Would Amazon Shut Down Their Affiliate Program If They Lose The Sales Tax Battle?

76 replies
If Amazon loses this battle they have going on with local small business owners and are forced to start charging a sales tax will that spell the end of their affiliate program? Many of these local business owners are up in arms about Amazon being exempt from charging sales tax where as they (the small business owners) are required to charge it by law. Obviously, these owners are struggling because customers are buying online to avoid the tax and Amazon is among the biggest online merchants that there is (which is why I feel they are being singled out here). This could cause some problems for members of Amazon's affiliate program if it's discontinued because of this. Of course this is assuming that they lose they might pull out a surprising victory.
#affiliate #amazon #battle #lose #program #sales #shut #tax
  • Profile picture of the author wee3wee
    Amazon is a vital part of my online business, where can I read about the upcoming litigation? Do you know if this affects all states or just 1 or 2?
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    • Profile picture of the author jan roos
      This whole sales tax thing is aimed at all internet retailers but Amazon is the biggest and this case will set the president. If they close their aff program then others will soon follow. Think CJ.com, Clickbank etc.

      Now I do not think affiliate marketing will end because it's too big of an industry. If the United States makes it impossible for affiliate programs then international affiliates will be able to clean up. I don't think affiliate marketing will come to an end any time soon. Maybe for U.S affiliates but they will find a way around the system.

      The States need more tax dollars bad as most of them are broke. They see the internet as an easy target but it might bite them in the ass longer term.

      My 2 cents.

      Cheers

      Jan
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      • Profile picture of the author myob
        Originally Posted by jan roos View Post

        This whole sales tax thing is aimed at all internet retailers but Amazon is the biggest and this case will set the president. If they close their aff program then others will soon follow. Think CJ.com, Clickbank etc....
        Actually neither CJ nor Clickbank are affected by the nexus law. CJ is an advertising company which does not sell physical products, and Clickbank does not sell physical products either. Neither one has ever dropped their affiliates in states where nexus laws have passed. The same goes for Shareasale and Linkshare. We're good to go to swap out Amazon links out of all our sites for similar products such as for Walmart, Best Buy etc, since they already are paying retail sales taxes in the states where it is applied. Commission is not as high, though.
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        • Profile picture of the author jan roos
          Originally Posted by myob View Post

          Actually neither CJ nor Clickbank are affected by the nexus law. CJ is an advertising company which does not sell physical products, and Clickbank does not sell physical products either. Neither one has ever dropped their affiliates in states where nexus laws have passed. The same goes for Shareasale and Linkshare. We're good to go to swap out Amazon links out of all our sites for similar products such as for Walmart, Best Buy etc, since they already are paying retail sales taxes in the states where it is applied. Commission is not as high, though.
          Most of the programs on CJ sells physical products so wouldn't they ultimately be effected by the tax laws as well? I would only think that eventually digital items download to a PC in a certain state would be seen by the authorites as a physical product sold and bought in a state and they would want their tax on it.

          Cheers
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          • Profile picture of the author KirkMcD
            Originally Posted by jan roos View Post

            Most of the programs on CJ sells physical products so wouldn't they ultimately be effected by the tax laws as well?
            CJ is not the retailer. They will never be affected by it. It's up to the individual merchants to decide what to do.

            And Clickbank is already charging the sales tax where necessary.
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          • Profile picture of the author myob
            Originally Posted by jan roos View Post

            Most of the programs on CJ sells physical products so wouldn't they ultimately be effected by the tax laws as well? I would only think that eventually digital items download to a PC in a certain state would be seen by the authorites as a physical product sold and bought in a state and they would want their tax on it.

            Cheers
            Unlike Amazon, CJ is an advertiser. They do not directly sell tangible products. Also, many of the programs already are paying sales taxes where applicable. For example, Best Buy (affiliate program administered through CJ) and Walmart (affiliate program through Linkshare) have been gleefully announcing that they are accepting affiliates in states where Amazon was impacted by the nexus law. Check out their affiliate links.
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          • Profile picture of the author Steve Faber
            Originally Posted by jan roos View Post

            Most of the programs on CJ sells physical products so wouldn't they ultimately be effected by the tax laws as well? I would only think that eventually digital items download to a PC in a certain state would be seen by the authorites as a physical product sold and bought in a state and they would want their tax on it.

