Utah affiliate marketers and bloggers were happy to see the state of Utah start to collect sales tax from Amazon purchases. This is not because we favor more taxes, rather because no matter if Utah passes an online sales tax or not, Amazon won’t terminate our affiliate agreement. Without that protection it was certain that they would terminate our agreement so we could no longer earn an income from promoting them. That would hurt because for many bloggers, as Amazon is a significant source of income.
Unfortunately, Amazon is just one company and there are many other retailers who will terminate us should Utah pass an online sales tax bill. Besides such a bill is illegal – without a physical presence in the state, it’s not legal to collect sales tax.
This week SB 110 passed through the Senate Committee (unanimously), their main claim was that not having online sales tax hurts local brick-and-mortar businesses. They wanted to help save them. Last year I listened to a speaker detail all the retail stores that have closed and wrongfully linked those closures to an unfair advantage online businesses had over local businesses. That is not true.
In the article I linked to above on KSL, it states: “the bill would require companies with at least $100,000 in online sales in the state to charge sales tax on purchases, even if they have no other tie to Utah….Because existing court rulings don’t require companies without a physical presence in a state to collect sales taxes, the bill is expected to be challenged.”
This statement is inaccurate: The bill also requires sales taxes to be paid by affiliate marketers, a provision seen as impacting bloggers who rely on earning a share of sales made through their online sites.
The state of Utah is advancing a bill that will probably cost them, since like other states have found, it will likely be challenged in court.
Truth: Should a nexus law pass, affiliate marketers and bloggers WILL NOT pay sales tax. We do not collect money from people. Rather, people click on our links and buy products and services we recommend. The sale takes place on the retailer’s website, not our blog. If there is a sale (usually within a set timeframe), we make a small percent of the amount spent. Normally it’s around 10% of the amount spent.
What Will Happen to Affiliates and Bloggers if the Utah Legislature Passes an Online Sales Tax Law?
Looking at many other examples from states that have passed a nexus law, we know what will happen: we will be terminated immediately. We will no longer be able to form partnerships with many online retailers. This will significantly impact our revenue (and income tax we pay). It will force some of us to go look for another job. Families will be hurt. Some bloggers may stop blogging or blog less since this is how many of us earn a living.
Here’s a direct quote that shows EXACTLY what happens to us should this law pass. This is from an online retailer that I work with that will stop working with us should we pass a nexus law.
People don’t purchase online to avoid paying online tax
Not getting sales tax revenue is not the reason stores are closing. It’s not keeping up with shopping trends and the convenience of online shopping that is hurting traditional retailers.
In many cases, online shoppers prefer to buy from stores near them. We often do research online or from our phone and then drive to the physical location to buy the item (and pay sales tax). According to Google people 76% of people use their mobile phones to do research and then visit the retailer within one day.
Traditional retailers often fail to keep up with digital trends
Digital content helps drive more people into local brick-and-mortar stores. Those who support a Utah sales tax bill claim that taxing online is necessary to help “level the playing field” and prevent brick-and-mortar stores from going out of business.
The American Economic Journal found in 2014 that online shoppers prefer to purchase from sellers within their state, even when sales tax was taken into effect.
In fact, people’s buying habits have changed dramatically over the last several years and many businesses haven’t adjusted to those realities.
Here are some numbers which I’m sure have only increased since this research from Deloitte has been published.
According to recent Deloitte research, many retailers fail to leverage the potential of or meet the digital expectations of their customers. That gap, the ‘new digital divide,’ puts at risk much more than just online shopping revenue. Clearly, this gap is different in nature from the standard notion of ‘digital divide’ that describes socio-economic differences based on access to information technologies. Nevertheless, for retailers, it poses a serious threat to overall revenue and a bold challenge to the way they respond to, and anticipate, customers’ shopping habits in-store. The fact is, traditional retailers are leaving too much money on the table and are allowing strictly online retailers to capture a growing share of revenue that could be theirs. Digital devices’ influence on in-store purchase behavior is growing much faster than anyone could have anticipated. Deloitte’s research shows that today, digital technologies influence 36 percent or $1.1 trillion of in-store retail sales, and this number will likely increase to 50 percent of in-store sales by the end of 2014.
Furthermore, 50% of mobile shoppers indicated that additional knowledge—including reviews, advice from friends and product information—makes them more likely to make an in-store buy. Affiliate marketers and bloggers are helping to drive in-stores sales, NOT taking away from them.
Sales tax isn’t killing brick-and-mortar stores, their lack of understanding of the new digital marketplace is. Here’s a screenshot of data from Retailnext.net
Thank you Natalie Martins for finding some of the sources I cited in this post and for your work on this issue. If you’re considering buying your child a new bike, check out her blog, Two Wheeling Tots. She has reviews and valuable information. Should you purchase anything after clicking one of her links, you help support her family.
Let Utah senators and reps know how an online sales tax law would hurt your business
Call your senators & representatives. Find yours here: https://le.utah.gov/GIS/findDistrict.jsp Let them know that while their intentions are good, this law will not save traditional retailers or stop retail stores from closing. It will not collect the revenue they hope to collect. Instead it will hurt many Utah families.
I urge them not to pass it. We fought it last year and thanks to one honest politician and countless hours, we won. Utah Governor Gary Herbert has vowed to pass this law. While hundreds of bloggers will be affected, if this passes, many won’t know what hit them until it’s too late. We have families to support, children to raise and businesses to mind. We don’t have lobbyists or deep pockets to fight this. It’s very difficult to get involved in the political process. With Utah’s part time legislature and bills coming and changing frequently, it’s challenging to educate and try and stop this bill. We need all the help we can get.
We need to stop this bill. I pray that we can.