Is IT Going To Be Dangerous to Run An Affiliate Program?

tradermike2008 · 09-22-2009, 07:00 AM

have an in-house affiliate program. Run by myself. Due to some acts several state legislatures are taking I no longer feel comfortable running an in-house affiliate program and am going to phase mine out and move it to an affiliate network within the next few weeks – probably Clickbank.

The reason why is that several state legislatures have passed bills making it so sales made by affiliates now must face a state sales tax. Non affiliates sales don’t get hit by this, but this bill makes it so that eventually vendors and affiliates are going to be put up against the wall if they don’t account for this tax.

I do my transactions and pay affiliates through paypal and next year paypal is going to start to report every transaction made in your account to the IRS to try to find people who aren’t reporting their income. That doesn’t bother me because I report all of my income and expenses so have no problem with that, but I’m worried that if I keep using an in-house affiliate program and use paypal to pay the affiliates then it could become a big mess, trying to account for sales taxes etc and maybe even being asked who they are etc..

Over the summer Amazon pulled the plug on all its North Carolina affiliates.

I can fix any problems any of this can cause by moving to an affiliate program like Clickbank – that does all of the transactions and pays out the affiliates itself. If there are any sales tax issues or special rules some state makes Clickbank will take care of it for both the vendor and affiliate.

f you run an online business you may want to think of doing something similar if you have an in-house affiliate program. I don’t think there is a real problem at the moment, but there is a clear trend emerging of states trying to find ways to tax anything moving – and that means looking at online commerce. This could eventually become a massive burden for people running in-house affiliate programs at some point in a year or two. I just want to be ahead of the curve and am always extra careful to make sure nothing I do falls into any grey zone.

Welcome to Obama nation. George Bush on steriods. The Bush regime cracked down on Internet poker, now Obama is going to eventually tax anything that moves.

Catalyst eMarketing · 09-22-2009, 05:21 PM

Quote:

Originally Posted by tradermike2008

I can fix any problems any of this can cause by moving to an affiliate program like Clickbank – that does all of the transactions and pays out the affiliates itself. If there are any sales tax issues or special rules some state makes Clickbank will take care of it for both the vendor and affiliate.

I understand your concern, but I don't think moving to CB would help. The sales tax has to be paid if the merchant makes a certain amount via affiliate sales - typically 5,000 - 10,000. CB is paying affiliates on your behalf.

The same thing happens with CJ, Linkshare and all the other big affiliate networks and even though the networks pay the affiliates, the merchant is still liable for the tax.

Dan C. Rinnert · 09-22-2009, 05:39 PM

Quote:

Originally Posted by tradermike2008

Welcome to Obama nation. George Bush on steriods. The Bush regime cracked down on Internet poker, now Obama is going to eventually tax anything that moves.

This was going on during the Bush administration too. It's a bipartisan issue. Politicians are unable to restrain their spending, so they look to tax everything they can to squeeze every last dime out of us.

Both Republican and Democratic run states have been pushing for sales taxes on Internet sales; never mind the fact that they are already getting income from the businesses and individuals paying income taxes on Internet sales. They see money changing hands somewhere, and they want a piece of the action.

Dan C. Rinnert · 09-22-2009, 05:43 PM

Quote:

Originally Posted by 5starAffiliatePrograms

I understand your concern, but I don't think moving to CB would help. The sales tax has to be paid if the merchant makes a certain amount via affiliate sales - typically 5,000 - 10,000. CB is paying affiliates on your behalf.

The same thing happens with CJ, Linkshare and all the other big affiliate networks and even though the networks pay the affiliates, the merchant is still liable for the tax.

ClickBank is different from the others. You sell your product to ClickBank at a wholesale price, and they resell that product to the consumer. Since we don't (yet) have a VAT tax in the U.S., products sold for resale are generally not hit with a sales tax. If any sales tax were due, it would be ClickBank's responsibility to collect. Technically, as a product vendor with ClickBank, you are a wholesaler and ClickBank is the retailer. And the retail sale is where sales taxes are typically applied.

Of course, you'd need to run everything by a tax professional.

tradermike2008 · 09-23-2009, 04:24 AM

My thinking too is that if you do this through clickbank you won't have to worry about VAT or sales taxes - they'll take care of those things for you. I don't want to be in a situation a year from now trying to figure all of this stuff out and then facing a chance I'm not going something right and a regulator or tax man comes. Go with clickbank and won't have to worry - I have the same thinking as you with clickbank.

shermancox · 09-23-2009, 10:29 AM

Yep...this is one reason why I have thought about using clickbank as my primary affiliate tool. I don't really like running my own affiliate program and then add in the multiple laws and rules that appear to be coming...

