It's All Over for Minnesota Amazon Affiliates

by 62 replies
Just got the email from Amazon this morning that because of the recent tax legislation that just passed MN amazon associate accounts will be terminated as of June 30th.

Yup, that pretty much stinks. I have a number of sites that use amazon. My one main site that I build a list in also using Amazon quite extensively because they have all the products that my subscribers use.

I guess I'm going to have to figure out what my option are from here.
#main internet marketing discussion forum #affiliates #amazon #minnesota
  • Profile picture of the author flipfire
    Could you not create a LLC or a company based in a city that accepts amazon affiliates and then paid through the company?

    I'm not actually sure how it works over in the US, i'm sure some other warriors will give a bit more of an explanation on setting up a company.

    Regards,

    Lee
  • Profile picture of the author Marc Rodill
    Without knowing more, I see two options. You could sell digital products to them. That depends on your market of course. If they don't buy those types of products, you can try pitching them and see what happens and how they respond. Will require salesmanship.

    Also, while you may not be able to be an affiliate, you could acquire the products yourself and sell them as a vendor from Amazon. The good news is you'll make more money. The bad news is you'll have to manage inventory and acquisition costs, returns, etc. Depends on your budget and desire to go down that path obviously but it can be scaled. But I'm pretty sure Amazon will do a lot of the legwork on fulfillment for you.

    There are other options out there of course, but those come to mind.

    Marc

    PS. Like flipfire said, you could create a Nevada corporation that holds your LLC then you and Amazon will be taxed according to that state. There are several other states too that will give you a level of privacy similar to Nevada too. Leave it up to the government and taxes to ruin a good thing.
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    • Profile picture of the author Daniel Elss
      "We are writing from the Amazon Associates Program to notify you that your Associates account will be closed and your Amazon Services LLC Associates Program Operating Agreement will be terminated effective June 30, 2013. This is a direct result of the unconstitutional Minnesota state tax collection legislation passed by the state legislature and signed by Governor Dayton on May 23, 2013, with an effective date of July 1, 2013. As a result, we will no longer pay any advertising fees for customers referred to an Amazon Site after June 30 nor will we accept new applications for the Associates Program from Minnesota residents"
  • Profile picture of the author JSProjects
    Seems to be happening fairly frequently. I agree with flipfire and would look at creating a LLC somewhere.
  • Profile picture of the author Mandi
    You could try finding sponsors through Commission Junction advertising your niche products as an alternative and push your traffic to their store instead. A lot of CJ sponsors pay a higher commission rate than Amazon, and if your content is good enough to convert browsers to buyers, you won't need the power of Amazon to help you finish the sale.

    Another alternative is skimlinks.com - I haven't used them before, but from what I understand, you can convert your Amazon links to skimlinks and get a flat 6% commission on your Amazon product sales without having to change too much on your site. This is a bonus for small sellers who don't reach the 7-30 products shipped tiered Amazon commission structure in the first place to boost commissions, but it'd be a bit of a reduction in your profits otherwise. However IMO, 6% is better than 0%. So the benefit here is sending your traffic to the same place as before, but getting your commission check from another source for the same sales.

    Regards,
    Amanda
  • Profile picture of the author wesawu
    No need to worry. Set up a single member LLC in a state that is Amazon friendly and open a bank account in that state. You will also need an office address in that state also. You can open a PO Box in that state and then use the USPS forwarding service for a few months, at least until you get the Amazon Key in the mail. You can then notify Amazon of the new LLC and address and have them reinstate your account. All payments will go to your out state bank account. You can then write yourself a check from that account! Of course you will have to file state tax returns in whichever state you start the LLC. As long as you are the only member in the LLC, you don't have to file a separate federal tax return for the LLC since all income/expense flows thru to your ss#.
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  • Profile picture of the author Lori Kelly
    Wow that stinks.

    Nevada is a good state to set up an LLC. There's no state income tax in that state so no state tax return is filed. A tax return for the LLC is filed on the federal level and then your personal return filed, you will claim any earnings from your LLC on your personal return.

