If you are in any of the Affiliate Tax battleground states, you’ve probably seen the commercials. Someone representing a small business in those States gets on TV and claims that affiliate taxes are necessary to “protect small businesses against the onslaught of Amazon.” Behind these commercials is a political action committee and lobbying organization called “The Mainstreet Alliance” which claims to be a network of “state-based small businesses.” They have been in every State that has tried to pass Affiliate taxes, which levy taxes against internet realtors based on bounty-relationships with affiliates. While they claim to be promoting small businesses, they are heavily backed by the biggest retailer in the United States, Wal-Mart.

The fight that the Mainstream Alliance claims to be fighting is against a perceived unfairness given to retailers that do business over the Internet. Their claim is that while local businesses pay local taxes, that businesses online don’t have to pay tax, causing unfair competition.  Unfortunately for the Mainstream Alliance, no matter how much they believe this is unfair, the Supreme Court already ruled in Quill Corporation v. North Dakota, that States cannot collect taxes from businesses that don’t have a presence in their state. In order to get around this ruling, States are passing “affiliate nexus taxes” that claim that “marketing affiliates” somehow are employees and agents of online retailers, and thus should taxed as having a presence in those States.

While the argument seems to make sense from the outside, that perhaps small businesses are being effected, there is a real problem with the entire campaign. As mentioned, heading this campaign, paying for most of the bills is Wal-mart.  No one in their right mind believes that Walle-World has any interest in protecting small business. We all know that their corporate strategy is to put a Wal-mart Superstore in every single community, replacing all the local stores. So really, what is happening?

It’s simple: the campaign has nothing whatsoever to do with small businesses versus big business. In order to push this idea, Wal-Mart and their comrades have dubbed these taxes as “Amazon taxes” somehow claiming that it is targeted to Amazon. However, as anyone in the marketing industry knows, a large part of the internet marketing done on every single platform actually comes from small businesses. More and more “local businesses” on “main street” are creating an internet presence. Tons of businesses exist on EBAY, promoted on AMAZON and through hundreds of affiliate programs.

The real truth is that Wal-Mart knows this. They employee hundreds of people who spend their entire time analyzing threats to their dominance of the marketplace. However, despite this they are already facing more and more consumers going not only to Amazon, but to other small businesses online. Their goal of taking over shopping experiences in your community is at risk when you can do comparison shopping online, find a small business in another State and buy that product from that business. Wal-Mart is actually facing finally stiff competition from small businesses online, not just Amazon. In fact, if you didn’t know it, Amazon is one of the top sources for small businesses to actually sell their products directly to consumers.

The worse part of this entire “affiliate tax” business is that behind the scenes, every State that has had legislators pass an affiliate tax, has received enormous benefits given to them from Wal-Mart. As soon as the legislators in those states showed Wal-Mart that they were on their side, Wal-Mart agreed to build new stores in those districts. The result was more small businesses in those areas being closed in order to make room for Wal-Mart. This has to be the saddest part about this entire issue. There are some small businesses that think that fighting the internet will help them, but they are actually promoting an agenda that will put them out of business faster.

Author: Pace Lattin is a leading interactive advertising expert and marketer. He has founded some of the top publications in the internet including ADOTAS, plus has been behind several affiliate marketing and display advertising networks. Pace Lattin currently writes for several publications including ClickZ and Technorati, and his own publication, Inside the Offervault.