Virginia Senators playing Whack-a-Mole with Amazon – While Affiliate Marketers get Whacked

In what many believe to be a short-sited attempt to collect sales taxes from large internet retailers, our Virginia Senators today passed SB660 which, if it becomes a law, would create a nexus for any company whose affiliates in the state are generating $10k in revenues. Once a nexus is created, the company would then be required to collect and pay sales taxes on all transactions in the state.

I call this a game of Whack-a-Mole, because my company has already received notices from these same large retailers that if the law passes in Virginia, they will drop their affiliate relationships in the state in order to avoid having to pay the taxes.

I wanted to share with you some of the correspondence that has gone back and forth with at least one senator:

From Senator Emmett Hangar:

Thank you for your message regarding Senate Bill 660. Simply put, this bill is a compliance issue and clearly not a new tax.

The legislation would close a loophole that is allowing some internet retailers to avoid collecting the required state sales and use tax at the point of sale, the same requirement that is placed on other internet and traditional store retailers today.

Besides making the law consistent and fair for all merchants, the legislation would remove the onerous responsibility on the consumer to remember to pay the required sales tax on all internet purchases at the end of each year.

It is entirely unfair to put traditional storefront retailers and other online retailers who are in compliance with current state law at a competitive disadvantage. This legislation gets at those few who are benefiting from a small loophole and costing Virginia millions in lost revenue.

Best wishes!

Emmett Hanger

Here is what I consider to be a very well thought out response from one of the Affiliate Marketers in Virginia:

Dear Senator Hanger,

I realize it is not a new tax but an attempt to collect sales and use tax via the retailer rather than the Virginia resident (which the Supreme Court has said can only be applied to companies with a physical presence in the state; I as an affiliate/publisher am not a physical presence for any of the companies that advertise with me). This bill will not close the current loophole for Internet retailers. As has been seen in other states already, the large online retailers will simply terminate their contracts with Virginia affiliates/publishers and continue to not collect and pay the Virginia Sales and Use tax. It is my belief that the impact statement that is being published with this bill is not taking into consideration the termination of those contracts and is erroneously including the income that will not be received from those large online retailers such as amazon.com who will pull out of the state rather than comply.

Below are just a sampling of the terminations that occurred in states with similar bills and the same is sure to happen in Virginia with the passage of this bill:

• Overstock Drops Affiliates in NC, RI, HI, and CA
• Amazon cuts Rhode Island, Hawaii Affiliates – Is California Next?
• Amazon Ends Affiliate Program For North Carolina
• Another Internet retailer cuts RI ties over tax

Ultimately, the bill hurts Virginia-based publishers (most of whom are small businesses without the big lobbies that typically weigh in on these issues) who *do* pay Virginia income tax and does not level the playing field for brick and mortar stores. This legislation will not “affect those few who are benefiting from a small loophole and costing Virginia millions in lost revenue” because once the Internet retailers terminate their Virginia affiliates, they still not be required to collect and pay sales and use tax. This law will hurt Virginia-based affiliates/publishers and no one else.

So the responsibility falls to us to help educated the lawmakers in our state.  Please reach out to your local senator and let them know that this bill just won’t generate revenues for the state, and will ultimately hurt thousands of small businesses in Virginia.