If you have a small business in North Carolina–and especially if you make money via internet marketing or info products–you need to be aware of two items in the budget bill the legislature is trying to finalize for the governor’s signature.

I’m not a lawyer, nor do I play one on TV.  So this is based on careful reading and deciphering of legislative gobbledygook in the actual bill (who knew my former stint on Capitol Hill could be helpful someday?!)

The bill (S 202) has been passed by both the House and Senate–they’re just trying to get the two versions to agree via a conference committee before sending it on. But it’s supposed to go into effect on July 1 so everything will happen fairly quickly.
Here are two issues that could have a BIG impact on your business:

1. We’ll be required to collect and pay sales taxes on more items we sell, when the buyer is another NC resident. This includes:

• Electronically delivered/accessed products, including books (aka ebooks and programs), audio, and audiovisual (I suppose video)

• Events–whether held a single time or multiple times–as well as membership fees and dues

• Possibly continuity programs and teleseminars, due to proposed new tax on “transfer of a digital code”

They define digital code as one that gives a purchaser the right to electronic delivery or access of an item. (But they do say it excludes gift certificates and gift cards.)

• Service contracts as well as repair, maintenance, and installation services. I’m assuming this is more for computer repair, HVAC companies and the like

2. Affiliate income is in jeopardy. The legislature is also set to require any company that makes more than $10,000 a year from sales through NC-based affiliates to start collecting sales taxes on ALL sales in NC (whether they came through an affiliate link or not).

Amazon.com has already announced they’ll be terminating their Associates program if this happens rather than go through this hassle. Overstock.com did the same when a similar measure was passed in New York and it hurt many small businesses. (A legal challenge is winding its way through the courts and may take up to 2 years before it’s resolved).

While this is definitely bad news, my bigger concern–especially with the addition of digital products and events–is about the affiliate programs from various internet-savvy marketers or even places like Clickbank.

Obviously, a couple sales of a $500+ program or $3,000+ event would put them over the $10k limit in a heartbeat. So they too may terminate relationships with NC affiliates to avoid the hassle.

So I thought you should know there’s a big effort underway to contact our NC state reps and senators about this. Here are a couple of opportunities if you want to get involved:

• Contact YOUR state rep and senator. Emails and phone numbers are available at www.ncleg.net. (You can also look up to see who yours is, if necessary. I had to do it because they just appointed us a new one.)

• Follow the discussion on Twitter by setting up a search for #ncaffiliatetax (obviously, they’re more focused on the affiliate part of it).

Notes:

Some people are recommending that you contact as many members of the General Assembly as possible. But I can tell you from experience they most won’t care unless you live in their district.

So if you have the urge to do more, it would be smarter to focus on the conference committee members who will actually be deciding what stays and goes. They may be interested in what people outside their district have to say, and they’re listed here. (Click on the link at the top of the page for the House list in pdf.)

A Cary business is organizing a trip to the General Assembly on Tuesday. They meet to prepare on Monday. More info here . (The info at the top of the page with the other bill numbers is outdated–start from where the font changes.)

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