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Originally Posted by rhadin
The question that the U.S. Supreme Court has not yet addressed and which is the basis of the laws passed by California, New York, and other states, is this: What is a sufficient nexus? The Supreme Court said having no physical nexus except shipping into a state is insufficient. But in California, Texas, and New York Amazon may have a sufficient nexus -- the affiliates or subsidiary businesses that are wholly owned by Amazon. The issue is not clear cut and Amazon does not have a guaranteed winning hand.
The affiliates are in essence sales agents. Call them whatever you want, but the reality is that is what they are. That Amazon prefers to call them something else doesn't make it so. Just like with insurance, the affiliate gets paid for a sale made through the affiliate's link. I personally think that is a sufficient nexus if the affiliate is within the state. But it remains to be seen what the courts will think.
Amazon also, in Texas, for example, has distribution warehouses. That is a physical presence. The fact that Amazon chooses to have a wholly owned subsidiary run the warehouse does not seem to me to be sufficient separation to avoid the tax issue. I think the way it could be avoided would be if the warehouses were independently owned by persons or companies that have no affiliation whatsoever with Amazon except for a limited term contract to provide distribution services.
As for incorporating in another state such as Delaware does not solve the problem if you are still running a warehouse in California. If incorporating in a low tax state were a panacea, there would be no companies incorporated in higher tax states.
As for how to track the sales tax for each jurisdiction, there are several software programs that do this. After all, Barnes & Noble, Sears, the Agency 6, and WalMart, for example, have to collect sales tax for online sales and do so, so clearly this is not a mountain that can't be readily conquered.
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Hmm. I'm not a sales agent. I do not take any money or make any "sales." All I do is post about products (usually books via review.) I sometimes recommend these products and sometimes I don't. I provide a link to Amazon as an associate so that people can view that product or go to the Amazon site. I don't work for Amazon; I merely mention products. If I so chose, I could link to Smashwords and also B&N and refer customers there.
Yes, Amazon has distribution warehouses in Texas. They also have an agreement with the state that it does not constitute a physical presence for tax purposes. Recently the state discussed changing that agreement. Amazon was fine with it--and intended to leave. Now, before everyone calls "foul" keep in mind that companies get tax incentives from states ALL THE TIME. Almost without exception large companies get tax exceptions BEFORE they agree to build a warehouse or manufacturing plant or whatever in a particular state. This is essentially what Amazon did when the put the warehouse in Texas and structured it such that they didn't run it. It was not done behind the scenes or in an alleyway. Anytime Texas decides to change the law/agreement, they can. And Amazon can choose to leave.
I assure you that as an Amazon Affiliate, I am not an employee of Amazon. I don't make enough to even get a check every month, so rest-assured those who do make a lot as a referral, do a lot of footwork on their own to find products, write about them or attract people to THEIR website--which then leads to Amazon.
California will actually take in less revenue because of this law. Those who were affiliates at least paid income tax. Without that income, they won't owe as much in taxes.