How Affiliate/Internet Marketing Creates Sales Tax Nexus

You may have heard of this hotly contested nexus creator. It’s also known as the Internet Sales Tax or the Amazon tax. Let’s say you have an Arizona company that sells perfume on the Internet. Your server is in Arizona, and you ship from Arizona, using the Post Office and UPS. So far, so good. You have Arizona nexus for all of your taxes.

But you want to grow your business even further, so you set up an affiliate marketing program to try and grow your business. An affiliate is someone who advertises for your business on their own website. They have links and banner ads that point to your website and your products. Every time someone goes through one of those links and buys something from your business, that affiliate gets a commission.

Depending on where your affiliates are located, you may have brought another state into your nexus mix without even knowing it. New York, North Carolina, Rhode Island and Illinois have all taken the position that by having one or more affiliate marketers in their state, you’ve created a tax relationship with that state. It doesn’t matter whether or not those affiliates are employees or not. The fact that they are providing a service that you are benefiting from is enough to create nexus.

Nexus is a shifting, slippery target. If you’re concerned that you may possibly have a nexus issue, we’ve got a number of products to help. Our Design Your Own Nexus Strategy product is a 140+ page eBook that talks about all aspects of Nexus, and provides handy checklists and other information to help you determine what may or may not apply to you. We’re also offering a Nexus Evaluation Program where you answer some questions and get a fully customized, detailed report on your specific nexus situation.