    I don't know about forming LLCs or corporations in other states, but I was registered agent in Nevada for over a decade. You can do the filing on your own (online) and that will save you money.

    You will need a registered agent in Nevada, find one that also offers the business address and mail forwarding. There are many agents who will also help you set up a bank account so you won't even have to leave the comfort of your own home.

    It will take a while, but at least you can get back in the game.

    Good luck and again, sorry to hear about this. It's like someone punches you in the gut.
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  • Profile picture of the author RogueOne
    Just to be fair, there is more to this email:

    While we oppose this unconstitutional state legislation, we strongly support the federal Marketplace Fairness Act now pending before Congress. Congressional legislation is the only way to create a simplified, constitutional framework to resolve interstate sales tax issues and it would allow us to re-open our Associates program to Minnesota residents.


    We thank you for being part of the Amazon Associates Program, and look forward to re-opening our program when Congress passes the Marketplace Fairness Act.
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  • Profile picture of the author Tom Ryan
    While I'm not absolutely killing it with Amazon, I am still contemplating forming an llc in another state. I might wait to see how sales ramp up as my sites grow before I do that, which leads me to the other option...

    In the meantime I may very well use a site like skimlinks or viglink, which will share the commissions.

    So, all is not lost, there are options.
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  • Profile picture of the author GforceSage
    Any friends or relatives in other states that could help get you set up there?

    Once it appears that you are operating from a different locale, you can keep rolling.
  • Profile picture of the author teresarothaar
    If you want to set up a corporation, look to set it up in Delaware. This state is very corporate-friendly. Additionally, there is no sales tax here.
  • Profile picture of the author schnisz
    Yep, same thing happened to us in California. I had myself all set up with an out of state relative when the state came to an agreement and everything was restored. for now. Hope that happens for you guys. Mobilize!!
    • Profile picture of the author midwestmedia
      Originally Posted by schnisz View Post

      Yep, same thing happened to us in California. I had myself all set up with an out of state relative when the state came to an agreement and everything was restored. for now. Hope that happens for you guys. Mobilize!!
      How exactly did that all shake out? What was used as the reason to restore everything?

      I'm in Minnesota and can probably expect to be dropped from other programs too now, correct? I've been checking for emails from other companies/networks but so far, I think Amazon is the first to officially drop me.
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  • Profile picture of the author seobro
    Well, move from Minneapolis to Indianapolis as houses are inexpensive. Also, it is warmer. Indiana is a right to work pro business state that is not going away. This is one solution for you. Frankly, I do like amazon. However, I do not like their affiliates program.
  • Profile picture of the author ratracegrad
    Well another option would be to sell your Amazon affiliate websites that are making money to others - like me. Just PM me your website and what price you are asking and what revenue you have earned in the past year and let's talk.
  • Profile picture of the author Randall Magwood
    Take your skills and migrate over to Ebay. Set up shop, forget about Amazon, and start over again. If you need to chill and re-collect your thoughts because of this new policy... take 1 or 2 days off, then get back on your grind on Ebay - or even your own website. Sorry about your situation though. Trust me, i know how you feel.
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  • Profile picture of the author Marc Rodill
    Originally Posted by Daniel Elss View Post

    This is a direct result of the unconstitutional Minnesota state tax collection legislation passed by the state legislature ...
    What's unconstitutional about it anyway? I'm not saying it's not, I just want more details.

    Originally Posted by Kay Elliott View Post

    Just received my email from Amazon. I saw a previous comment in this thread about selling digital products instead. Good suggestion, but that won't work either. MN's new sales tax law includes digital products.
    I'm not sure I see how that matters, unless digital websites close down their affiliate programs. And if you're selling your own product, just charge sales tax? Problem solved?

    I love Minnesota, but it may be time to move.
    This seems silly. You can't just move every time they change the tax law. If anything this is probably just a sign of more to come. You'll be moving a lot!

