislation allowing states to require online retailers to collect sales tax—something Amazon has said it would not object to, since it treats all retailers the sames, whether they are online or off and whether or not they use affiliate marketers.
Leave a Comment » | Issues, State News | Tagged: affiliate nexus legislation, affiliate tax, Amazon, amazon affiliates tax, Internet Sales Tax, Main Street Fairness, online sales tax | Permalink
Posted by FedTax
April 11, 2011
This post in the StorefrontBacktalk blog ponders why there have been no consumer advocacy groups fighting against affiliate nexus laws. The answer, though, is contained in the post:
Rightly or wrongly (OK, it’s wrongly), consumers in those states have been avoiding paying state sales tax.
It would seem to me that a consumer advocacy group would be hard-pressed to make a pitch that says, in effect, “don’t take away a citizen’s right to evade taxes.”
Instead, the debate continues to focus on the issue of fairness—whether it is fair that only bricks-and-mortar retailers collect the tax, and whether it is fair to ask online retailers to calculate and collect the tax.
Today large online retailers easily manage millions of items for sale at any given moment, and even the smallest online retailer can calculate accurate shipping rates to every corner of the country in a blink of an eye. It is no longer too difficult to keep track of a few thousand tax jurisdictions.
What’s more, comprehensive sales tax management services are available—for free—making it even easier to calculate sales tax online. TaxCloud calculates the sales tax due for any purchase anywhere in the country. It is certified to comply with the Streamlined Sales and Use Tax Agreement (SSUTA) and can therefore also prepare, file, and remit sales tax for states that are members of SSUTA. The service is completely free to retailers.
Perhaps another reason consumer groups are shying away from the debate is because it is local community services that are losing out on uncollected sales tax as more shopping shifts online.
What does surprise me, though, is that the Performance Marketing Association and other groups that support the affiliates have not been coming out in favor of Streamlined and federal legislation that would require ALL online retailers, not just those who sell through affiliates, to collect and remit sales tax.
Leave a Comment » | Issues, Uncategorized | Tagged: affiliate tax, Amazon, amazon affiliates tax, Internet Sales Tax, Main Street Fairness, sales tax, SST, SSTP, streamlined sales tax, TaxCloud | Permalink
Posted by FedTax
April 11, 2011
The Macomb Daily
We love this editorial from the Macomb Daily (MI). After offering a quick background on online sales tax, affiliate nexus legislation, and Amazon’s response to affiliate laws, it turns to the need for federal legislation:
The better answer is federal legislation requiring Amazon and its competitors to collect sales taxes in each state. That’s been proposed for years. An early response was that it was too complex.
That’s hogwash.
We couldn’t agree more!
The Streamlined Sales and Use Tax Agreement has effectively simplified and standardized sales tax categories and definitions, making it much easier for retailers to remit sales tax to multiple states. Now all we need is federal legislation allowing states to require online retailers to collect sales tax.
It looks like the editorial has been picked up by the Associated Press, so we expect it to appear in many more papers around the country.
1 Comment | State News | Tagged: affiliate tax, Amazon, Internet Sales Tax, Main Street Fairness, online sales tax, SST, SSUTA, streamlined sales tax | Permalink
Posted by FedTax
April 6, 2011
It’s official: Starting this summer, online retailers with affiliate marketers in Arkansas will have to collect sales tax on purchases by Arkansas residents.
This article in Internet Retailer confirms that Overstock.com is canceling its relationships with affiliates in the state:
By the end of today, Overstock will have sent notices to all of its Arkansas affiliates that it will no longer do business with them as of May 1, unless they re-locate to another state without a similar affiliate tax law, president Jonathan Johnson says.
No word yet from Amazon, but we expect that it, too, will soon cancel its relationships with Arkansas affiliates.
We continue to believe that federal legislation in the form of the Main Street Fairness Act is a better solution than affiliate nexus legislation, and we hope to see it enacted soon.
Leave a Comment » | Federal Legislation, State News | Tagged: affiliate tax, Amazon, amazon affiliates tax, Arkansas, Main Street Fairness, online sales tax, Overstock | Permalink
Posted by FedTax
April 5, 2011
The Patriot Ledger: Massachusetts considers joining SSUTA, enacting affiliate nexus legislation
Massachusetts has become the latest state to introduce legislation that would allow it to join the Streamlined Sales and Use Tax Agreement (SSUTA), according to this article in the Patriot Ledger. At the same time, it’s also become the latest state to consider enacting affiliate nexus legislation (aka, the “Amazon tax”).
