The Facts

In1992 U.S. Supreme Court ruled that the Constitution prohibits states from asserting taxing authority outside their borders unless the retailer maintains a physical presence in the taxing state. (Quill v. North Dakota)

Politicians will claim that these bills add much-needed revenue to dwindling state coffers. But no additional revenue for the state will be realized.

Out-of-state retailers end their relationships with all businesses in the state that could cause nexus.
Web advertising businesses will lose their income. There will be loss of jobs.

There are more than 225,000 online affiliate businesses in the US that could be impacted. These businesses paid billions in state income tax for 2009.

Two states (Rhode Island and Colorado) that have enacted these laws have started repeal processes, noting that no additional revenue was collected and small businesses were harmed.

Amazon is suing the state of New York for enacting such laws, claiming they are unconstitutional.

The Performance Marketing Association is suing the state of Illinois, claiming the law is unconstitutional and also violates the federal Internet Tax Freedom Act, which Congress passed and President Clinton signed into law in 1998. The ITFA prohibits a state from imposing a discriminatory tax, or tax collection obligation, on electronic commerce, including any tax obligation imposed on a person or entity that would not also apply to transactions involving similar property, goods, services or information accomplished through other means.

If there is going to be a solution that is fair for all parties, it needs to come from the Federal Government – not tied to ideas of “Nexus”. One such bill that is supported by Modern Main Street was proposed on July 27, 2011 by Federal Senator Dick Durbin