New Jersey had decided to become part of a long line of States that will try to pass a law that will tax affiliates. It seems that State Senators Paul A. Sarlo (R) and Raymond J. Lesniak (D) have been watching Jersey Shore to get some of their economic ideas. The have introduced Senate Bill 1305 that will institute a new tax on those who are making a living as affiliates in the Garden State.
The idea behind these affiliate taxes is to impose a tax on online stores in a State, if the retailer has any affiliates in that State. The idea is that an affiliate suddenly becomes a representative of the company and establishes a physical presence in that State. The claim by those making the laws is that it helps the small “brick and motor” companies in those states. However, as I’ve written before, Walmart is behind the Affiliate Taxes
The fact is that for the few states that have passed these laws, the same things happens: companies “fire” all their affiliates in those States, and retailers start to refuse to work with an internet marketing companies on a cost-per-performance out of fear they will have to pay more taxes. Despite overwhelming support from Constitutional scholars that any internet-tax is unconstitutional, politicians who want big donations from Political Action Committees supported by Wal-Mart, introduce these laws even though most are doomed to fail.
Affiliate Taxes do one thing: Drive businesses out of a state, and cause online retailers to stop doing business in that State. There is absolutely no proof whatsoever that in any State that has passed these laws, that any significant taxes have been collected. That’s because all the retailers just cancel any affiliate contracts in those states effective immediately, and the State has nothing to collect.
On the other hand, if NJ would heavily taxes tanning lotion and hair extensions, the State would probably make millions.