While we certainly understand why Massachusetts would enact affiliate nexus legislation—like most states, Massachusetts is experiencing a severe budget crisis, and in 2010 alone, $99.3 million in sales tax on e-commerce sales went uncollected—we believe that joining SSUTA is a better strategy.
We’re concerned that affiliate nexus legislation hurts small businesses that rely on the affiliate marketing income they receive from Amazon and other large online retailers. Rather than collect sales tax in states with affiliate nexus laws, Amazon and others have simply dropped their affiliate relationships in those states.
The article includes several quotes from Jonathan Johnson, president of Overstock.com, that confirm our fears:
Jonathan Johnson says Overstock has terminated its affiliate relationships in every state that has passed one of these bills because the company doesn’t want to be put in the position of being a tax collector. He says the bills do little to increase revenue for the states: Overstock, Amazon and others simply sever the ties with the local marketers and continue to avoid the sales tax.
Johnson says many of these affiliates pull up stakes and move to states that don’t have these new sales tax laws. As long as a few states don’t adopt the change, there will be tax havens for these marketers— and the online retailers that pay their commissions. He says there are at least 100 marketers in Massachusetts who would be affected if the legislature here passes RAM’s legislation. All of them, Johnson promises, would be cut off from Overstock if the bill becomes law and they stay here.
With Amazon and New York still embroiled in a lawsuit over the constitutionality of affiliate nexus laws and Amazon closing a warehouse in Texas rather than pay the sales taxes Texas says it owes, it’s become clear that a national solution is necessary. Federal legislation, in the form of the Main Street Fairness Act, would require all online retailers to collect sales tax, not just those with affiliate marketing relationships—something Amazon has said it would support.
The article also includes figures we haven’t seen before that are quite revealing:
Each year, the stakes in this battle get higher for the brick-and-mortar companies. Wells Fargo Securities estimated in a February report about Amazon that online commerce represents 8 percent of all U.S. retail sales, up from 2 percent a decade ago.
That report clarified Amazon’s pricing power: Wells Fargo found that prices at Amazon, with the sales tax benefit, were 13 percent below Wal-Mart’s, 21 percent below Target’s and 23 percent below the prices at specialty retailers. The differential further widens once Amazon’s free shipping program is added to the equation. (emphasis added)
With prices like that and free shipping on most orders over $25, it’s no wonder Amazon is so popular. Clearly Amazon has a hugely successful business model, and it—as well as other large online-only retailers—no longer needs the price advantage that comes with not collecting sales tax.
Let’s level the playing field for local retailers. If they have to collect sales tax, so should online retailers.
Leave a Comment » | State News | Tagged: affiliate tax, Amazon, amazon affiliates tax, Internet Sales Tax, Main Street Fairness, Massachusetts, online sales tax, SSUTA, streamlined sales tax | Permalink
Posted by FedTax
March 30, 2011
This terrific article by St. Louis Post-Dispatch columnist Bill Nicklaus offers a great summary of the debate over online sales tax and explores where the debate may go in the future.
We found this section particularly interesting:
Convenience and selection are the biggest reasons for the growth of e-commerce, but the tax-free shopping environment doesn’t hurt. One study, done by two Georgia State University professors in 2003, estimated that collecting sales taxes would reduce online purchases by 6 percent.
If that’s accurate, then traditional retailers are already losing some business because of the disparate tax treatment. They’ll lose more as e-commerce continues to grow.
It’s great to see a study confirm what we’ve long known from anecdotal evidence: although most consumers shop online for convenience and selection, some consumers shop online specifically to avoid paying sales tax, which means those are sales that would otherwise go to local retailers.
Among the other hot topics Nicklaus covers are Illinois’ recent enactment of affiliate nexus legislation and the $269 million bill that Texas recently sent to Amazon for uncollected sales tax.
Nicklaus notes that Senator Dick Durbin (D-IL) is about to introduce the Main Street Fairness Act in Congress because “he wants a federal version of Illinois’ Amazon tax, making it harder for online firms to play one state against another.” (A quick note of clarification: The column mentions that Illinois’ new tax law is called the Main Street Fairness Act. The federal legislation is also called the Main Street Fairness Act, but unlike Illinois’ law, it would allow all states to require online retailers to collect sales tax.)
