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Overstock kills affiliate programs in 4 states, just like Amazon
Each of those states has either adopted or is about to adopt a law that would require online retailers with in-state affiliate partners to collect sales tax on items sold. The idea is that a web publisher who posts links Amazon, Overstock, or other web stores and gets a commission for items sold through those links is essentially giving the online store a physical presence in the state, which means state tax laws come into play.
On the one hand, states are struggling thanks to the recession, and it makes sense that some states would turn to this tax as a revenue source. On the other hand, if companies like Amazon and Overstock decide that the laws are too burdensome and just pull out of those states altogether, then nobody wins.
It's worth pointing out that you're really supposed to pay sales tax for most things purchased on the internet. But in most cases, the burden is on the shoppers, not the retailers. If enacted, these state laws would require the stores to collect the taxes which consumers pretty much never pay voluntarily.
[via The Business Insider]
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Reader Comments (Page 1 of 1)
Rocketboy said 8:59PM on 7-01-2009
No, you're really not supposed to pay taxes, unless the company has a physical presence in your state. Internet sales are no different then catalog sales, but somehow we've let our politicos tell us differently.
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Greg said 11:05PM on 7-01-2009
Legally, in virtually all states, people are supposed to pay use taxes on all catalog and internet orders for products that would be taxed if bought in their state. in fact, people are supposed to pay such use taxes even if they travel to other states and purchase things in person. When people travel out-of-state and buy an item for which there is sales tax but that sales tax is less on that item than it would be in their home state, they are supposed to pay the difference to their home state in use tax.. In reality, states have been unable to enforce these laws except on very large purchases such as cars or expensive artwork. This has been the case for longer than the Internet has existed, basically since the Supreme Court's ruling in National Bellas Hess v. Department of Revenue (1967). Various states have tried to overturn this ruling, which said that states could only force companies that have a nexus in that specific state to charge sales tax because such taxes were "an unconstitutional burden on interstate commerce." After that ruling, every state with a sales tax revised their laws to require that people in the state send in use taxes in case where they bought something from an out-of-state retailer who didn't charge sales, but, as I said above, states have rarely enforced these laws. In recent years, as Internet sales have been growing, states have been looking at ways to collect these taxes. The legal issue in question is whether affiliates represent a nexus. I suspect this will go to the Supreme Court, because it really is a question that the Court did not anticipate in its ruling. In 1992, the Supreme Court clarified the Bellas Hess ruling by saying that Congress could pass a bill enabling states to force out-of-state retailers to charge sales tax if enough states were able to get together and simplify their sometimes byzantine sales tax systems, but so far attempts to get enough states to forge an agreement to do that has failed. Amazon.com officially supports that effort, which would result in Amazon collecting sales tax from their customers.
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sybgtwy said 10:46AM on 7-02-2009
All true. And still, I would avoid paying those taxes regardless of what the Supreme Court says. I don't like what the gov't -- local, state, and federal -- is doing and my say is somehow being diluted by corp lobbyists, so I'll resort to corporate disobedience. And good luck fighting that.
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Scott Cook said 3:04PM on 7-05-2009
Extremely surprised NY isn't mentioned since I believe they already have this law in effect. They are the absolute worst in taxation doing things other state tax commissioners consider illegal. Like basing non-resident tax rates on combined spousal income. e.g. couple lives in NJ, wife makes 500,000 in NJ, husband makes 100,000 in NY. Husband's income taxed at 600,000 rate. Total BS.
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David Campbell said 2:08PM on 7-27-2009
Overstock is protecting itself from unequal taxation - not trying to avoid sales tax. Please take a moment to review the following:
http://blog.fed-tax.net/2009/07/20/complexnexus/
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