North Carolina now wants sales tax revenue from online retailers, like Amazon, even after it and others stopped using affiliates there. A new law forced online retailers to collect sales taxes if they have online-marketing affiliates in the state. But now lawmakers are arguing that cutting off affiliate relationships before the law became effective doesn’t change the companies’ tax status, since they’ve already established a physical presence in North Carolina. ‘Physical presence’ is the operative phrase.
Online retailers like Amazon and Overstock, which are based in Washington and Utah respectively, have been ending ties with affiliates, who post links to certain products in exchange for commissions on sales, in other states such as Rhode Island, Hawaii, New York because state governments are scouring ways to find new revenue streams. California nearly enacted a similar law, prompting Overstock to threaten to end affiliate relationships there, until Gov. Arnold Schwarnegger promised to veto it if it every got to him. Overstock did dump affiliates in New York, though Amazon decided to continue its relationships there.
But despite withdrawing from North Carolina before the law was enacted, state lawmakers say companies must pay their bills and they will sue to make it happen. “The Department of Revenue is going after them, and I’m for it,” state Sen. David Hoyle told the Citizen-Times. Hoyle said the department has notified several companies, including Amazon, that they owe money. They face lawsuits if they refuse to pay, he said.
I’m sure if this is successful, others, especially New York, will try to recoup past sales tax that consumers themselves were supposed to remit but didn’t. But it’s easier politically and financially to go after the companies rather than individual consumers.