Nexus and Affiliate Marketing

Determining your nexus in a state and sales tax jurisdiction has big effects on your sales tax filing and what kind of software you need. The larger your sales tax filing, the more advanced software you’ll need to handle the amount of filing and transactions you do. But if you’re not sure where all your points of nexus fall, you might not know you need to be aware and taking care of filing until it’s too late. Affiliate marketing, or click-through sales, is an important piece of the nexus puzzle that you need to be aware of to ensure you’re filing correctly for sales tax. Affiliate marketing is an arrangement in which the owner of a website directing traffic to buy purchases gets a commission on those sales in return for posting a link to the sales site, or a payment for a click-through to the sales website.

Basically, it’s seen as a salesperson relationship that’s transacted through a website. In New York, a law was passed that said if someone sold $10,000 worth of tangible personal property for a company through a relationship where they get a cut of those sales, the company needs to collect sales tax in New York. It went through the Supreme Court of New York and was upheld, despite pushback from affiliate marketing giants like those in the fashion and beauty industry as well as Amazon. A number of other states followed.

The companies with affiliates chose, in many cases, to end the affiliate relationships rather than collect sales tax. With the Manufacturing Fairness Act, that could change. If your company has affiliate marketing programs and you currently avoid states where those relationships would force you to collect sales tax, laws requiring all e-commerce companies to collect sales tax could expand your options. With no difference from one state to another, you could revive affiliate marketing programs in the states you’ve had to write off.

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