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Hawaii Inches Forward

Well, turns out HB1405 Hawaii’s original stand alone version of the Internet Tax has passed the House. A joint committee had been working to resolve some differences between House and Senate on 1405 and the committee reached agreement. Bill was sent to House and it passed. It is now on to the Senate. The original version passed in Senate so I believe the new version will also pass. It is scheduled for vote tomorrow, May 7.

Here is an excerpt from the bill:

(2) (A) The sale of tangible personal property by a person soliciting business through an independent
contractor or other representative if the person enters into an agreement with a resident of this
state under which the resident, for a commission or other consideration, directly or indirectly
refers potential customers, whether by a link on an Internet website or otherwise, to the person,
and if the cumulative gross receipts from sales by the person to customers in the state who are
referred to the person by such a resident, is at least $10,000 in the twelve-month period ending
on the last day of the most recent calendar quarter before the calendar quarter in which the
sale is made.
(B) This presumption may be rebutted by proof that the resident with whom the person has an
agreement did not engage in any solicitation in the state on behalf of the person that would
satisfy the nexus requirement of the United States Constitution during twelve-month period in
question. Nothing in this section shall be construed to narrow the scope of the terms
“person,” “purchasing agent,” or “representative” as defined in section 237-1.”

Link to HB1405

Sb1678, has also passed in the House and is due for vote in the Senate tomorrow, May 7. So Hawaii has taken several steps towards Internet Tax. I guess we will see if merchants who threatened to remove affiliates upon passage of an Internet tax will follow through. I think it is time to take proactive steps and inform merchants that there is opportunity to rebut the presumption of nexus.

{ 3 comments… add one }

  • Pete May 7, 2009, 9:01 pm

    I really don’t think it’s going to be as bad as all that. I mean the reality for a storeowner selling their products is that they want sales. Unless there are an equal or greater number of sales to be had in other states without an affiliate tax law on the books, I doubt a company will drop its affiliates.

    You may see Amazon balk for a while about this, but they’ll get no rhythm from the USSC. Clearly, many other states are moving to this. Couple that with the SSTP and internet taxation is going to happen.

    The affiliate isn’t on the hook for the sales tax collection and reporting the vendor who ultimately sold the goods is, so what’s the big concern for affiliates?

  • Melanie May 16, 2009, 1:51 pm

    The fact is, merchants will drop affiliates. It happened in NY last year. Thousands of affiliates were terminated from hundreds of programs. The result was thousands of NY affiliates had to scramble to find replacement merchants and sometimes, quality was hard to find. NY affiliates lost thousands of dollars in income that in many cases has yet to be replaced.

    Amazon has indicated that they will be forced to drop affiliates in some states if the legislation passes. The reason for many merchants is that states all have different taxable products, different rates and in some cases multiple rates within the state. This means many filings and a lot of programing. Smaller merchants will be hard pressed to keep up.

  • Pete May 18, 2009, 10:33 pm

    Not to sound self-serving (ok, maybe a little self-serving), but programs like ours – http://www.accuratetax.com (AccurateTax TaxTools) are meant to take the taxing pain out of the equation for merchants and affiliates alike.

    A merchant can simply collect the taxes for a given state and remit online as needed. As I said before the issue isn’t or rather shouldn’t be that collection and reporting are too difficult. merchants will keep selling through affiliates, because a sale is a sale and that’s what they care about…give them an easy way to deal with taxes and they won’t care as long as sales continue.

    And think of it this way…if the playing field is level (e.g. local sellers and internet sellers alike are responsible for taxes), then it’s going to be affiliates that make the difference for an out-of-state retailer.

    just my 2 cents.

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