Monday, April 9, 2012
Travis Cavanaugh (J.D. 2012, Iowa), Note, Iowa Can do Better Than the Affiliate Tax: A Proposal for an Intermediary Tax, 97 Iowa L. Rev. 567 (2012):
New York was the first state to implement the affiliate tax, also commonly referred to as the “Amazon tax” due to its primary purpose of imposing sales-tax liability on Amazon.com. The tax requires many online retailers to collect sales tax on all sales of merchandise to residents of the taxing state if the retailer hires in-state residents to advertise its goods and such advertisements result in $10,000 or more in revenue for the retailer. Recently, other states have begun implementing the New York affiliate tax. However, in all of these states, except New York, Amazon has responded by cancelling its affiliate advertising program within the state in order to avoid the corresponding tax liability. This Note proposes a different tax, an intermediary tax, which like the affiliate tax imputes the requisite “physical presence” and “substantial nexus” to retailers with substantial contractual relationships with residents of the state. The contracts used to impute such a presence are not based on the advertising and other contracts used for the affiliate tax, but rather on the retailers’ contracts to provide in-state residents with a forum to sell their goods. This proposed tax is more advantageous than the affiliate tax because, among other reasons, it is more difficult for retailers, like Amazon, to avoid the tax.