Nicklaus closes with a strong endorsement of federal legislation and an equally strong condemnation of Amazon’s tactics: “The sales tax has long been viewed as an efficient and fair way of raising government revenue. It shouldn’t become a wedge that favors some retailers over others. If states can’t stand up to Amazon on their own, then Congress must find a way to end the bullying.” (emphasis added)
Leave a Comment » | State News | Tagged: affiliate tax, Amazon, Illinois, Main Street Fairness, Texas | Permalink
Posted by FedTax
March 29, 2011
The Oakland Tribune Editorial
This editorial by Drew Voros, Oakland Tribune‘s business editor, focuses entirely on Amazon and the pending California bill AB-153, which is affiliate nexus legislation. The arguments for collecting sales tax on all purchases stand, though, regardless of which online retailer you consider: Not collecting sales on remote purchases puts local stores at a competitive disadvantage and deprives communities of much-needed revenue for local services.
1 Comment | State News | Tagged: affiliate tax, Amazon, amazon affiliates tax, California, sales tax, SST, streamlined sales tax, TaxCloud | Permalink
Posted by FedTax
March 24, 2011
Chicago Tribune
The Chicago Tribune published a scathing editorial yesterday that urges Congress to address the issue of uncollected sales tax on remote sales. According to the editorial, “The time has come for Congress to back up states like Illinois as they stand against a corporate bully. Amazon is putting its interests above the common good—a situation we hope Durbin & Co. will rectify.”
The strongly worded editorial refers to the current situation of uncollected/unpaid taxes on remote sales as “widespread abuse.” It says that federal legislation is needed “not only because of basic fairness but also because of the shameful efforts of Web merchants to retain their arbitrary advantage.” It calls out Amazon specifically as having “treated its local affiliates as pawns, severing ties with them to evade its tax-collection obligations” and as having “strong-armed other states, threatening to shut down facilities in Texas unless Longhorn lawmakers cave in to its tax demands. Amazon has tried to make an expansion project in South Carolina contingent on relief from collecting sales tax.”
Will the surge of editorials continue now that the Chicago Tribune has joined the Los Angeles Times, the New York Times, the Sacramento Bee, and the Minneapolis Star Tribune in calling for federal legislation to resolve the issue fairly and efficiently?
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2 Comments | State News | Tagged: affiliate tax, Internet Sales Tax, Main Street Fairness, online sales tax, sales tax, SST, SSTP, SSUTA, streamlined sales tax | Permalink
Posted by FedTax
March 24, 2011
StarTribune
Another newspaper’s editorial board has come out in favor of requiring all retailers to collect the sales tax due on purchases. The editors acknowledge that affiliate nexus laws don’t solve the problem entirely, but they suggest that Minnesota pursue that avenue in advance of federal legislation: “Minnesota shouldn’t wait for Congress—not when it can gain an estimated $10.6 million more in revenue in the coming biennium without raising taxes. (Tax-averse legislators should note: The retailers’ proposal does not raise taxes. It simply collects an existing tax.)”
Leave a Comment » | State News | Tagged: affiliate tax, amazon affiliates tax, Internet Sales Tax, Main Street Fairness, online sales tax, SST, SSTP, streamlined sales tax | Permalink
Posted by FedTax
March 23, 2011
Sacramento Bee Editorial
Pia Lopez, editorial writer at the Sacramento Bee, wrote an excellent piece in favor of requiring online-only retailers to collect sales tax. In fact, it was so well-written we wish we wrote it. The premise of her essay is that sales tax policy “is antiquated. It hasn’t kept pace with changes in the economy—for example, the shift from the production and consumption of goods to services and from in-store sales to online sales.” This antiquated policy has caused the following unintended consequences:
1. An unfair price advantage to online-only retailers (over bricks-and-mortar and bricks-and-clicks retailers)
2. An erosion of the tax base that pays for government services
Her conclusion? “Broadening the sales tax base to include online sales—and services, too—should allow California to reduce its sales tax rate, while still providing one-third of general fund revenue. That’s a more fair tax system.”
This editorial feature was called “Head to Head,” and an opposing view was presented by Ben Boychuk, managing editor of the Heartland Institute’s School Reform News. You can, and should, read Ben’s essay here. However, in our opinion, it was a pretty weak rebuttal—that affiliate legislation will result in lost business for California websites that earn affiliate income (though we agree to a point). His conclusion is that the state “should consider expanding the tax base by lowering individual and corporate tax rates, backing away from the sky-high 9.75 percent sales tax, and easing the regulatory burden.”
