Amazon and other e-commerce firms are cutting ties with all Minnesotans who earn money by posting links that send traffic to online merchants after lawmakers passed a tweak to state sales tax law.
Minnesota E-Fairness legislation, signed by Gov. Mark Dayton on May 23 and going into effect July 1, classifies independent bloggers and online reviewers as a physical presence of a business in the state. This means online companies who pay these people to generate new sales must collect tax not just on those sales, but on all sales in the state.
The tax on online sales is already due, but the onus has been on consumers, who often never pay the tax. The new law puts the onus on Amazon, as long as they have a single blogger posting links to its products from Minnesota.
The state has estimated the new law will generate $5 million in new revenue, but Amazon is having none of it.
The company sent an email to associates in Minnesota, saying it will close all 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 Governor Dayton,” the letter said. “We will no longer pay any advertising fees for customers referred to an Amazon Site after June 30 nor will we accept new applications for the Associates Program from Minnesota residents.”
The state Department of Revenue said it is working on this issue today, but was not immediately ready to comment.
Aaron Hall, an attorney in Minneapolis who has clients who will be affected and has written about the new law, said even he will lose a couple hundred dollars a month as Amazon pulls the plug on the Minnesota program.
“A lot of bloggers have been hit,” Hall said.
Amazon, which was not immediately available for further comment, is not the only company cutting off ties with Minnesota bloggers and reviewers. Commission Junction, a California-based firm that handles online marketing and advertising, has also pulled out of the state, Hall said. Commission Junction was not immediately ready to comment.
The people affected are part of a grass-roots, independent e-commerce sales force, creating accounts with these companies and posting special links to blog posts, reviews and display ads that credit them for sales. Sometimes they earn a commission, up to 6 percent, Hall said. Some people make tens of thousands of dollars a year.
Amazon has already pulled out of states like California, North Carolina, Colorado, Connecticut, Arkansas, Illinois and Rhode Island for similar reasons.
The online giant called Minnesota’s E-Fairness legislation “unconstitutional” in its lette, and called for federal lawmakers to pass the Marketplace Fairness Act to resolve the confusion of online sales tax policy from state to state.
“Congressional legislation is the only way to create a simplified, constitutional framework to resolve interstate sales tax issues and it would allow us to re-open our Associates program to Minnesota residents,” Amazon said.