After a prolonged legal battle Amazon.com has announced to stop its affiliate program in the Louisiana state. World’s biggest online retailer has done this in other states too after similar battles. Company has done this after the state legislature passed a law to force online retailers to collect sales tax when a sale happens from a referral from a Louisiana based affiliate website.
Whenever a product is sold through affiliates they receive a percentage of the commission from Amazon. However, Louisiana law mandated to have physical presence in the state or have a legal nexus if it works in tandem with another affiliates based in Louisiana. This legal nexus requires collecting sales tax and remitting it to state.
There is no clarity that how much loss of revenue it is for affiliates based in Louisiana. Apart from Louisiana, residents Arkansas, Maine, Missouri, Rhode Island and Vermont can’t participate in the affiliate marketing.
Richard Carbo, communications director for Louisiana Gov. John Bel Edwards, says the state is “in a severe budget crisis” and the move will help state to raise necessary resources.
Amazon’s latest move is due to the result of a prolonged legal battle with states. In 1992, U.S. Supreme Court had ruled that those companies selling their products in a state without warehouse or physical presence was not required to collect the tax.
The only saving grace for the retailer is that two states—Colorado and Alabama— contradict this ruling. In 45 states, 24 states have already enacted some form of simplified tax regime for out –of-state online retailers. However, 13 states are in the process to create legislation.
The development in Louisiana is an important step in the direction of bringing a level playing field between brick-and-mortar and online retailers. Brick-and-mortar owners have long accused that online retailers have an unfair advantage because they are not required to pay taxes.