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Letter on Affiliates Tax - Feb. 2012

February 22, 2012 J

February 21, 2012

Dear Gov Fallin,

On behalf of Americans for Prosperity’s more than 23,000 activists in Oklahoma, I strongly urge you to oppose Senate Bill 1561 and House Bill 2586. These bills expand collection of sales and use taxes to corporations located outside of the physical borders of Oklahoma.

I urge you to oppose S.B. 1561 & H.B. 2586 when they come up for a vote.

Since the 1992 Supreme Court decision in Quill Corporation v. North Dakota, it has been recognized that states may only tax businesses with sufficient connection to a state (also known as “nexus”), typically defined by some physical presence. To meet this standard in Oklahoma, there must be a retail location, a warehouse, a distribution center or some other physical place of business employing individuals in the state.

These bills seek to redefine the ‘physical presence test’ in Oklahoma to capture out-of-state businesses that utilize an in-state affiliate. Many corporations use in-state affiliates to drive web traffic. These affiliates link potential customers directly to out-of-state websites with the out-of-state vendor handling all customer-facing activities such as purchasing, shipping and returns. In return, the in-state affiliate is paid a small commission for the referral.

Americans for Prosperity opposes these bills and similar efforts to redefine nexus laws to treat out-of-state retailers as in-state businesses. These bills violate the spirit of the Supreme Court’s Quill decision and are the subject of ongoing litigation in other states.

More importantly, these bills are simply another attempt by the state to collect more of Oklahomans’ hard-earned dollars. According to the Tax Foundation, Oklahoma ranks 39th in “sales tax climate” based on its rates and complexity. Considering this, expanding sales taxes is exactly the wrong approach for Oklahoma to pursue.

I urge you to oppose S.B. 1561 & H.B. 2586 when they come up for a vote.

Sincerely,

Stuart A. Jolly
State Director
Americans for Prosperity- Oklahoma
Lieutenant Colonel, US Army (Ret)

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