#4 State Affiliate Nexus Laws

What’s so iAWFUL?  A report by the New Mexico legislature explains best why advertising nexus taxes are so awful:

• If New Mexico passes its advertising nexus law, it “will likely have negative effects on New Mexico business’s retail sales, and therefore, will have a negative impact on general fund revenues.”
  
• “[I]t is likely that major sellers will discontinue all affiliate relationships in New Mexico in response to the imposition of tax on internet sales transactions.”

Illinois (HB 3659) and California (Budget) recently passed laws declaring that Internet advertising is equivalent to having sales agents in their states.  Both of these states want to force out-of-state advertisers to collect and remit sales tax on sales to their residents.

States across the country are mistakenly turning to advertising nexus taxes to force out-of-state retailers to collect sales tax from in-state consumers.

These laws present all pain and no gain to states; they don’t increase revenue and they damage in-state businesses.  This is exactly what has happened in the states that have passed such laws.

California watched as Amazon cancelled every one of their 5,000 affiliate business relationships in California the day the affiliate nexus law took effect.  Illinois witnessed the same.  And in Illinois, Coupon Cabin and Fatwallet took their jobs and businesses to neighboring states.

These laws are all pain and no-gain losers.

New York passed the first advertiser nexus law and is presently defending it against constitutional challenges by remote retailers. Until that case is resolved, these laws remain all pain, no-gain losers for the state.

States should take other steps to increase their tax revenue, but should avoid nexus taxes that only harm the state and its businesses.

NetChoice Statements:

NetChoice Testimony to Maryland Regarding Online Tax Collection

NetChoice Letter to California Governor Brown in Opposition Affiliate Nexus Bill

NetChoice Letter to Louisiana Legislators in Opposition of Affiliate-Nexus Bill

NetChoice Testimony to Pennsylvania House Legislators for Hearing on Online Tax Collection

NetChoice Letter to California Legislators in Opposition of Affiliate-Nexus Bill

NetChoice Testimony to Hawaii Legislature in Opposition of Affiliate-Nexus and Reporting Bill

NetChoice Letter to New Mexico Legislature in Opposition of Affiliate-Nexus Bill

Blog Posts:

Maryland’s Attempts To Hunt New Tax Revenue Without Shooting Itself In The Foot

California, You Don’t Trade Your Star Player for A Couple of Bucks

Can You Kill a Bad Bill in Only 180 Seconds?

Small Sellers Rally to Oppose California’s Affiliate Tax Bill

Alabama: Don’t Dis’ the U.S. Constitution as You Dig for More Tax Revenue

On affiliate nexus taxes, Illinois was ill-advised

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