Affiliates Prepping For Return Of Nexus Tax In California, Pennsylvania

Affiliate marketers are keeping an eye on both California and Pennsylvania, where affiliate nexus tax laws are due to return within the next month.

In Pennsylvania, a law is due to be reinstated on September 1, 2012, and California’s law is due for reinstatement on September 15, 2012. Both states had previously suspended their nexus tax laws in the hope that the federal government would pass its own legislation regarding how online retailers should handle tax collection. But that hasn’t happened.

In a blog post yesterday, the Performance Marketing Association said it’s working with officials in both states.

About Pennsylvania, the PMA writes

The PMA and our attorneys have been working closely with the state of Pennsylvania, to obtain further clarification of their broad and ambiguous statute. There are key components missing from their originally published statute; namely they do not explicitly describe what kinds of advertising constitute nexus, nor do they provide the typical sales volume threshold as seen in other states.

We have been in daily touch with the Department of Revenue and they have promised clarifications imminently. We continue to press for further extension, but we don’t believe it will be granted.

We understand that most affiliate agreements have an advanced notification requirement. We ask advertisers considering termination to please wait until the last possible moment, as we continue negotiations with the state.

And about California, the PMA writes

The PMA has been working closely with the Board of Equalization, the agency that oversees sales and use tax collection. The BOE has developed a work-around process that will allow affiliate relationships to remain in place, under certain circumstances. Modeled after similar regulations developed in New York, advertisers can still work with California publishers and not have nexus established, if their publishers agree to avoid certain marketing activities that are deemed ‘solicitation’ or directly targeting California consumers. This means publishers are not allowed to send emails to Californians, distribute fliers, or verbally inform people to visit advertisers’ sites.

California’s Board of Equalization has published its regulation online, but the PMA says that specific instructions on compliance haven’t been revealed yet. The regulation goes into effect on August 26th.

Nexus tax laws have been used by states to require that online retailers collect sales tax in states where the retailer has a presence — and the law has been interpreted to include affiliates as establishing a presence in a state. Amazon.com is the most common target of these laws; in some states, Amazon has responded to the state pressure by shutting down its affiliate program. In other cases, the company has negotiated tax collection agreements with states that allow its affiliates to continue operating.