    Originally Posted by Kay Elliott View Post

    Here's another issue. A few weeks ago I called MN Dept. of Revenue to ask about the new sales tax laws and if online sales would be MN 6.875% sales tax or if local taxes would be included.
    Every other brick and mortar business pays sales tax already. Why can't Amazon just charge tax? But I agree with you about the time frame and the vagueness of the law. Meet government!

    Originally Posted by OnlineStoreHelp View Post

    Unfortunately this is just Amazon.com posturing. They want the marketplace fairness act passed as it gives them a huge competitive advantage over just about any other seller, regardless of what their PR pieces are telling you. Now they will use this to lobby congress of, "oh look how this hurts stay at home moms trying to make a little money". Bunk.
    Do you have a source, or are you speculating?

    As for setting up a Nevada LLC and trying to run it through there... don't. While there is no "corporate income tax" starting an LLC or corp in Nevada is cost prohibitive now, with a $350 a year business license you need to file now, as well as your typical $99 registered agent fee. Your bank will not allow you to use a PO Box as your address (Patriot Act and KYC rules) which means you will need to use your home address (which Amazon will pick up) or your registered agent which will charge you for every forwarded mail you want to send.

    Add on top of this, even if your business is "based" in Nevada, you still have nexus in Minnesota and your corporation or LLC will still have to file income tax filings in Minnesota. You don't want to run afoul of the state revenue department and guess what happens when Amazon finds out. Back at square 1.

    When it is all said and done, many online businesses are starting to register in Wyoming or South Dakota which also has lax filing requirements and no "corporate income taxes".
    Like you said. Wyoming, Delaware, South Dakota.

    Originally Posted by socialsignals View Post

    wow the US really has become a police state.
    We did revolt from England for less, which a lot of people like to remind us of. The only problem is, there's not a lot of land to take from Indians these days.

    Regardless of what anyone thinks, it's the customers who are going to absorb most of the consequences when smart business owners relocate and or pass the cost down to them.

    Marc
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    • Profile picture of the author OnlineStoreHelp
      Originally Posted by Marc Rodill View Post

      Quote:
      Originally Posted by Daniel Elss
      This is a direct result of the unconstitutional Minnesota state tax collection legislation passed by the state legislature ...
      What's unconstitutional about it anyway? I'm not saying it's not, I just want more details.
      Essentially Minnesota State Legislature is finding nexus where there really isn't any. You are not required to collect sales tax where you have no physical presense. What they are saying is if you use affiliates those third party seller act as your agent and you have nexus. The next route will be for any manufacturer that also sells online to pay taxes since, selling in a retail store gives them nexus.

      Quote:
      Originally Posted by OnlineStoreHelp
      Unfortunately this is just Amazon.com posturing. They want the marketplace fairness act passed as it gives them a huge competitive advantage over just about any other seller, regardless of what their PR pieces are telling you. Now they will use this to lobby congress of, "oh look how this hurts stay at home moms trying to make a little money". Bunk.
      Do you have a source, or are you speculating?
      Speculating of course since I have not been in the board room but ask yourself why the entities such as Amazon.com, Sears, Walmart and National Retail Federation would be pushing for this? All of these companies have fully staffed tax departments whose only job is to file taxes, inside for sales and tax, outside for federal and others. I don't have a full time tax department and find it cost prohibitive and time prohibitive to file taxes in 48 tax jurisdictions.

      Add on top of this, while Amazon, Walmart and Sears are complaining about level playing fields, they are all negotiating property and sales tax exemptions plus "retraining" funds for their company owned warehouses and facilities. No small seller, whether retail or online has these advantages, so yes, maybe I am speculating but history tells us if a large Fortune 500 company is pushing for something, someone is going to be hurt, most likely their competitors.
      Like you said. Wyoming, Delaware, South Dakota.
      Regardless of where you domicile the entity, it doesn't get away from the fact you will still have nexus in the state you live and work. The only possible route is an offshore entity theoretically but even companies like ADP that are domiciled offshore still have nexus in the states they work in.

