State Legislation

– Minnesota passed an affiliate nexus tax, as expected. F 677 will go into effect June 30, 2013. If you are a Minnesota-based affiliate marketer, or if you are a retailer with Minnesota-based affiliate marketing partners, we strongly suggest you consult legal or tax advice.

– Missouri’s House and Senate quickly passed an affiliate nexus tax bill, HB 252/SB 23, without any typical procedure like a hearing, and it is expected to be signed by Governor Nixon. Once signed, it will go into effect August 28, 2013.

However, we do have an opportunity for a line item veto. If you are a Missouri-based affiliate marketer, we encourage you to email Governor Nixon. More information can be found in the PMA’s Missouri Google Group.

Maine has introduced affiliate nexus tax language to H.P.251, and our sources have informed us that Governor LePage supports this bill, although there doesn’t appear to be much support in the Senate. More information can be found in the PMA’s Maine Google Group.

West Virginia did NOT pass what we have come to call an ‘affiliate nexus tax’, although some analysts refer to a recently passed law with the same term. The law passed in West Virginia implicates subsidiaries or controlled groups of corporations, which are often legally referred to as ‘affiliates.’ The West Virginia law does not contain ‘click through nexus’ language, which would have impacted advertising and affiliate marketers.

PMA vs. Illinois

On Wednesday May 22, 2013, the Illinois Supreme Court heard the appeal launched by the State of Illinois, challenging the PMA’s 2012 victory. Because this case was based on the US Constitution, this appeal went right to the state’s highest court.

Seven justices oversaw this hearing, and the PMA and our industry was very well represented by George Isaacson and Matt Schaeffer, the attorneys who secured our initial victory.  The Illinois Attorney General’s office represented the defendant, the Illinois Depart of Revenue. As appellant, they had first remarks lasting 20 minutes, followed by George’s arguments, lasting 20 minutes, followed by the appellant’s closing comments for 10 minutes.

In 2012, Judge Cepero ruled that Illinois’ affiliate nexus tax was unconstitutional, it violated the Internet Tax Freedom Act, and that a click on an ad does not establish nexus for out-of-state retailers (thereby obligating them to collect Illinois sales tax).

It’s difficult to predict how the court will rule, but the justices asked informed and engaging questions, and we believe there’s keen interest in our case because it was added to the docket six months ahead of schedule. We don’t know when they’ll issue their opinion, but we are hoping for the Illinois courts to continue to accelerate this case, providing we continue to win!

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