S.F. 458, an attempt by the Minnesota senate to get online merchants such as Amazon.com to collect sales tax, is more far-reaching in its ambition than I originally indicated.
As I noted today, the bill expands the definition of a retailer's physical presence, or "nexus", to include affiliate marketers. One clarification: the presence of affiliates would require online-only merchants to collect a sales tax on all taxable purchases in the state, not just those transacted through affiliates. [There is an escape clause if a particular retailer can show that total gross receipts from affiliates in Minnesota was less than $10,000 in the previous 12 months].
This can be confusing. It was one of the questions I had for one of the bill's co-sponsors, who I was unable to reach. Even one of the bill's backers thought the legislation applied only to entrepreneurs who actually conduct their business through Amazon or other online retailers, and not their advertisers.
Minnesota's bill is modeled after similar legislation adopted in Illinois, New York and other states. Amazon and other online retailers have responded by "firing" all affiliates in certain states. No affiliates = no nexus = no obligation to collect sales taxes, and thus no impact on consumers.
In New York, however, Amazon has kept its affiliates but sued. That case is still being litigated. Meanwhile, the New York Times reported Monday that the state has collected $70 million from online retailers, including Amazon, in fiscal 2009-2010.