            Cheers
            In some states (like mine, for instance) businesses selling digital products are already subject to B&O taxes.

            The states and municipalities need to get together and just have one standard Internet tax or they are going to get a nice percentage of nothing, because the cost of compliance will be so high companies will simply suspend their affiliate programs. You'll be fie if the company has a nexus of business there and have been subject to taxes the whole time, but for the rest of you???
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      • Profile picture of the author Darrell Hagan
        Originally Posted by jan roos View Post

        .....The States need more tax dollars bad as most of them are broke.....
        Thats because of ever-increasing already way too high public salaries and bloated benefit packages and poor fund management.

        I sincerely hope that Amazon and all other internet retailers win this battle in a big way and that the states get very little or nothing from them, now or ever.
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  • Profile picture of the author Jon Tees
    From my prospective it seems like Texas and Pennsylvania have been the most heavily featured as far as running ads about it but other states seem to be following suite thinking “Hey, that’s a great idea we’re cash strapped as well and could use more revenue.” I did a Google search on it and there are several articles about it just enter Amazon Sales Tax Battle
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    • Profile picture of the author Sarah S
      Originally Posted by Jon Tees View Post

      From my prospective it seems like Texas and Pennsylvania have been the most heavily featured as far as running ads about it but other states seem to be following suite thinking "Hey, that's a great idea we're cash strapped as well and could use more revenue." I did a Google search on it and there are several articles about it just enter Amazon Sales Tax Battle
      Oh great. I live in Pennsylvania, and I just recently started a few Amazon sites. *sigh*

      Maybe I should start reading up a bit more on this subject; I've peeked into these Amazon threads from time to time, but I didn't even realize that my state was on the list yet. I really hope that something can get resolved so that this doesn't start a domino effect from state to state until their IS no Amazon affiliate program. But honestly, I do feel much worse right now for the people who were making almost all of their income from Amazon, and have suddenly had that option shut down on them. I guess we'll have to wait and see how this all ends up...
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  • Profile picture of the author gefflong
    Probably. They've already done that here in Illinois.
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  • Profile picture of the author humbledmarket
    Banned
    Wait does this mean that sales from those states are not qualified for commission or that affiliates are not qualified to apply in those states?

    "In the event that North Carolina repeals this tax collection scheme, we would certainly be happy to re-open our Associates program to North Carolina residents."
    It seems to imply that it does not affect international affiliates or referrals in North Carolina just the affiliate program

    Also this article was written JUNE 26, 2009?

    I think if they pulled through then in 2009 they should be fine in 2011. But you never know there might be some huge changes but I prefer not to get all anxious about something that might never happen. I prefer to be assured on solid ground.
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    • Profile picture of the author gefflong
      Originally Posted by humbledmarket View Post

      Wait does this mean that sales from those states are not qualified for commission or that affiliates are not qualified to apply in those states?

      "In the event that North Carolina repeals this tax collection scheme, we would certainly be happy to re-open our Associates program to North Carolina residents."
      It seems to imply that it does not affect international affiliates or referrals in North Carolina just the affiliate program

      Also this article was written JUNE 26, 2009?

      I think if they pulled through then in 2009 they should be fine in 2011. But you never know there might be some huge changes but I prefer not to get all anxious about something that might never happen. I prefer to be assured on solid ground.
      I got a message from them a while back saying they were terminating the affiliate program in Illinois since the bozo's here passed the new tax law. I can receive no income from affiliate sales of amazon items.
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  • Profile picture of the author Rich Struck
    Ask yourself one question: Does Amazon need affiliates? No, they don't. This is why Amazon isn't putting up much of a fight over this.
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    • Profile picture of the author BizBoost
      Originally Posted by Rich Struck View Post

      Ask yourself one question: Does Amazon need affiliates? No, they don't. This is why Amazon isn't putting up much of a fight over this.
      Amazon doesn't need affiliates? Where did you come up with that? Some of these businesses are built on the backs of affiliates. The question is do you really think they can afford to LOSE all their affiliates... remember, one person knows 100 people knows 100 people... so affiliates dont just refer sales, they refer people who have networks of friends. You can't buy that so easily doing media buys or in-house marketing.
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      • Profile picture of the author Rich Struck
        Originally Posted by BizBoost View Post

