Small business owners from across the state gathered Monday for a roundtable discussion in Cary to discuss ways to fight the so-called “Amazon” tax from being inserted into next year’s budget bill.
The tax actually refers to a little-discussed proposal tucked away in the Senate budget proposal that would enact taxation of Internet sales in North Carolina made by companies that pay commission to “agents” in the state who refer Internet shoppers to the company’s products. The new tax has been dubbed the Amazon tax because Amazon.com is perhaps the most recognizable on-line retailer that would be affected.
Amazon is a leader in the “affiliate” or “associate” marketing strategy in which owners of Web sites can provide links to Amazon products. In exchange, the affiliates receive a commission based on any sales produced by customers who clicked through using the affiliate’s link.
MGECOM, inc., an affiliate management company located in Cary and founded in 2006, hosted the event. Affiliates who live as far away as Asheville voiced their concerns that they may lose their chosen means of income due to the potential new tax.
Especially troubling to those in attendance was the fact that Amazon has already issued an email to their North Carolina associates declaring they will terminate their affiliates program if North Carolina enacts the new tax scheme.
Matt Enders, CEO and founder of MGECOM, inc., prepared a list of relevant talking points to express the concerns of the affiliates that would be affected by the tax. First on the list was the fact that anticipated revenue from enacting the Amazon tax will fall far short of projections. In addition to Amazon, hundreds of other online retailers will most likely discontinue their affiliate programs in North Carolina should the new tax be approved. Following passage of such a tax in New York, an extensive list of merchants terminated their associate programs in the state, including notables like Fingerhut, Home Shopping Network, KB Toys and Overstock. Dismantling the affiliate program will force online sales in North Carolina down much lower than expected.
Further, because thousands of North Carolinians rely on various affiliates’ programs for their income, many people will be put out of work at a time when the state is already struggling with high unemployment. Affiliates range in size from single mothers trying to make ends meet to small business people who provide work to contractors to keep up with their growing online endeavors. Enders also indicated that MGECOM, inc. is looking to add employees in the coming months, providing very rare opportunities during desperate economic times. If the Amazon tax passes, those jobs will most likely not be created.
By stripping thousands of these affiliates of either their primary source of income or a source of discretionary income, other tax revenue streams will be adversely affected as well. Many affiliates will leave the state looking for more friendly environments taking their property, income and sales tax payments with them. Those that remain will be forced to cut down on their spending in their local economies.
Mr. Enders and other MGECOM, inc. employees had arranged for meetings with several legislators who are involved in the budget writing process. Several affiliates also planned on attending the meetings to provide testimony regarding how this proposed tax would adversely affect them and their families.
Time will tell if their lobbying efforts will successfully thwart the efforts of lawmakers to impose a tax that will force thousands of North Carolinians to either move to another state or start scrambling for work. Either way, the grassroots efforts of a local small business and entrepreneurs from across the state provides an example of regular citizens trying to fend off yet another job-killing tax increase proposed by North Carolina’s elected officials.