Affiliate Tax in Indiana Update

While I was away at Affiliate Summit, the State of Indiana was making a pretty big deal that could have an impact on my business. Governor Mitch Daniels announced last week that Amazon and Indiana have reached an agreement whereby Amazon will begin collecting sales tax for purchases in Indiana starting in 2014. Although the issue does not directly impact affiliate marketers in the state, I see it as fairly good news. Unfortunately, a new affiliate tax bill has also now been written.

Why was the Amazon agreement good for affiliates? First of all, much of the argument in favor of taxing all online purchases in Indiana was based on Amazon having fulfillment centers here. The issue of whether true out-of-state merchants whose only contact with Indiana are its affiliates became muddied into the discussion. The average voter/consumer did not understand where the physical location argument stopped and the alleged “nexus” argument began.  (See my full post Internet Tax Looming in Indiana?)

Second, while numbers are very speculative, as much as 1/3 of the total amount of uncollected state sales taxes as a result of online purchases in Indiana will now be collected by Amazon. That significantly lowers the total amount uncollected, which makes it less lucrative for the state to pass an affiliate tax that would result in affiliates losing their income. It’s even more likely that the state would lose money overall now if it were to pass an affiliate tax.

Third, we at least know that if an affiliate tax is passed, we will not be dropped as Amazon affiliates.

Why wasn’t the agreement good for affiliates? First, we no longer have Amazon fighting on our side since they will be collecting the taxes anyway. Second, the issue continues to get so much attention that a new House Bill (No. 1119) was introduced January 9, 2012, and referred to the Committee on Ways and Means that would require out of state merchants to collect sales tax if they have affiliates in the state. The language specifically includes as affiliates of retailer anyone who “whether by a link on an Internet web site, an in-person oral presentation, or otherwise, to the retail merchant.” Although it includes exclusions, similar ones in other states were not enough to keep merchants from dropping affiliates.

This isn’t the first time that Indiana state legislators have pushed for an internet tax, and in the past it has not gotten anywhere. We need to continue to contact our state legislators and support Senator Luke Kenley, who has been at the forefront of the push for federal legislation.

We’ll be discussing this issue further at the Affiliate Summit Indianapolis Meetup on January 31 at RAM in Fishers. Please RSVP if you are interested in attending.

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Thanks for reading! I am a lawyer, blogger, affiliate marketer, and consultant most known in the industry for my cashback site, You can reach me on Twitter @sunshinetricia.

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