The federal Commerce Clause regarding Internet sales tax can be broken down simply: If an online retailer has a physical presence in a particular state, such as a business office or a warehouse, it must collect sales tax from customers in that state. If an online business does not have a physical presence in a state, it is not required to collect sales tax from customers in that state. Sounds easy enough right? Not so much. However, here at a2b Fulfillment, we’re on the cutting edge of e-commerce fulfillment news within our industry and are here to offer insight on this continuing issue.
In a recent major development in the contentious battle over Internet sales tax, the California State Assembly passed a bill requiring online retailers such as Amazon.com to collect sales tax on all Web purchases. According to Reuters, the bill was approved 50-18 and now heads to the Senate stipulating “online retailers with a physical presence, including “affiliates” – independent Web operators who get a fee for directing traffic to Amazon if it yields a sale – must collect sales tax from sales made to California residents.”
The contention resides over the definition of “affiliates” as it can include bloggers who direct traffic to sites such as Amazon and in turn receive a small commission but have no warehouse and do not provide direct sales from their location. Prior to California’s passing of their bill, Jeff Bezos, Amazon’s chief executive, stated the company “will continue to drop states who pass those affiliate laws, from the affiliate program” and have already announced plans to cancel affiliate programs in Illinois where there are an estimated 9,000 affiliate marketers since their state’s law passed in March.
Many states and major companies are following suit in the Internet sales tax debate. Overstock.com has already pulled ads on affiliate websites in the state of Connecticut where a law was recently adopted requiring online retailers with marketing affiliates in the state to collect sales tax. Mark Griffin, Overstock’s general counsel stated, “Our building sits in Utah. If our building catches fire or people are threatened, I don’t call the Connecticut police department or the Connecticut-based fire department to come assist.”
Bloomberg News reported Texas is another state with a recent law passed effecting tax on web-based sales although Governor Rick Perry vetoed the measure. “My strong preference is to conduct a thorough policy discussion with Texas lawmakers, consumers, retailers and technology experts — and with other states and even the federal government — about interstate commerce and the structure of state sales taxes in the 21st century,” Perry said. “That conversation is under way, and I believe that a consensus can and should be reached.”
While the discord continues between online retailers and brick-and-mortar sales, it appears there is much to be discussed and dissected when it comes to enacting state laws. Consumers, retailers and affiliates alike are all connected in this dispute but the question still remains: how will this affect you and your business?
At a2b Fulfillment, we support e-commerce fulfillment , direct response fulfillment , retail distribution support , order management , continuity management , customer service , returns and refurbishment , with our prime location for third party logistics in our Georgia fulfillment center. Contact us today to see what we can do for you by calling 1-866-843-3827 or email firstname.lastname@example.org and rest assured we’re on top of the latest developments and will continue to monitor all aspects of our industry.