Quote:

Originally Posted by Dan C. Rinnert

ClickBank is different from the others. You sell your product to ClickBank at a wholesale price, and they resell that product to the consumer. Since we don't (yet) have a VAT tax in the U.S., products sold for resale are generally not hit with a sales tax. If any sales tax were due, it would be ClickBank's responsibility to collect. Technically, as a product vendor with ClickBank, you are a wholesaler and ClickBank is the retailer. And the retail sale is where sales taxes are typically applied.

Of course, you'd need to run everything by a tax professional.

chickenlittle · 09-23-2009, 10:46 AM

I am currently planning my affiliate program, and I was going to use the e-junkie one, i.e. in house. But hearing these makes me think that maybe ClickBank would be much better. I certainly want to avoid wasting time on complicated tax matters.

I am UK based - does anyone know if this new legislation is going to affect merchants outside the US (who might have affiliates in the US)?

09-22-2009, 07:00 AM	#1
tradermike2008 HyperActive Warrior War Room Member Join Date: Mar 2008 Location: , , . Posts: 191 Thanks: 23 Thanked 58 Times in 20 Posts	Is IT Going To Be Dangerous to Run An Affiliate Program? have an in-house affiliate program. Run by myself. Due to some acts several state legislatures are taking I no longer feel comfortable running an in-house affiliate program and am going to phase mine out and move it to an affiliate network within the next few weeks – probably Clickbank. The reason why is that several state legislatures have passed bills making it so sales made by affiliates now must face a state sales tax. Non affiliates sales don’t get hit by this, but this bill makes it so that eventually vendors and affiliates are going to be put up against the wall if they don’t account for this tax. I do my transactions and pay affiliates through paypal and next year paypal is going to start to report every transaction made in your account to the IRS to try to find people who aren’t reporting their income. That doesn’t bother me because I report all of my income and expenses so have no problem with that, but I’m worried that if I keep using an in-house affiliate program and use paypal to pay the affiliates then it could become a big mess, trying to account for sales taxes etc and maybe even being asked who they are etc.. Over the summer Amazon pulled the plug on all its North Carolina affiliates. I can fix any problems any of this can cause by moving to an affiliate program like Clickbank – that does all of the transactions and pays out the affiliates itself. If there are any sales tax issues or special rules some state makes Clickbank will take care of it for both the vendor and affiliate. f you run an online business you may want to think of doing something similar if you have an in-house affiliate program. I don’t think there is a real problem at the moment, but there is a clear trend emerging of states trying to find ways to tax anything moving – and that means looking at online commerce. This could eventually become a massive burden for people running in-house affiliate programs at some point in a year or two. I just want to be ahead of the curve and am always extra careful to make sure nothing I do falls into any grey zone. Welcome to Obama nation. George Bush on steriods. The Bush regime cracked down on Internet poker, now Obama is going to eventually tax anything that moves.
	I'm the ownder of WallStreetWindow.com where I do several big mega launches a year. I also moderate a mastermind group of financial stock trading/forex marketers and affiliate marketers who shares ideas and a launch calendar check it out: http://theprivatealliance.com

09-23-2009, 04:24 AM	#5
tradermike2008 HyperActive Warrior War Room Member Join Date: Mar 2008 Location: , , . Posts: 191 Thanks: 23 Thanked 58 Times in 20 Posts	Re: Is IT Going To Be Dangerous to Run An Affiliate Program? My thinking too is that if you do this through clickbank you won't have to worry about VAT or sales taxes - they'll take care of those things for you. I don't want to be in a situation a year from now trying to figure all of this stuff out and then facing a chance I'm not going something right and a regulator or tax man comes. Go with clickbank and won't have to worry - I have the same thinking as you with clickbank.
	I'm the ownder of WallStreetWindow.com where I do several big mega launches a year. I also moderate a mastermind group of financial stock trading/forex marketers and affiliate marketers who shares ideas and a launch calendar check it out: http://theprivatealliance.com

09-23-2009, 10:46 AM	#7
chickenlittle HyperActive Warrior Join Date: Nov 2008 Posts: 120 Thanks: 12 Thanked 10 Times in 8 Posts	Re: Is IT Going To Be Dangerous to Run An Affiliate Program? I am currently planning my affiliate program, and I was going to use the e-junkie one, i.e. in house. But hearing these makes me think that maybe ClickBank would be much better. I certainly want to avoid wasting time on complicated tax matters. I am UK based - does anyone know if this new legislation is going to affect merchants outside the US (who might have affiliates in the US)?