Staying updated about what is new in affiliate marketing is hard, but there are some issues that need to be followed else you might lose your business entirely. The biggest of these right now is the Affiliate Nexus Tax legislation. Affiliates need to understand where their state stands on the tax issue and how things are progressing at a federal level. The issues are complex, but I want to break them down for you so that you have a basic understanding. Be sure to read through to the section with the MOST important information!

States are looking to get money anywhere that they can. Online shopping is increasing. States want to be able to collect taxes on purchases that their citizens make online. The U.S. Supreme Court has held that states cannot collect the taxes from retailers outside of the state unless those retailers maintain a physical presence in the state.

So at issue is what constitutes a physical presence in the state. Numerous states have passed or attempted to pass laws that mandate that an affiliate within the state who is working with the out of state merchant creates the appropriate “nexus” to qualify as a physical presence.

When these laws are passed, all that the merchant has to do to avoid having to collect the taxes is to drop the affiliates in that state from their program. And that is exactly what many of them do.

It is up to each and every one of us to stay apprised of the situation in our state. The Performance Marketing Association is, in my opinion, the best place for you to stay current with that information. In addition, we will pass as much along to you as we can.

Now the most important part of this post!

On February 14, 2013, the Marketplace Fairness Act (S. 336) was introduced into the United States Congress. This legislation would effectively negate the effects of the state nexus laws on affiliates because states would be given the right to decide whether they want to collect the taxes for online purchases regardless of affiliates within the state.

When you hear people talk about this legislation as a “federal solution,” it does NOT mean that there would be any additional federal tax on purchases. It would only give to the states their own rights to collect taxes. This is often misunderstood and immediately turns some people against the legislation.

The Marketplace Fairness Act has bipartisan support within Congress and is currently with the Senate Committee on Finance. Hopefully with the right support, this bill will become a law in 2013 and affiliates will no longer have to fear losing their businesses due to state nexus legislation.