In mid-May, the Minnesota legislature passed a tax reform bill that included an amendment to require remote retailers with online affiliates in the state doing $10,000 or more in gross sales annually to collect and remit sales tax. One month later, Amazon.com and other remote, online retailers are terminating their affiliate programs in Minnesota to avoid triggering nexus, as reported by the Minneapolis Star Tribune.
The Star Tribune reported that Amazon sent an e-mail to its online affiliates in Minnesota on Tuesday, June 18, saying it will close all seller accounts in the state to avoid the tax. “This is a direct result of the unconstitutional Minnesota state tax collection legislation passed by the state legislature and signed by Gov. Dayton,” the letter from Amazon said. A least 100 merchants will drop their affiliates in response to Minnesota law, the article noted.
However, the state expected Amazon.com and other remote online retailers to end their affiliate programs, Myron Frans, the state revenue commissioner told the Tribune. Frans said that the change in the state law will still generate about $5 million in new sales taxes. “If they’re really utilizing someone in the state of Minnesota to sell on their behalf, then that really should qualify as nexus, and therefore they should collect sales tax like everyone else,” Frans said. “We’re trying to level the playing field.”
Amazon.com and Overstock.com challenged New York State’s affiliate nexus law, which was signed into law in 2008, and lost both the initial ruling and their two appeals. In late March of this year, the New York State Court of Appeals ruled 4-1 in favor of the state’s sales tax fairness law, dismissing arguments made by Amazon.com and Overstock.com that the law was unconstitutional. The ruling came more than two years after a New York State appellate court dismissed claims by Amazon.com and Overstock.com that the state’s sales tax fairness law was unconstitutional.