This debate is not about whether you should be taxed, why you should be taxed, or at what rate you should be taxed; that debate takes place at every election when you choose your local representatives and weigh-in on various ballot initiatives to authorize funding for services in your community. The debate is over the fairest and most efficient way to collect those taxes.
Leave a Comment » | State News | Tagged: affiliate tax, Amazon, amazon affiliates tax, California, Internet Sales Tax, Main Street Fairness, online sales tax, SST | Permalink
Posted by FedTax
March 22, 2011
Los Angeles Times: Are you an online tax cheat?
This editorial in today’s Los Angeles Times covers all the issues in the ongoing debate over sales tax collection. It starts off by outlining on the debate over the affiliate nexus bill introduced by California representative Nancy Skinner. The editorial recognizes the pitfalls of that legislation: that Amazon and other companies will simply drop affiliate relationships with California websites, which is bad for California businesses in the short term (although it will bring in some of the uncollected sales tax—”about $300 million, a fraction of the estimated $1.7 billion California loses each year.” The writers keep the focus where it needs to be, though—the taxes are due and consumers are supposed to report them, but they don’t. The issue is collection, and the most efficient way to improve collection is to shift responsibility to the retailer.
The editorial effectively neutralizes two arguments often made by online sellers: First, that they are neutral as far as sales tax goes. The LA Times says:
Online retailers assert that they are not trying to exploit an unfair advantage over local companies by letting shoppers believe that no taxes are owed, or colluding with them to avoid taxes. But that argument is balderdash on its face. If the Amazons of the world really wanted shoppers to know that they have to pay taxes, they’d include a statement at e-checkout (upfront, not several asterisks and clicks away) telling them to find out from their state and local authorities about adding up and paying the tax. Most are only too happy to promulgate the notion, wordlessly and falsely, that tax obligations dissolve in cyberspace.
The second argument frequently offered by online sellers is that collecting sales tax is too complex. The LA Times points out that “it’s not hard to track rates in some 7,500 jurisdictions across the country; it takes a simple software add-on.”
The only point we at FedTax think needs clarifying is that it doesn’t even take software. With TaxCloud, there is no software or database to install. Instead, the relevant tax data is delivered to the merchant or e-commerce shopping cart over a real-time web services API. TaxCloud can calculate correct local sales tax rates in every U.S. tax jurisdiction and account for the type of merchandise, exemptions, and tax holidays. In addition, because we are a Certified Service Provider under the Streamlined Sales and Use Tax Agreement, we take responsibility for tax filings and remittances on behalf of our retailers, who will also appreciate pass-through indemnification by states regarding the accuracy of our rates.
As the editorial points out, with more online buyers than any other state, California has more to gain in uncollected revenue than any other state. Rep. Skinner’s bill, if it passes, is likely to be only the starting point for California. We hope that support for federal legislation is the next step.
Leave a Comment » | State News | Tagged: affiliate tax, Amazon, amazon affiliates tax, California, Fed-Tax.net, FedTax, Internet Sales Tax, Main Street Fairness, online sales tax, sales tax, SST, streamlined sales tax, TaxCloud | Permalink
Posted by FedTax
March 11, 2011
This article by Curt Woodward, senior editor of Xconomy Seattle, points out that the best long-term solution to the problem of uncollected sales tax is for states to join the Streamlined Sales Tax effort and for the federal government to enact legislation such as the Main Street Fairness Act.
The volley of lawsuits, rhetoric from fired-up tax collectors, and Amazon’s hardball response tactics are certainly entertaining to watch from afar. But any real resolution will almost certainly come from a much more boring, slow-moving effort to get state sales taxes on a common source code, and then change the federal laws.
The article goes on to highlight Washington State’s efforts on behalf of the Streamlined Sales and Use Tax Agreement (SSUTA). In fact, it was Washington’s decision to join SSUTA that spurred FedTax’s founders to create TaxCloud, our free, easy-to-use tax calculation and remittance service.
TaxCloud is the only service designed specifically to comply with SSUTA at a scale that supports all online retailers. TaxCloud is easy for retailers to integrate with their current systems—from sign-up to tax collection takes just 20 minutes.
Leave a Comment » | Uncategorized | Tagged: affiliate tax, Amazon, California, FedTax, Illinois, Main Street Fairness, sales tax, SSTP, streamlined sales tax, TaxCloud, The Federal Tax Authority | Permalink
Posted by FedTax