        Amazon doesn't need affiliates? Where did you come up with that? Some of these businesses are built on the backs of affiliates. The question is do you really think they can afford to LOSE all their affiliates... remember, one person knows 100 people knows 100 people... so affiliates dont just refer sales, they refer people who have networks of friends. You can't buy that so easily doing media buys or in-house marketing.
        Although using affiliates was a good idea for Amazon in the past, why would they need them now? Amazon.com is a household name and I'd bet that 99% of the people who shop there go to Amazon.com, not buysomecrapfromamazonbecauseImanaffiliate.com. My bet is that Amazon secretly doesn't really mind these laws because now they can shed themselves of the burden of dealing with thousands of affiliates who are no longer needed. Simply put, the affiliates have outlived their usefulness.
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        • Profile picture of the author BizBoost
          Originally Posted by Rich Struck View Post

          Although using affiliates was a good idea for Amazon in the past, why would they need them now? Amazon.com is a household name and I'd bet that 99% of the people who shop there go to Amazon.com, not buysomecrapfromamazonbecauseImanaffiliate.com. My bet is that Amazon secretly doesn't really mind these laws because now they can shed themselves of the burden of dealing with thousands of affiliates who are no longer needed. Simply put, the affiliates have outlived their usefulness.
          I still think you're missing the obvious, Rich... do you think Amazon is willing to lose all those affiliates.... to someone else?

          What an opportunity to set up a page now that targets Amazon affiliates, tells them the looming peril and promotes a product that could help them should Amazon pull the rug out from under them. The product would obv even sell whether or not Amazon pulled out the rug.
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        • Profile picture of the author ShayB
          I really haven't done much in the way of Amazon sales, but there is one product (fairly high-ticket) that I sell that does well for one of my niches.

          I actually wasn't going to expand my affiliate product promotions, but Amazon is actually going to have a physical presence in my state, and they've gotten a waiver for taxes in this state (for at least 5 years, I think).

          That makes me a bit more comfortable with working as an Amazon affiliate, but I still have a backup plan "just in case." (And it's not a huge part of my income, anyway.)
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  • Profile picture of the author Jon Tees
    Government officials really need to become more fiscally responsible. They waste money on needless things and then try and make up for it by scrounging for income wherever they can. Sort of like someone with a serious gambling problem (no offense to anyone who has or has had one or know someone who has). But this is another matter entirely. Affiliate programs are in effect like jobs where you set your own hours and can write your own paychecks depending on your ability to market and sell. But like jobs you don’t really own them and they can be ceased and desisted at any given time . You see it all the time companies discontinue affiliate programs, decide to constantly change them in order to cause people to quit by making it difficult or impossible to make money. Kick people out on a whim and so on and so forth. This is a large part of the reason why it’s better to run your own business where you have total control of the products and/or services you offer.
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    • Profile picture of the author Kevin_Hutto
      Originally Posted by Jon Tees View Post

      Government officials really need to become more fiscally responsible. They waste money on needless things and then try and make up for it by scrounging for income wherever they can. Sort of like someone with a serious gambling problem (no offense to anyone who has or has had one or know someone who has). But this is another matter entirely. Affiliate programs are in effect like jobs where you set your own hours and can write your own paychecks depending on your ability to market and sell. But like jobs you don't really own them and they can be ceased and desisted at any given time . You see it all the time companies discontinue affiliate programs, decide to constantly change them in order to cause people to quit by making it difficult or impossible to make money. Kick people out on a whim and so on and so forth. This is a large part of the reason why it's better to run your own business where you have total control of the products and/or services you offer.
      You should read Atlas Shrugged... It's having a resurgence right now because of the movie. The basic concept is that the moochers/looters tax the producers. It is more and more evident that Ayn Rand's vision of what the future would hold for America was right.
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  • Profile picture of the author DPM70
    "from my prospective.." ah-ha

    Amazon made its money from cutting out many small businesses. It could pick, pack and ship quicker and cheaper. That's actually good for us consumers but is part and parcel of why the economy is screwed. People need to re-adjust themselves for a world where physical labor, picking, packing, logistics is automated. It won't be easy.
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  • If not for affiliates Amazon would never have been successful.

