Take heed Colorado online small businesses: know and understand affiliate nexus tax and its implications for your online LLC, C Corp or S Corp.

The Fine Print
This tax requires out-of-state retailers that advertise through a Colorado based Internet marketing “affiliate” to collect and remit Colorado sales tax. As an example, Colorado-based Invisible Shoes which makes huarache-style running sandals, had to implement the nexus tax plan passed in 2010 in Colorado. The company originally sold books and other items from Amazon to its customers via an online affiliate account. After the passage of the nexus tax, Amazon cancelled their account with Invisible Shoes because they didn’t want to pay the tax on every sale through the Colorado account. This cost Invisible Shoes thousands in monthly revenue. This, of course,  can also be a major impediment to a company’s long range plans.

But many states are behind this tax in order to capture a slice of the revenue from Internet taxes, which consumers are supposed to report, but rarely do. Internet affiliates are also a fairly large piece of the Internet economy. There are a number of national bills in the works to try and simplify the sales tax system, which could benefit the Internet affiliate business.

Always be Prepared
The point of all this is that it is crucial to your LLC, C Corp or S Corp to know and understand the tax issues that will affect your Colorado business formation and growth plans. Tax planning is a not a one-time exercise, but a continuous process that an experienced Colorado business attorney can help the small business through.

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