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Affiliate Nexus Tax Law clarification

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Some analysts and journalists have used the term ‘affiliate nexus tax’ to describe a different kind of scheme that does not have an impact on the performance marketing industry. The term ‘affiliate’ has a legal meaning that often defines two companies with shared ownership or a contractual relationship to sell or be an agent of another company. It does NOT define an affiliate marketing company. In this alternative scheme, a company would have ‘nexus’ (a physical presence that requires collection of sales tax) if they have an affiliated corporation in the state, like a sister company or subsidiary or agent. This type of scheme does not impact affiliate marketing companies. We offer this clarification because Hawaii recently passed what reporters have called an ‘affiliate nexus tax’ law, but which in fact describes this other scheme and does not impact affiliate marketers in Hawaii.

The ‘affiliate nexus tax’ laws that have devastated affiliate marketers state that companies would have nexus, and the obligation to collect sales tax, if they have agreements with affiliate marketers in the state. The overwhelming response to those laws has been that about 1,000 online advertisers have terminated their advertising agreements with affiliate marketers in the 9 states where this kind of law has passed, to avoid having to collect sales tax. This has devastated the income of 76,000 affiliate marketers.

The 9 states that have passed this kind of ‘affiliate nexus tax’ law are:

  • Arkansas
  • California (the law is currently suspended but will go back into effect September 15, 2012)
  • Connecticut
  • Georgia
  • Illinois (the PMA won its lawsuit against the state, but Illinois has refused to suspend enforcement of the law during the appeals process)
  • North Carolina
  • Pennsylvania (the law is currently suspended but will got back into effect September 1, 2012)
  • Rhode Island

Please note: Updates provided in this post do not constitute legal advice. If you are a Publisher living or running your business in in the above states where these laws have passed, you should consult legal advice on how to proceed. If you are an Advertiser doing business with publishers in in states where these laws have passed, you should consult legal advice on how to proceed.

The post Affiliate Nexus Tax Law clarification appeared first on PMA.


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