    Their business model is built around FREE LABOR offered by affiliates.
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    • Profile picture of the author myob
      [DELETED]
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      • Profile picture of the author DPM70
        Is this not the classic example of not building your business on another's property?
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  • Profile picture of the author Tenzo
    I'd be curious to see how things would play out in Pennsylvania. If a nexus law passed, Amazon would have to close down fulfillment centers to skirt it. I know they have threatened just that in other states, but I suspect that our new governor would fight against losing that presence.
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  • Profile picture of the author dvhantiques
    CJ has followed Amazon. They no longer accept affiliates from NC, where the nexus laws do apply.
    Deb
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  • Profile picture of the author Sojourn
    Originally Posted by Jon Tees View Post

    If Amazon loses this battle they have going on with local small business owners and are forced to start charging a sales tax will that spell the end of their affiliate program?
    In short, no, I don't think that the nexus tax issue being hashed out in several states is going to be enough to cause Amazon to close down their affiliate program.

    I do think it's more than just local small business owners driving the bus, though. Walmart stands to gain a great deal if Amazon were required to collect sales tax.


    Originally Posted by wee3wee View Post

    Amazon is a vital part of my online business, where can I read about the upcoming litigation? Do you know if this affects all states or just 1 or 2?
    To stay up to date on the nexus tax issue, go here: Nexus Tax | Performance Marketing Association

    Make sure to sign up for the Google group for your state. They do a great job of staying on top of the issue and you'll get even more info about your state through the Google group notices. The group that runs that site just sued Illinois challenging that states nexus tax change.


    Originally Posted by Rich Struck View Post

    Ask yourself one question: Does Amazon need affiliates? No, they don't. This is why Amazon isn't putting up much of a fight over this.
    They're probably not putting up a fight because they don't need to allow the program in every state in the US. Those in impacted states will either find a way to maintain their associate relationship inside or outside of the rules/laws or will be replaced with affiliates in non-impacted states and countries.

    I know the issue scares people away from starting up as an Amazon associate and it worries those who have just started but your defense is information.

    Get informed about what's happening in your state. Read posts by Warrior kindsvater on this issue. Research your alternatives like other business structures using trust worthy sources of information like an attorney. Have a backup plan or exit strategy ready in case you have to face the issue in your state.

    Maybe you decide that if your state gets dropped by Amazon you're going to:
    • move
    • change out your links to another program
    • flip all of your sites because they'll still have value to others and use the proceeds and your experience gained to try something new
    If something happens, you'll be less stressed and you'll be able to respond quickly because you've figured out in advance how to deal with the issue.
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    • Profile picture of the author Jeff Hampton
      Originally Posted by Sojourn View Post

      Maybe you decide that if your state gets dropped by Amazon you're going to:
      • move
      • change out your links to another program
      • flip all of your sites because they'll still have value to others and use the proceeds and your experience gained to try something new
      Whatever it is, just have a backup plan. If something happens, you'll be less stressed and you'll be able to respond quickly because you've figured out in advance how to deal with the issue.
      Why not just form a corporation or LLC in a state that doesn't have sales tax? Nevada would be the obvious option.
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  • Profile picture of the author InitialEffort
    My advice is to set up your business in a state that would be the least likely to want to pass the nexus law. For me, Minnesota almost passed in a couple years ago. So I set up my business in another state.
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  • Profile picture of the author Marian Berghes
    US economy seems so weird sometimes

    I don't think they will shut it down entirely...they might raise some prices tho, to cover the tax.

    And as far as amazon not needing affiliates? You gotta be joking. No business, no matter how profitable, will just pass up on HUGE HUGE amounts of free publicity and probably MILLIONS of dollars in affiliate referred sales.
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  • I'm sure Amazon cares about all the free links going to their pages, and would hate to eventually be over-run by companies such as walmart on the search engines due to a swap in affiliate programs, because that could happen should Amazon close its program.

