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MLM Sales On The Internet
By Jeffrey Babener, © 2013
MLM Internet Sales Exploding
Sales of MLM products on the internet are exploding. The reasons are many. First, internet technology has
enabled virtually all leading MLM/network marketing companies to take orders over the internet rather than by call
centers. For many companies, internet ordering dominates the ordering process and makes the buying experience
much more convenient for distributors and customers. Second, leading MLM companies provide replicating web
templates for distributors to drive customers to the ordering section of web sites. Third, in addition to existing MLM
companies that allow for alternative ordering via the internet, many new MLM companies have appeared whose
sole method of marketing is through the internet, often offering web shopping malls. Will this paradigm change in
ordering relieve MLM companies from obligations for sales tax collection in that the ordering process makes them
more like a catalog mail order firm? Unfortunately, although the typical internet marketer is immune from sales tax
collection in the same fashion as mail order sellers, the same will probably not hold true for the MLM company that
markets over the internet by utilizing networks of thousands of distributors in every state to drive customers to their
Wake-up Call for MLM Internet Malls
MLM distributors often express frustration that MLM companies collect sales and use tax on product purchases.
Because there is no "in store sale," networkers often think that they are immune just like mail order catalog and
Well, unfortunately the activity of distributors in each state deprives networkers of the immunity from sales and use
tax. In fact, at an earlier industry meeting, James Richmond, Chief Administrator, Sales and Use Tax, for Amway,
noted that Amway has collected and remitted such tax since 1971 and believes it has a moral and legal obligation
to do so.
To the surprise of many, Richmond indicated that, since Quixtar, Amway's internet spinoff, was a part of the Amway
family of companies, it also became legally obligated to collect tax on internet sales as well. This is a wake-up call
for all the MLM internet virtual malls sprouting on the web.
Blame the Pharaohs.
Sales and use taxes are a source of great revenue for states and great headaches for MLM and direct selling
companies. Sales taxes are collected in the vast majority of states and tens of thousands of local cities and
counties have similar taxes.
Commerce Clearing House, the publisher of many tax publications, reports that in Egypt the pharaohs placed a
general tax on the sale of all commodities at the rate of 5% of sale price. The Romans obviously thought this was a
good idea and, after their conquest of Egypt, the rate rose to 10%. For the next 2,000 years, to this day,
bureaucrats have found sales tax a favorite revenue raiser.
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