| Planning Strategically for Internet Sales Activity |
As a response to budget deficits, some states are passing legislation which would require an out-of-state seller to collect sales tax on goods sold to customers in that state merely because the seller utilizes an affiliate's website in the state to direct potential customers to the seller. Frequently referred to as an "Amazon.com law," the states claim that the in-state affiliates' websites containing advertising for the seller's product give the necessary presence or nexus with the state to require the seller to collect sales tax on its sales to the in-state customer. 
A client inquired about the Internet affiliate business model for its Internet product sales. We consulted with the client to evaluate the situation, and identified the states that have adopted or are moving toward economic nexus legislation. We warned the client that this sales strategy could create tax liabilities in many states. Additionally, the states' laws are constantly changing so it could be a risky and expensive venture in terms of compliance costs. Result #1: We described an alternative sales model that would effectively avoid much of the tax compliance hassle. The client chose to use our suggested sales model instead. By asking for advice about their future business plans, we were able to suggest a way to structure the activities to minimize the tax and compliance costs which will add to their bottom line. Contact Darcy Kooiker at 425.289.7609 or dkooiker@bpcpa.com for more information. |