    A ton of lost links, and a hit in the search rankings.
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  • Profile picture of the author PPC-Coach
    It's just a matter of who is complaining and who is not complaining. Amazon affiliates need to band together to fight this like the small business owners have. It's not about what's right or wrong in a democracy it's about which group has more votes. The small business community has come together to say enough is enough and Amazon affiliates are just sitting on the sideline hoping that Amazon fights it. Amazon is taking a hard line because they're not meeting any resistance from their existing affiliates.

    I do think it's kind of a moot point though as you can just open up in another state and even move to another state if Amazon is a big part of your income. Hell come to Canada, we don't have these laws at all.

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  • Profile picture of the author Dan C. Rinnert
    Originally Posted by Jon Tees View Post

    Obviously, these owners are struggling because customers are buying online to avoid the tax and Amazon is among the biggest online merchants that there is (which is why I feel they are being singled out here).
    Customers aren't buying online to avoid sales taxes. Often the sales tax savings are offset by shipping costs anyway.

    At any rate, customers are buying online for lower prices and convenience.

    If, for example, Amazon (and other online sellers) are forced to collect sales taxes on all purchases, a lot of these other business owners (and politicians) will likely be shocked to find they won't be winning any of those customers back or gaining any new customers.

    The problem is they are not recognizing why customers are really buying online and doing better at competing with the online merchants to win and keep customers.
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  • Profile picture of the author timpears
    If the affiliates (the advertisers) for Amazon are not the sellers and so I don't see where this basis for charging sales tax is. If the states are successful in this endeavor, then any time you advertise on TV, your state should be able to collect sales tax.

    The sale doesn't need to be based in a state for them to lay claim to this sales tax as far as I understand it. How can that prevail? What ever happened to the federal ban on internet sales taxes?
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  • Profile picture of the author TCrosby
    I have a hard time believing Amazon would completely shut down affiliates. As someone who is an employee of amazon, affiliates is a large team and shutting that down would require a lot of corporate craziness
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    • Profile picture of the author Why9999
      Amazon does not want to lose their affiliates. They are actually a huge chunk of revenue for Amazon - it's in the hundreds of millions. However, it is clearly a battle worth fighting.

      Wikipedia has some good coverage on a state-by-state basis:

      Amazon.com - Wikipedia, the free encyclopedia
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    • Profile picture of the author jan roos
      Originally Posted by TCrosby View Post

      I have a hard time believing Amazon would completely shut down affiliates. As someone who is an employee of amazon, affiliates is a large team and shutting that down would require a lot of corporate craziness
      Interesting! Yeah I would think that affiliates are responsible for a ton of sales each year for Amazon. Personally I've sold almost $1 million of product for them in the last 12 months and I am sure I am one of the smaller affiliates so if Amazon cuts their aff program and us affiliates change our links out to places like Sears, Walmart, Overstock etc that has to be detrimental for Amazon so I believe they will keep their aff program open for sure.

      Right now there's just a bunch of politics being played.

      Cheers
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      • Profile picture of the author Fred Young
        This is definitely a good reason not to put all your eggs in one basket. Just think of how devastating it would be if you were earning the vast majority of your income from Amazon and possibly overnight, you could lose it all.
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        • Profile picture of the author remodeler
          Originally Posted by Fred Young View Post

          This is definitely a good reason not to put all your eggs in one basket. Just think of how devastating it would be if you were earning the vast majority of your income from Amazon and possibly overnight, you could lose it all.
          You're right. It didn't happen overnight, but being from IL it did happen to me within a couple of months and it was devastating nonetheless. Fortunately, I had several other income streams going at the same time.

          I'd definietly advise anyone to think twice before going all out in building sites promoting Amazon. You may think it can never happen in your state, or that Amazon would NEVER shut down their affiliate program, but it can. Not saying they will, but don't kid yourself, Amazon has built up such a trust and a presence, and on the backs of affiliates to a big degree, that they can go it alone and do just fine.
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      • Profile picture of the author Steve Faber
        Originally Posted by jan roos View Post

        Personally I've sold almost $1 million of product for them in the last 12 months and I am sure I am one of the smaller affiliates ......

        Cheers
        I, however, am not so sure
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  • Profile picture of the author Bruce NewMedia
    Its hard to say whether Amazon or others who come under these state tax schemes will abandon all the states that try to impose them on , but I can tell you that in Illinois, they dismissed 9,000 affiliates overnight....

