The advertising tax will be coming to Texas in September 2011 if new legislation passes.
The whole thing is a bit complicated, so I’ll try to boil it down. Texas wants to collect taxes when residents buy online, but many companies don’t have a physical presence (tax nexus) here.
So, this bill says that if a company has affiliates in the state then that counts as a physical presence.
Similar legislation in other states has resulted in Amazon.com and other companies simply kicking people out of their affiliates programs, so they won’t have the tax nexus.
The result would be a whole lot of people earning less money, and therefore less money into the Texas economy.
At the same time, the expected incremental tax collected has not materialized in other states, since the online retailers effectively maneuvered around the law by “firing” their affiliates.
This scenario was recently brought to light by the Tax Foundation, a nonpartisan, nonprofit organization, when they released a special report about the results of this sort of legislation in Rhode Island.
There will be a discussion on HB 1317 on Tuesday, February 22 at meetup for the Austin Affiliate Marketing Group. All Texas affiliate marketers in the area are encouraged to come out to get educated on the issue.
If you’re not familiar with the advertising tax, have a look at a brief history of the advertising tax.