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Florida’s Misguided Lunge for Internet Sales Taxes

| February 28, 2012

Neither paper nor plastic.

By Nancy Nally

The Florida Senate is currently considering a bill (SB 7206) that tries to force online stores that don’t have physical locations in Florida to charge Florida sales tax based on the use of affiliate nexus. These laws are commonly called “Amazon laws” because they clearly target the country’s largest online retailer to force it to collect sales tax.

Affiliate nexus is another way of saying that a company has a presence in a given place. It is created when a state targets the use of affiliate marketing programs to declare that a company has nexus through any affiliates there, and so must collect sales tax. In an affiliate marketing program, companies pay a sales commission for sales that are generated as a result of clicks on ads that are placed on a website. These affiliate marketing programs have become widely used tools in internet marketing by both small and large companies, and proceeds from them support the publication of a lot of internet content including my own website, Scrapbook Update.

Nancy Nally

The Live Commentary

Online sales tax legislation s is widely expected to pass this session. Proponents of affiliate nexus laws say the measures are necessary to create a level playing field between internet businesses and local businesses with physical addresses. They say that these laws protect local businesses from unfair competition and benefit the state through collecting more tax dollars.

The problem is that affiliate nexus laws do neither of the things that their proponents claim. They don’t collect more taxes for the state and they don’t level the playing field for local businesses. But affiliate nexus laws do harm local businesses by destroying the income of internet entrepreneurs like me, who rely on affiliate marketing income to make their living.

In each of the seven states that have implemented an affiliate nexus law, internet companies such as Amazon,, and countless others have simply cut off their affiliates in the affected state from the program, so that they do not have to start collecting sales tax for that state. Affiliate marketing effectively becomes banned in that state except for companies that have other nexus that require them to collect the tax anyway. So no new taxes are collected using affiliate nexus – but revenue is lost to the state from the many affiliates in a state whose income suddenly goes away overnight.

But does the use of affiliate nexus level the playing field for local businesses? It absolutely does not, for two reasons. First, online retailers simply continue not charging sales tax by ditching their affiliate programs, so nothing changes regarding price competition. And even if internet retailers were to start charging sales tax, it still wouldn’t erase the competitive advantage that they have over most local retailers.

I don’t shop at Amazon because they don’t charge me sales tax. I shop there and at other online stores because I can buy things that simply aren’t available in this community, or pay prices that are usually 30 to 40 percent lower than what’s available locally. I also have access to a much wider selection of merchandise without having to drive all over the place to compare prices.

The internet is provoking radical change in the retail and publishing landscapes. Local businesses must adapt or they will go the way of print publishers. Forcing online retailers to collect sales tax won’t change their inherent advantage in many retail segments.

The real answer to the issue is the Streamlined Sales Tax. Created by the National; Governors Association and the National Conference of State Legislatures, it’s a national, simplified tax code easier for businesses to implement than the current, complicated patchwork of codes. It doesn’t make pawns of affiliates in the middle of a political battle between businesses and state governments. This solution is fair to everyone and would actually increase sales tax collection.

Twenty-four states have passed the necessary legislation to enact the compact (see a sample bill outlining the proposal), more subscribe to its principles. Florida has proposed legislation to enact it, but not passed it. This is the direction that Florida needs to go to actually achieve the goals of local retail advocates and state legislators. Affiliate nexus laws, in contrast, only turn affiliates into collateral damage while accomplishing nothing.

Trying the same thing over and over and expecting to get different results is the definition of insanity. Yet the Florida Legislature will be doing just that if it passes an affiliate nexus law. It’s time for the Legislature to stop listening to high-paid lobbyists and start listening to common sense.

Nancy Nally, a Flagler County resident, publishes Scrapbook Update. Reach her by email here.

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4 Responses for “Florida’s Misguided Lunge for Internet Sales Taxes”

  1. Sammy says:

    Can we tax the Florida Senate for being greedy little politicians ? Can we tax all the county politicians for being greedy little politician wannabe’s?

  2. Keith Yockey says:

    The author is correct. Affiliate nexus will do nothing to solve the sales tax issue. As has happened in NC, CT, IL, and CO, the State has actually lost revenue. Amazon/Overstock dropped the programs, and other companies moved out of the State. By dropping the programs, the States also lost on Income tax.
    Affiliate Nexus is unconstitutional law and is being challenged in NY and IL.
    States have gone out of their way to make Sales Tax law complicated, and these laws make it even more so.
    Visit my blog and Facebook group for more details.

  3. Jim says:

    I was ready to purchase a home in Cape Coral, Florida this spring of 2013 but since this nexus law was passed in Florida I cannot buy a home and move to Florida from New Hampshire. New Hampshire has no sales tax and no personal income tax. I moved from Rhode Island when they passed the nexus tax and the RI state legislators who wrote the bill now admit it was the wrong move for Rhode Island. All Rhode Island affiliate product marketers were shut down overnight. Rather than go on welfare I moved to NH and am thriving up here only an hour from Boston. States that pass these nexus laws see business owners and affiliates packing for safe states like Wyoming and New Hampshire. Shame on you Florida state lawmakers, you just lost a home sale and a resident who would have spent much of his income in the Sunshine state. The Nexus tax is a total loser for any state that passes but since the jokers who write the laws have no idea how to right an effective law they destroy peoples lives and force them to move, shut down their business and may even leave many homeless. I was almost homeless when I discovered affiliate marketing and now less than 4 years later I can buy a house with CASH, but not in Florida.

  4. Dennis l Brookins says:

    Any unfair tax proposals by Florida state legislature, should have to be voted on first, by the citizens of Florida. With still very high unemployment in the state of Florida, with medium income in $39,000 range, imposing another tax burden on the citizens of Florida, is a absolute outrage! Any state legislature, governor that supports one more tax, on the hard working citizens of Florida, deserves to be recalled, at least, be voted out of office.Several states are being sued by their citizens for this unfair tax, it will eventually end up in the Supreme Court. Than the state of Florida, will have to pay back, too all the citizens that it robbed of all their hard working dollar. The United States was founded upon free enterprise, not on unfair tax burdens. I suppose after this, Governor Scott and his state legislature will try to impose a state income tax, on the people of Florida. How greedy are politicians in Tallahassee are becoming!

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