      I'm not sure I see how that matters, unless digital websites close down their affiliate programs. And if you're selling your own product, just charge sales tax? Problem solved?
      Sure, because its the charging of the sales tax that is the issue. Wait a minute, that's an easy change, its the filing and payment of those taxes that takes time. Remember you still have to collect data from every one of your sales channels, parse out what state they belong to then go about figuring out the non-sense of a government form, file and pay. For my Hawaii Excise taxes it takes me a full day once a month to collect and file. If I have to add in 47 more states, I will either spend all my profits on accountants or all my time filing taxes.

      And before anyone starts popping off about there being software available, what software there is, is limited and is integrated only with a few shopping carts. So no, it sounds great on paper but real life tends to be quite different.

      Most news releases that tends to give Amazon lots of kudos will even admit, the only reason Amazon supports online sales tax is not only do they not need it anymore, but it gives them a competitive advantage since they will be building warehouses in most states anyway to provide 1 and 2 day delivery.

      Here is just one story on Amazon today about the incentives states throw at them. Florida alone, not any tax break, could lure Amazon to Hillsborough | Tampa Bay Times

      And another one: Behold: How Amazon wins the sales tax wars even when it loses &mdash; Tech News and Analysis

      I am all for paying my fair share of taxes but when I ship to a state that I don't have nexus in, they are still getting money from me. Whether it be federal excise gas taxes, state specific gas taxes, Federal Highway and DOT transfers or tolls, I am not getting a free lunch.
    • Profile picture of the author Kay Elliott
      I really don't have a problem with sales tax (a little off the topic of Amazon). The problem is knowing the correct sales tax to charge. Brick and mortar stores know exactly what to charge for sales tax at the location of their stores (state and local taxes).

      If the sales tax applied is where the buyer is located, then it gets really messy.

      MN taxes aren't even by zip code. There are multiple tax codes within a zip code. If You need to know the exact address of the buyer in order to charge the correct tax.

      If it's a digital product, it makes it even more difficult since there isn't anything to ship. Maybe use the billing address of the credit card to figure out the location/tax?

      Setting up a product with the correct tax with a payment processor like Paypal might be challenging since in some areas the taxes rates vary street by street and block by block, so it makes it really hard to charge sales tax upfront or to pre-program the tax rates.

      It would probably be easier for the seller not charge tax to the customer upfront, then figure out and pay the total sales tax due from monthly sales reports. If a person uses multiple sales channels, then the workload increases.

      There are other MN oddities that programs like Amazon would have to deal with. For example, some states charge sales tax on clothing, MN doesn't tax clothing (well, some clothing). If a person in MN buys a shirt it wouldn't be taxed, but if it had a sports logo on it, then it would be taxed.

      I'll say it again. This tax stuff gets messy. There are services out there that receive quarterly updates from all the states and they will help with sales tax records. I'm not sure what they charge. Whatever happens, I'm guessing it will cost time and money to be compliant.
  • Profile picture of the author Marc Rodill
    I see what you're saying. I think. I'll summarize.

    So according to the constitution, you are not required to collect sales tax in a state where you do not reside. But Minnesota is telling Amazon, hey these people are your affiliates, and they reside in Minnesota, so you have physical presence there. So we're going to require you to collect it.

    So Amazon said, okay good bye affiliates. So they won't have to deal with it. But shouldn't Amazon be supporting what Minnesota just did, if they want the Marketplace Fairness Act passed?

    Or are you saying, they won't do it because some companies are selling online in Minnesota right now, who don't have affiliates, and Amazon can't compete on price, right now?

    I think that makes sense since Amazon wants to dominate. So now they're posturing to get it passed ASAP. But I'm not sure if I got your point of view yet. I think I do.

    As for it being unconstitutional, I can see how that can be argued both ways. So, not sure if I agree with the other posters opinion of it being unconstitutional, but it's an emotionally interesting word that may or may not be true.

    Then the thing about it being a pain in the ass to file your taxes. Why not just get a tax guy? Wouldn't you save more in the long run? Not only on your time, but if you get a guy who actually knows the tax law, you would probably save a bundle, wouldn't you?
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    • Profile picture of the author Farish
      Originally Posted by Marc Rodill View Post

      I see what you're saying. I think. I'll summarize.

