Fighting the Affiliate Tax in Mississippi 2011

As was the case last year, those of us involved with affiliate marketing in Mississippi must remain vigilant because the affiliate tax has been proposed again this year. Introduced by Representative Jessica Upshaw on January 4, 2011, House Bill 363 specifies that a “person soliciting remote sales through representatives in this state is subject to [the] use tax.” The bill, if enacted into law, would take effect July 1, 2011.

I have several problems with this bill that I elaborated on last year when I wrote about Senate Bill 2927 which ultimately died in committee. In short, though, this bill would define my work as an affiliate marketer as equivalent to owning a physical storefront. For example, if I am an affiliate or associate of an Internet retailer like Amazon and put an Amazon ad on my website then this bill equates my association with Amazon as meeting the “nexus,” or physical presence, requirement for state sales tax purposes. The result of my association is that Amazon would then be required to collect sales taxes for orders made by Mississippi residents. Let me state this again because the implications are staggering: my ad on my website (which could be likened to a billboard along a highway) means that an out-of-state entity (any retailer I’m associated with via an affiliate marketing relationship) has to collect sales taxes on every order coming from Mississippi.

As I see things, HB 363 is fraught with both legal and practical problems. For starters, the Supreme Court in 1992 (Quill Corp. v. North Dakota) declared that electronic associations do not meet the nexus (physical presence) requirement for states to collect sales tax from out-of-state business entities selling to residents of their state. From a personal point of view, this bill could put me ( out of business by drying up our primary sources of revenue. When other states have adopted legislation similar to HB 363, Amazon and many other online retailers have simply severed their affiliate relationships within those states. Put another way, these online retailers simply dropped their affiliates in those states so they did not meet the new requirement. The unintended result: (1) little or no new sales tax collections and (2) more unemployment as people like me (plus employees) who depend on affiliate marketing revenue had to relocate their businesses to other states or find a different line of work.

Bottom line: I oppose HB 363 because it runs contrary to the Supreme Court’s Quill decision and it would do serious financial harm to legal Internet businesses in the State of Mississippi who are agents or affiliates of online retailers located in other states and even nations. For more information, I encourage you to read last year’s “fighting the affiliate tax in Mississippi” article that provides more details on this issue. In it I also propose a possible solution to the lost sales tax dilemma that many States are facing across this nation due to increased Internet and catalog sales.

I urge Mississippi residents to take action and contact their state representative in Mississippi and explain how HB 363 would hurt them personally and, as a job-killer, why it is bad for Mississippi. While the Legislature is in session you can call the House of Representatives switchboard at (601) 359-3770 and leave a message for your representative (I suggest asking them to call you back so you can have a personal conversation). Other contact numbers are here plus you can research the Mississippi Legislature website if we have to fight this in the state Senate also. While emailing them is fine, I do not recommend only relying on that form of communication because many times it gets lost in the clutter of the session and some don’t check it much. Personal telephone calls and face-to-face meetings are likely to be the most effective. Please do so today.

Also, you can keep track of the status of HB 363. There are links to the bill’s full text, committee details, and more on this page also.

Other details to help fight the affiliate tax, sometimes called the advertising tax, are as follows:

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