Sales Tax, Amazon Laws, and Smugmug
saxon75
Registered Users Posts: 4 Beginner grinner
I read in the news this morning that California has, like a bunch of other states, just passed a so-called "Amazon law." The gist is that any out-of-state company who pays commissions to in-state affiliates for sales is now required to collect use tax on all sales into the state. This all hinges on the idea that by paying affiliate sites a commission, these companies have agents within the state and are therefore maintaining a physical presence in the state, and therefore are on the hook to collect use tax.
Now, the new California law won't actually affect Smugmug, since Smugmug is already physically located in California. But what caught my attention was the list of other states with similar laws: North Carolina, Rhode Island, Colorado, New York, Illinois and possibly South Dakota, Arkansas, and Connecticut.
Where this intersects Smugmug has to do with something one of the support staff said when I brought up some concerns I had about the fact that Smugmug doesn't accept resale certificates. Specifically, she said "Your SmugMug sales fall under the 1099 status. Like a commissioned sales person. We pay you a percentage of the profits." (emphasis added.)
Since Smugmug doesn't accept resale certificates and it is explicitly their position (I was told this by two different people) that they are the final seller and not an intermediary vendor, and especially given their stated position that we photographers are commissioned salespeople, it looks like there is a very strong possibility that they may run afoul of these "Amazon laws" in the states I mentioned. I imagine that Smugmug is still small enough to be able to fly under the radar on this sort of matter, but you guys will probably want to look into this matter before it comes to the attention of the sales tax bureaus in New York or Illinois, otherwise you could be hit with some hefty fines.
Mind you, if you accepted resale certificates and changed your rhetoric from "we pay you a sales commission" to "we charge you a service fee" you'd almost certainly avoid this whole mess. ::shrug:: I'm not really interested in starting that argument up again, though. Just thought I'd give you a heads-up.
Now, the new California law won't actually affect Smugmug, since Smugmug is already physically located in California. But what caught my attention was the list of other states with similar laws: North Carolina, Rhode Island, Colorado, New York, Illinois and possibly South Dakota, Arkansas, and Connecticut.
Where this intersects Smugmug has to do with something one of the support staff said when I brought up some concerns I had about the fact that Smugmug doesn't accept resale certificates. Specifically, she said "Your SmugMug sales fall under the 1099 status. Like a commissioned sales person. We pay you a percentage of the profits." (emphasis added.)
Since Smugmug doesn't accept resale certificates and it is explicitly their position (I was told this by two different people) that they are the final seller and not an intermediary vendor, and especially given their stated position that we photographers are commissioned salespeople, it looks like there is a very strong possibility that they may run afoul of these "Amazon laws" in the states I mentioned. I imagine that Smugmug is still small enough to be able to fly under the radar on this sort of matter, but you guys will probably want to look into this matter before it comes to the attention of the sales tax bureaus in New York or Illinois, otherwise you could be hit with some hefty fines.
Mind you, if you accepted resale certificates and changed your rhetoric from "we pay you a sales commission" to "we charge you a service fee" you'd almost certainly avoid this whole mess. ::shrug:: I'm not really interested in starting that argument up again, though. Just thought I'd give you a heads-up.
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