      So according to the constitution, you are not required to collect sales tax in a state where you do not reside. But Minnesota is telling Amazon, hey these people are your affiliates, and they reside in Minnesota, so you have physical presence there. So we're going to require you to collect it.

      So Amazon said, okay good bye affiliates. So they won't have to deal with it. But shouldn't Amazon be supporting what Minnesota just did, if they want the Marketplace Fairness Act passed?

      Or are you saying, they won't do it because some companies are selling online in Minnesota right now, who don't have affiliates, and Amazon can't compete on price, right now?

      I think that makes sense since Amazon wants to dominate. So now they're posturing to get it passed ASAP. But I'm not sure if I got your point of view yet. I think I do.

      As for it being unconstitutional, I can see how that can be argued both ways. So, not sure if I agree with the other posters opinion of it being unconstitutional, but it's an emotionally interesting word that may or may not be true.

      Then the thing about it being a pain in the ass to file your taxes. Why not just get a tax guy? Wouldn't you save more in the long run? Not only on your time, but if you get a guy who actually knows the tax law, you would probably save a bundle, wouldn't you?


      In 1992 Quill Corp. v. North Dakota, the Supreme Court ruled that a business must have a physical presence in a state for that state to require it to collect sales taxes.

      However, the court explicitly stated that Congress can overrule the decision through legislation

      Until the bill is passed by Congress or signed by the president, these bills are technically unconstitutional. The Supreme Court is the final decider in all these test cases.

      The reason why Amazon compromised with California, is because the state is such a large market that Amazon wanted to build distribution centers there. They wanted to delay the start of the sales tax collection for a couple years once they build their centers there, but the compromise was a one year reprieve.

      A bill will probably be passed by Congress by the end of the year ending this and changing how the system works. Until then, these bills really won't stand in Court, as Amazon has already won in other states over this.

      The other thing Amazon has stated is they don't want to have to fight all 50 states over this so they rather a uniformed law that all states must follow versus each individual state.

      For example, California has several counties, and each county has its own sales tax. I can drive 20 miles away in two different directions and pay different tax rates because of that.

      Also expect somebody to sue the federal version of this law once it passes, either the Court will reaffirm there previous decision or overrule it. Unless it is a great injustice, rarely does the Supreme Court overrule its past rulings.
  • Profile picture of the author NewParadigm
    Elections have consequences Minnesota. I live here and don't drink the city water, there's got to be an extra dose of stupid put into it by the Dayton government. Or perhaps Dayton's bipolar psychotic medications. Driving business out of state is not smart.
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  • Profile picture of the author northernbird
    Hi Tom,

    I, too, got the shocking email yesterday from Amazon. I was in the process of having 6 Amazon sites built. Guess that plan is out the window. I hate living in such a liberal state, but my spouse won't consider leaving. Minnesota is NOT business friendly!

    JR
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    Aut viam inveniam aut faciam
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  • Profile picture of the author elmo033057
    What can you expect from a state that elects a SNL flunky comedian for a senate office?
    • Profile picture of the author northernbird
      Yes, an SNL wannabe comedian, and a former wrestler for a governor. C'mon Minnesotans, we can do better than this!!!

      Elections have consequences; pay attention!
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      Aut viam inveniam aut faciam
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  • Profile picture of the author NewParadigm
    I was going to relocate a biz to st paul and met w/ the city planners etc.. 10 of them showed up across from me at the table, from a different department, EACH with a regulation book from 2-8" thick. They interrogated me basically. Then at the end had the audacity to say they look forward to me bringing my 50 jobs to their city!!!! My eyes rolled back, i bit my tongue hard to hold back telling them to effff offf.
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    In a moment of decision the best thing you can do is the right thing. The worst thing you can do is nothing. ~ Theodore Roosevelt "Trust, BUT VERIFY" ~ Ronald Reagan

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