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.
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.