Internet Sales Tax Reform
Federal and state legislative activity concerning Internet sales tax – both passed and proposed – may affect your business.
- Please click on the YELLOW states below to review the state’s respective law/statute.
- GREEN states indicate a bill, or bills that were ruled invalid through the court process.
- RED states indicate a bill that is introduced and being considered by state legislature.
Contact the PMA or contribute to the Fairness Fund to help us fight these bills.
This information is not tax or legal advice, it does not necessarily represent the PMA’s position(s). It is provided as a courtesy for your convenience. The PMA shall not be responsible for the accuracy of such information, especially considering a portion of the information may be provided by third parties. We therefore disclaim all liability and responsibility arising from any reliance placed on such information. You should consult with your own legal and tax advisors before taking or refraining from taking any actions.
Why Does the PMA Care About Internet Sales Tax Reform?
Since 2008, there has been severe damage to small online businesses caused by ‘Affiliate Nexus Tax’ laws, also misleadingly known as ‘Amazon Tax’ laws. These unconstitutional laws have caused financial ruin to 90,000 affiliate marketers in the 13 states where the laws passed. These laws were passed to force Internet retailers to collect sales tax on behalf of the states that passed these laws, but in fact did nothing of the sort. In the end, states have not collected any additional sales tax revenue, and actually lost income tax revenue from the impacted affiliate marketers.
The PMA has been actively fighting this state legislation since its inception in 2008, spearheading over 70 grassroots campaigns, filing suit against the state of Illinois, lobbying in support of federal reform legislation, and most recently, supporting Amazon and Overstock with an amicus brief, in support of their petition to the US Supreme Court.
April, 2012: The PMA won its lawsuit against the State of Illinois (an appeal is pending). The judge ruled that the state’s Affiliate Nexus Tax law was unconstitutional and that it violated the Internet Tax Freedom Act. We are awaiting a final ruling from the Illinois State Supreme Court.
September 2013: The PMA submitted an amicus curiae (friend of the court) brief in support of petitions recently filed by Amazon and Overstock with the US Supreme Court. Amazon and Overstock are hoping the Supreme Court will hear their appeal against the State of New York and its Affiliate Nexus Tax law.
October, 2013: The PMA is thrilled to announce that the Illinois Supreme Court has upheld a lower court victory in favor of the PMA’s suit against the State of Illinois, declaring its ‘Affiliate Nexus Tax’ is illegal. Advertisers Can Immediately Reinstate Illinois Affiliates![FULL PRESS RELEASE], [COURT DECISION: SUMMARY], [COURT DECISION: FULL].
The ruling by the Illinois Supreme Court that Public Act 96-1544 is “void and unenforceable” results in a judicial finding that the statute was never legally valid and, therefore, it is not currently in effect. This means that advertisers are free to reinstate their Illinois affiliates whose contracts were terminated out of fear of the “click through” nexus law. Of course, advertisers must still be wary of any additional activity that may be conducted by web affiliates on their behalf, such as active solicitation of prospective customers and other in-state promotional efforts. The court ruling does not displace, or supersede, traditional, physical-presence nexus standards. If Illinois affiliates engage in activities that go beyond the posting of Internet links, there remains the risk that those affiliates could create nexus for out-of-state retailers under existing nexus principles that are unrelated to the statutory provision that was struck down by the state Supreme Court. – PMA Legal Team
Federal Legislation: Marketplace Fairness Act
The Performance Marketing Association is actively lobbying in support of the Marketplace Fairness Act, just passed by the US Senate on May 6, 2013. This federal bill, now making its way to the US House of Representative, will pave the way for the collection of sales tax on Internet sales, and will reverse the severe damage to small online businesses caused by ‘Affiliate Nexus Tax’ laws. These unconstitutional laws have caused financial ruin to 90,000 affiliate marketers in the 13 states where the laws passed. In the end, states have not collected any additional sales tax revenue, and actually lost income tax revenue from the impacted affiliate marketers.
The bill contain a new approach to sales tax reform, a ‘no-nexus’ concept that simply allows states to require out-of-state retailers to collect their sales taxes. The ‘no-nexus’ approach lets states keep their current sales tax policies in place, a critical requirement in getting bi-partisan support, and necessary to ensure passage. The ‘no-nexus’ approach is constitutional if approved by Congress. Most importantly, to our industry, since all retailers (online and offline) would be required collect sales tax on all purchases, online retailers will be able to reinstate their affiliate programs. These bills have support from influential allies and former opponents such as the National Retail Federation (NRF), Retail Industry Leaders Association (RILA), Walmart and Amazon.
The PMA supports this approach to sales tax reform because it will eliminate the Affiliate Nexus Tax laws that have devastated 83,000 affiliate marketers around the country, it is Constitutional, and it has a very good chance of passage.
- Marketplace Fairness Act and MFA Q&A
- PMA Written Testimony Senate Finance Committee Hearing, April 2012
- PMA Written Testimony House Judiciary Committee Hearing, July 2012
- PMA Press Release Supporting Federal Sales Tax Bills, November 2011
How Can You Help?
- Contribute to the Performance Marketing Fairness Fund to help us fight these bills.
- Contact us to volunteer to help with grassroots efforts.
- Become a member of the Performance Marketing Association.