New York, North Carolina, and Rhode Island are the only states to have enacted affiliate nexus taxes, but according to The Bureau of National Affairs, Inc’s recent 2010 Survey of State Tax Departments, 14 additional states indicated that “that an Amazon-type arrangement with an in-state affiliate would trigger nexus if the affiliate was paid less than $10,000 during the year,” according to BNA’s Steve Roll.

The states? Arizona, Florida, Iowa, Maryland, Missouri, Nevada, New Mexico, North Dakota, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and the District of Columbia.

These 14 states (technically 13 states and DC) may be taking what Roll refers to as the “subtle approach” of taxation. Roll says that “The fact that 14 additional states said that they would find nexus for in-state affiliates, suggests that these jurisdictions may believe that the ‘Amazon-law’ approach fits within their sales tax nexus policy---without the need for enacting legislation.”

Roll continues, “The survey results reflect an ongoing trend: cash-strapped states are aggressively pursuing new theories for establishing nexus and enforcing tax obligations against online vendors or their customers. So far there have been no adverse court rulings to deter them.”
 

This year, Philadelphia’s government saw the city’s hobbyists as their own moneymaking venture when it chose to slap bloggers with a $300 “Business Privilege Tax.” To add insult to injury, on top of the $300 business license any ad revenue now invites a 6.45% tax.

 Often the cost of this license vastly exceeds blog revenue. Philadelphia’s City Paper highlighted the case of Marilyn Bess, who has made $50 over the past few years on her blog. When she tried to explain this to the city, she was told to hire an accountant.

 Bloggers are rightfully arguing that the license discourages free speech and dissent as some opt out of the fee through foregoing blogging altogether. In addition to inhibiting the creative expression of Philadelphians, the city government is stealing even more money from its constituents in a time when money is scarce.

 According to NBC’s Philadelphia website, 85% of people are “furious” over the tax. As city governments continually view their constituents as resources to be tapped for funds, which city will be next in enacting this legislature?
 

Governor Schwarzenegger’s May budget seeks to remedy California’s $19.1 billion overspending problem with necessary cuts and no tax increases. The Governor believes that more taxes would “punish the people” and are “the worst thing you could do.”

On August 3^rd, Democrats in California’s legislature unveiled a budget plan that includes a number of tax increases.

Among the budget’s provisions is the disconcerting proposal of implementing an affiliate nexus tax, Assembly Bill 2078, on internet purchases. This would require out-of-state retailers to collect tax on California consumers and remit it to the state. This is not the first time in California that this business-killing tax has been proposed; it has been rejected in the past and was already vetoed by Governor Schwarzenegger in 2009.

The plan is called the “Jobs Budget,” a misnomer in that the enactment of the affiliate nexus tax would put California web-based businesses and advertisers out of work, as California legislators could learn from other states that have passed such legislation.  Though the online tax proposal claims to raise $100 million on paper, in truth it won’t raise a dime for the state.  The bill forces out-of-state online retailers to sever contracts with in-state advertisers to avoid collecting what is an unconstitutional tax.  This means no money for the state, and significanly less revenue for California businesses.

Last Friday, World Health Organization (WHO) delegates failed to reach any conclusive decisions in regards to a series of global internet taxes.

Illinois Gov. Pat Quinn is quickly backpedaling on a plan to tax downloads of music, movies, ringtones, and books. The proposed tax hike was originally released by the Quinn administration’s Office of Management and Budget (OMB) last week, contained in a long list of potential revenue raises for the state. 

Earlier this year, Colorado became the first state to employ a new and controversial way to force consumers to pay tax on online purchases. House Bill 1193 required out-of-state retailers to provide the Department of Revenue with detailed customer information on purchases made, so that the state can pursue residents who fail to pay “use tax.” Use tax is sales tax on out-of-state purchases that requires the consumer, not the retailer, to collect and pay up.

Governor Pat Quinn of Illinois is well known for his massive 33% income tax increase proposal, but quietly behind the scenes his Office of Management and Budget (OMB) has a whole host of tax hikes in the queue, including on digital goods.

Last night, legislators emerged from a meeting with the Governor and presented a list of tax increases he has proposed, including on downloaded goods.  While a bill has yet to be filed, Illinois's OMB has concluded that the state could raise as much as $10 million a year by taxing downloaded music, movies, books, and ringtones.

Stay tuned for futher updates, or follow us on Twitter and Facebook.

A new poll was released this weekend showing that Americans are fundamentally opposed to taxing Internet commerce.  Rasmussen Reports has found that a mere 20% of individuals support taxing e-commerce, such as books, movies, music, and ringtones purchased online, while 61% oppose it.

