Louisiana officials may have destroyed the state’s startup economy.
Ok — granted — *destroyed* is a bit strong. But Louisiana’s legislators definitely made their state unattractive to e-commerce entrepreneurs by passing Act 22 — a.k.a. the Amazon Tax Bill.
Check out these figures:
- In 2014, Amazon generated $79.48 billion in online sales.
- Experts expect the online retail space to grow by 20%, annually, over the next several years.
- Analysts predict it will be a $523-billion-dollar market — in the U.S. — by 2020.
Do you think Louisiana made the right choice?
What Is An Amazon Tax?
States can collect taxes from companies with a physical presence — or nexus — to a given state. Or, to put it a much simpler way: states can collect taxes from brick-and-mortar businesses, which raises their costs of doing businesses.
But here’s the rub: currently, in about 40% of states, online boutiques aren’t subject to the same brick-and-mortar charges. Internet retailers, in states without the online levies, don’t have to remit state taxes associated with online sales.
(The Amazon Tax issue is, of course, more complicated than the above explanation; but in this post we’re doing broad strokes. If you sell to customers in every state, get with an account or attorney to ensure compliance.)
Why Did Louisiana Opt For An Amazon Tax?
According to reporters, Louisiana legislators needed money to combat a “severe budget crisis.”
What States Have Online Sales Taxes?
At the time of this writing, 29 states have some sort of “Amazon tax.” They include:
Arizona, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington, West Virginia, and Wisconsin.
Amazon Won’t Work With Affiliates From SOME States
Each state’s “Amazon tax” is different. For example, Arkansas’ Amazon law has caused discord between the company and state. But, a few jurisdictions away, in North Carolina, the opposite happened; before NC legislators ratified an “Amazon tax,” Amazon didn’t allow NC residents to operate affiliate accounts, but after passing the statute, Amazon added affiliate opportunities for NC residents. Go figure.
Is Amazon The Only Company Affected By Online Sales Taxes?
No, Amazon isn’t the only platform that needs to worry about Amazon taxes. They can also affect affiliate marketers, affiliate networks, online stores, and e-commerce platforms.
Extra Credit: Quill v. North Dakota SCOTUS Ruling Established *Nexus* Standard
In 1992, the Supreme Court of the United States established the “nexus standard” in Quill v. North Dakota. A tax concern case, the question at the center of Quill was whether or not North Dakota could collect levies from a company without a physical presence in — or nexus to— the state. In the end, SCOTUS ruled that “a state can only tax businesses with a physical presence in the state.”
Ultimately, the decision created profit opportunities for e-commerce companies.
Marketplace Fairness Act
Industry associations and traditional retail outlets want lawmakers to pass a federal Marketplace Fairness Act, which would effectively dismantle Quill by replacing the “physical presence” tax standard with an “economic presence” one.
Pro / Con of the Marketplace Fairness Act
Proponents of a Marketplace Fairness Act say it would level the playing field between online and offline concerns.
Opponents argue that states should abolish brick-and-mortar-only taxes to level the playing field.
Get Answers To Your E-commerce Business Law Questions
Kelly Warner is an Internet law firm that works with startups, marketers, and developers. In fact, we’re one of the first firms to concentrate on legalities associated with online marketing and selling.
Founder Aaron Kelly is a preeminently AV-rated attorney, with a 10-out-of-10 on Avvo.com; named partner Daniel Warner has a photographic memory; partner Raees Mohamed has won his fair share of David v. Goliath cases; associate lawyer Hansen Tong has a rocket science background. They’re an online business legal dream team.
Get in touch; let’s chat about your situation and start crafting a solution.
Guy, S. (2016, April 5). Amazon ends its affiliate program in Louisiana over a sales tax law. Retrieved May 10, 2016, from https://www.internetretailer.com/2016/04/05/amazon-ends-affiliate-program-louisiana-over-sales-tax-law
Mire, M. (2016, March 28). Louisiana’s New. Retrieved May 10, 2016, from http://www.thepelicanpost.org/2016/03/28/louisianas-new-amazon-law-raises-constitutional-questions/