First, an explanation of what Nexus laws are for those who may not already know: However there's another wrinkle to this: Source for the above info: http://www.salestaxinstitute.com/Sales_Tax_FAQs/What_is_nexus Okay, so I get why state's have a problem with losing tax revenues. That said, it can have a really negative impact on small businesses: Source for the above: http://smallbiztrends.com/2013/07/three-states-pass-affiliate-nexus-ta.html This is really bad news for me. But first, some background: I'm about a year into getting started with merchandizing my artwork. The nature of the business is that one has the potential to actually earn a lot more by making the kind of click-through referrals mentioned above. The good news, is that the merchandiser I work with let's me refer myself for orders that I place with them - something I do in order to check quality and to have sample products that I can market face-to-face. Various family members also make occasional purchases, and I've earned referral $$ through those sales as well. Today we received notice from our merchandiser that we'll no longer receive referral $$ on sales shipped to addresses within our own state if we live in one of the states that have adopted these nexus laws. Michigan, where I live, is such a state. They apparently don't want the hassle of having to figure out how to collect sales tax on referred sales for a bunch of different states with different rates. Ouch! I'm barely getting started with this venture, and I can already see the lost $$$ flying away from me. The impact on someone whose businesses is largely built on affiliate referrals must be staggering. No surprise that people either fold up shop or move operations across state lines. So state's not only lose the sales taxes they're trying to collect, but also the $$$ that business operator would have put back into the local economy. Leave it to Michigan to do something like this and shoot themselves in the foot. Seems like every week there's some new headshaker coming out of Lansing. Wondering what people think about this situation. Do you side with the states, or with the small business operators?
the laws make sense other wise every single website could just register in whatever states don't charge any sales taxes on products, they are selling in those states that do charge tax, if you put someone out of business in a state where they charge sales tax, because hes brick and mortar and your internet based you get an automatic unfair tax advantage, which isn't a big deal now, but considering how much of our shopping will be done online and how drones will be delivering our products, its seems the most fair for everyone i think it might be better of they imposed a very high federal sales tax on business with 1 million or more in revenue and then allowed states to give deductions to business owners, seems like it would be simpler, but im not tax lawyer
Actually, it has been a big deal for a while; a locally headquartered brick and mortar bookstore here (Borders) closed up shop some time ago, and it seems in part the issue was that having no real online presence, they couldn't compete with Amazon. But I don't think that's really the result of an "unfair tax advantage"; I think it's a result of the way the world wide web has changed people's shopping habits. Meanwhile, people who have adapted to the new way of doing business by opening affiliate web sites are being put out of business by these nexus laws. So the state hasn't gained anything; it's going to lose tax revenues as a result of those businesses moving out of state or closing as well. Seems short-sighted. I don't know what the solution is. What I do know is it has created a very unfair situation for affiliate sellers that live in nexus states, as compared to their competitors who don't. I basically can't earn a penny now on sales shipped to my own state. Meanwhile, someone a few states over, whose state doesn't have a nexus law, faces no such penalty. So the solution, as for so many things, seems to be to move out of Michigan. Which is no solution at all for some people, myself included. Just not a viable option. It may cease to matter once more states adopt nexus laws. I suspect the end result will be that our merchandiser will eventually terminate affiliate programs altogether and adopt a different business model for driving visitors to their site. Between royalty caps, sites changing focus to brand and fan merchandising, and the ending of affiliate programs, it's a terrible time to be a print-on-demand designer.
I side with the states. Sorry but allowing internet companies to avoid collecting sales tax just pressures income tax rates.
And trying to collect sales tax from entities that don't have a physical presence in the state won't resolve that. It means they'll just cut off the in-state affiliates - exactly as my merchandiser has done. Many of those in-state affiliates are sole proprietors/small businesses running web sites. So the state hasn't gained a thing. If anything, it's cut off its nose to spite its face, and will face more pressures on income tax rates to make up for the loss of those small businesses.
I guess the tax question to answer is in the process of manufacturing and selling and buying and reselling, should there only be a single tax collected or should a tax be collected each time a sale is made? Sales taxes can contain money for city, county and state governments while an excise tax like the federal fuel tax has money in it for city, county, state and federal governments. Wholesalers typically don't collect a sales tax while it is the retailers who collect the sales tax. And...all of these buy-sell transactions, now with multiple vendors for a single product shipment, are being done on line. It's confusing for me just to type this so I can imagine how convoluted it is in live transactions! Regarding Amazon for example, a BBQ might be manufactured by Company A in Detroit and sold to Company B, a wholesaler in Baltimore, who will sell the BBQ to Company C (Amazon) in Arizona, who will then sell the BBQ to me in California. IMO it doesn't make any difference if all of these transactions were brick & mortar or online. The question is 'who pays the sales tax and to whom...or should there be a sales tax at each transaction...in the above example there would be 3 separate sales transactions on a single product sale? If only the retailer collects the sales tax, in the above example this would be Amazon, this means Company A and B collected no sales taxes for their city/state. But who gets the sales tax collected by Amazon...Phoenix and Arizona or Detroit and Michigan or Baltimore and Maryland and at what sales tax rate? Lastly, I think the reason we have a million places in our economy where we apply taxation, no matter if it's city, county, state or federal, is to hide from the public the total taxes we are actually paying. Look at your utility or phone bills and others and see all the taxes that are applied! The root problem in all of this is the city, county, state, and federal governments are huge spenders (especially federal government using $500+ billion deficit spending) and the more they spend the more taxes they demand and IMO their spending is already beyond what average Americans can afford...