The poll comes as numerous states continue pushing for taxes on goods purhcased online.  Additionally, the Federal Communication Commission's National Broadband Plan released last month contains a section discussing the future tax treatment of digital goods and services:

Recognizing that state and local governments pursue varying approaches to raising tax revenues, a national framework for digital goods and services taxation would reduce uncertainty and remove one barrier to online entrepreneurship and investment. (pg. 58)

While this goal is fairly ambiguous, we hope the effort would work in the same way as the Internet Tax Freedom Act, which prevented states from further taxing Internet access.  As noted by the poll above, a nationwide effort to ensure e-commerce is taxed in all states would be completely unwelcome.

Last week, Connecticut joined a growing chorus of states considering a tax on e-commerce to help shore up budgets.  The state's Joint Finance, Revenue and Bonding Committee held a hearing on Thursday where legislators hinted at eventual support for advancing the bill (HB 5481), which would require e-retailers to collect taxes on residents if they advertise through a third party based in the state.

Today, the Federal Communications Commission (FCC) released its National Broadband Plan (PDF), an outline for the federal government to become significantly more involved in universal broadband access. The plan, which the FCC estimates will cost $350 billion, claims it pays for itself (a point already called into question), but the plan itself calls for raising taxes on the Internet, as well as enacting some that have yet to exist.

Last year, when Gov. Arnold Schwarzenegger vetoed a proposal (AB 178) to extend the sales tax to all online sales, the California legislature vowed a rematch.  That time has now come.

Currently in Special Session, lawmakers have taken the language from last year's measure and inserted it into a new bill (ABX8 8), pushing a tax hike under the guise that they are simply clarifying current tax law.  The affiliate nexus tax (or "Amazon" tax) has been tossed back and forth between legislative chambers, but now is scheduled for final passage in the State Assembly.

While vetoing the bill last year, Gov. Schwarzenegger rightly noted that it will cause much more harm to California businesses than it will do to raise revenue. Since the bill assumes out-of-state retailers who advertise with in-state websites are obligated to collect tax, those out-of-state retailers can simply sever their relationships with California companies.  This means no tax collected for the state, a huge profit loss for California based advertisers, and another subsequent decline in tax revenue collected from these advertisers' profits.

This appears to be of less concern to money-hungry lawmakers in Sacramento than to maintaining current spending levels. Proponents claim the bill will raise $150 million, knowing full well for reasons above that the measure will actually raise next to nothing.  The only possible justification then is to fake tax revenue numbers to maintain current spending baselines, almost guaranteeing at least a $150 million "budget shortfall" next year - all while hurting California businesses and consumers.  This is objectively horrible and deceptive public policymaking.

In recent days, the Governor has stated his reluctance to sign off on the same bill he vetoed for good reason last year. Should this pass the Assembly, we hope he carries this veto out.

CLICK HERE to write your state lawmakers in opposition to etaxes.

A Colorado measure aimed at requiring consumers to pay tax on all online purchases took an interesting and disturbing twist on Wednesday. As we previously reported, the Colorado House passed an unconstitutional bill (HB 1193) to require out-of-state Internet retailers to collect tax on Coloradoans, known as the affiliate nexus or “Amazon” tax. Yesterday the Senate also approved the measure, but not without making some significant changes.

Yesterday, the Colorado House of Representatives signed off on a package of tax hikes that included applying the state’s sales tax to all internet transactions and software purchases. It was a brisk start to the legislative year, where a single committee hearing was held on the tax measures only a few days prior.

Here we go again!  Colorado has officially became the first state this year push a bill to collect taxes on all internet purchases.  Yesterday, the House Finance Committee considered "affiliate nexus tax" legislation in a hearing amongst a number of other tax proposals.  The measure would require out-of-state online retailers with no physical presence in the state to collect taxes on Colorado residents.

While the bill is a tax increase on consumers and a significant burden on online businesses (and interstate commerce), it also will likely fail to raise revenue.  Last year, when the bill passed in Rhode Island, the tax was estimated to raise no additional tax revenue and this has been confirmed by the Department of Revenue.  In fact, there was even a bill introduced in Rhode Island this year (House Bill 7071) that would repeal the tax.

Unlike other nexus tax bills, however, Colorado's House Bill 1193 goes one disturbing step further to allow the Department of Revenue to issue subpoenas to any out-of-state business that would require them to provide personal information about their Colorado customers.  Who doesn't love sharing their personal information including possibly credit card numbers and purchase details with the government?  Presumably, it would allow the state to come after residents to collect "use tax" on the products.  Even worse, if a business doesn't provide the information and chooses to protect the proprietary information of their customers, they can be held in contempt.  It also would apply regardless of the fact that the same internet tax bill is currently being challenged as unconstitutional in New York.

Similar bills have also been introduced in New Mexico, Virginia, and Mississippi this year.  No matter where you live, click here to write your state legislature now and oppose taxes on internet commerce.