On the other hand, my state won't allocate the money needed to fix the roads. They tried to get more from us through a proposal to up our sales tax (and Michigan's sales tax, while not the highest at 6%, isn't exactly on the low side, either), but voters weren't having it - not when they're giving away huge subsidies for things like moviemaking (which looks like it's going to get cut now.) I'm kinda sick of this argument that giving big tax cuts and subsidies away stimulates the economy by providing jobs, and thereby a revenue stream through income taxes and sales taxes. It doesn't work, and the potholes & ruts in the pavement that I have to dodge on the way to and from work are the evidence of that. We aren't getting enough back on that "investment". Maybe try investing in the state's crumbling infrastructure before you start trying to attract businesses with huge freebies. But this digresses from the topic of this thread, which is the nexus tax laws. The bottom line is this: Don't do stupid stuff that kills businesses that provide you with a real revenue stream and put money back into the economy without big giveaways, in an effort to chase revenues from sales taxes that you're never going to collect anyway. It's a bad law that ends up hurting the little guy without achieving anything positive for the state.
I disagree. If I go to State X and buy something then I pay sales tax in State X. Because I order it from State X does not mean I should not pay taxes and mail order has been collecting taxes for years and they have not gone under. The only other acceptable alternative for me would be a national internet sales tax that gets distributed to the state in proportion to their population.
You still don't get it. I'm not saying we shouldn't pay the sales tax. I do a lot of online shopping, so the state gets a nice little check from me every year in "use tax" - the replacement for the sales tax they would have collected if I'd made the purchase from a business domiciled here. The problem is that those taxes are collected from me by the seller. I'm not exactly keen on the idea that they get to escape from that obligation by not having a presence in the state, but that's where the law stands for now. To me, the cost of collecting the tax is part of the cost of doing business with the way things are currently structured. But part of doing business also means avoiding costs when you can. The law has given them a loophole for doing just that. So what do states do to make up for that lost revenue? They foolishly think they can get some of that sales tax back by declaring that affiliates give the business a "presence" in the state that makes them liable for collecting the sales tax. Trouble is, a lot of those affiliates have built their income stream on commissions for the referrals they provide, which net the referred business the sale. The affiliate that referred the purchaser often doesn't handle the sale, so they don't collect the tax. As affiliates, we don't make the goods. We don't hold them in stock as inventory. Nor do we deliver the goods. That's all up to the business making the sale once the referred person actually buys something. In other words, we are not the equivalent of the business having a brick and mortar store in the state. Many times we aren't even the storefront through which the purchase is made - we're referring the buy to that business' storefront. But now we're being treated a if we were the equivalent of the business' brick and mortar store, when we are not. Yet we are the ones getting the shaft, here. The business doesn't want the cost of collecting the sales tax, so because of the nexus law that treats affiliates' referrals as a "presence" in the state indistinguishable from the business, that business just stops taking referrals, or refuses to pay the percentage of the sale back to the affiliate due the referral commission. Which means...think about it. The state trying to collect that tax isn't ever going to receive it. Instead, the state is going to lose it's income tax revenue stream from the affiliate whose business they just killed.
If you are selling what is a service, it should not matter as those are at least not taxed in my state. Either way, I think you over estimate what a referral fee is worth in a transaction for normal internet sales. If I want blueberry & lima bean goatmilk soap, I don't care who gets a fee or not. I want my soap and I will find someone who sells it the cheapest. Sounds like what they are doing has less to do with sales tax collection and more to do with evading longarm statutes in case someone wants to sue them over the lead paint in their product or whatever.
Helping you find it the cheapest is one of the things that referrers sometimes do. I think you underestimate just how pervasive affiliation is in this regard. You probably don't even notice it taking place, which is why we're required to state somewhere on our web sites, facebook, pinterest, twitter, etc. accounts that they may contain affiliate links.
Hey...the cheap bastards in my County just voted down a 1/4% tax to fund infrastructure. Not even the most downtrodden homeless person will have a problem with a 1/4% tax but voters did. But you know what, as the infrastructure worsens, accidents happen, stuff fails, etc. the money will be spent no matter most people's distaste for taxes. And the cost to rebuild a bridge is probably 10 times more expensive that performing effective periodic maintenance and extending the life of the current bridges...but this doesn't matter. Regarding subsidies to create jobs and boost the economy...unless you can do the full accounting on this how do you know if it was beneficial or not? Business will be taxed forever because business has the gall to earn profits and make people rich and create good paying jobs. Too many are jealous of this so it's not really a matter of the tax policy or rates but more about showing old Joe-Blow that we don't like him making $20 billion from stock options. I always say how great the US would be if we had 1000 Bill Gates success stories! The jealous one's talk about Gate's $100 billion but never talk about the other 99% of wealth and opportunities that were created in parallel. These whiny people cannot understand that when some have great successes this translates to 1000's of other successes and so on into the future...
your situation sounds very complicated but if your main source of revenue is no longer viable because of advancements in technology, than you need to change your basic business model, after all your business is based in the expansion of the tech industry, you cant complain that new technology laws make your business obsolete because tech made you competitive in the first place, and put someone else out of business didn't it? My advice to you is take your money and invest elsewhere
So, you really don't have a problem with government using tax laws to put people out of business, then? Interesting.
Interesting viewpoint you have since sole-proprieterships pay personal income tax and corporations pay tax based on their profits. In both cases the businesses must be viable and earning profits in order to pay taxes...so exactly how does government tax laws put people out of business??
Do me a favor and actually read the other posts in this thread - including the opening post and this one - before you post again. If you had, you wouldn't be asking this question, which is unrelated to the thread topic.
Do me a favor and do not attempt to micromanage my responses. Amazon and others can do whatever they wish as long as they play by current laws and tax policy. Never has the government maliciously created tax laws to put people out of business??
Stay on topic, and there won't be a need. This matter is not in dispute. Has it? If you have a point, make it already.