    So when it happens it sure can affect a lot of small business people.....like you and me.
    _____
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    • Profile picture of the author BizBoost
      Originally Posted by brucerby View Post

      Its hard to say whether Amazon or others who come under these state tax schemes will abandon all the states that try to impose them on , but I can tell you that in Illinois, they dismissed 9,000 affiliates overnight....

      So when it happens it sure can affect a lot of small business people.....like you and me.
      _____
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      it's called a test.
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  • Profile picture of the author ahlexis
    For those affiliates who make enough money on Amazon, why not just incorporate in Singapore? And then change your Amazon account in such a way that you are paid offshore? The Singapore govt will give you a big break on your taxes the first 2 years. You can incorporate and get a bank account for under $2,000. In some cases you can get this done without a visit to Singapore, depending on who does your incorporation. Get the people who file the corporation to also open a bank account for you, and you're all set. And unlike the banks in the USA, Singapore has NEVER had a bank failure. EVER.

    If Singapore doesn't work for you, there's always Hong Kong. Or Marshall Islands.

    The problem with the whole US tax thing is, the politicians forget that you don't have to get on a plane to get things done anymore. There's this thing called the internet (the thing they seem dead set to tax) that allows you to do things from anyplace in the world.

    The politicians have also forgotten that those who hold the gold . . . can pick up their chips and leave, taking their chips with them, and refuse to come out and play anymore.
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  • Profile picture of the author GameVoid
    My guess is that as soon as the number of states that force Amazon to pay sales tax reaches a certain point, they will just flip and start charging sales tax for every state (where applicable), whether there was a lawsuit or not, and then let all the associates back in cause "it's the right thing to do!"

    As soon as it becomes more profitable to comply than to fight, Amazon will change their tune.
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    • Profile picture of the author myob
      The problem is much deeper than what seems apparent. I'm not sure of the exact number of states, but perhaps as many as 20 states have always had nexus type laws.

      In states with sales tax and affiliates, they have required residents to pay a tax on their internet purchases and submit the payment along with state income tax returns. This was not intended to be voluntary, but also was not enforceable. Since compliance was low, these states are making Amazon's tax liability retroactive to when the law came into effect - being years in arears.

      For example these states (maybe more) have existing sales tax nexus laws and want it retroactive: Arizona, the District of Columbia, Florida, Iowa, Maryland, Missouri, Nevada, New Mexico, North Dakota, Pennsylvania, South Dakota, Tennessee, Texas, and Washington.

      It has been widely published that Texas alone has demanded over $269 million in uncollected back retail sales taxes, which they backed down after Amazon's bluff to evacuate the distribution center and cut off affiliates. The way I understand it is that these are crippling penalties, and Amazon is not fighting against having to pay its fair share of taxes, but rather that these actions by the states are illegal and unconstitutional.
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      • Profile picture of the author JRCarson
        If Amazon shut down their program, there would now be millions of web pages that DON'T sell their products.

        All those pages, in one fell swoop, would be shifted to Wal Mart, Best Buy, etc...

        They don't have the ability to "take over" the content creation that is created day to day and exists on the web to keep their sales at the level they are at.

        The Affiliates are obviously just the pawns in the pi##ing contest (good metaphor, huh?) going on between lawmakers and Amazon.

        In Colorado, we were dropped last March. Now they are discussing repealing the law...of course that could take a while!

        Bottom line, set up shop in a state that doesn't have the law if you are an Amazon earner, or want to be. It was worth it for my wife and I!! This battle is going to take a while. There's no sense in lying down and not earning any commissions!
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      • Profile picture of the author jan roos
        Originally Posted by myob View Post

        The problem is much deeper than what seems apparent. I'm not sure of the exact number of states, but perhaps as many as 20 states have always had nexus type laws.

        In states with sales tax and affiliates, they have required residents to pay a tax on their internet purchases and submit the payment along with state income tax returns. This was not intended to be voluntary, but also was not enforceable. Since compliance was low, these states are making Amazon's tax liability retroactive to when the law came into effect - being years in arears.

        For example these states (maybe more) have existing sales tax nexus laws and want it retroactive: Arizona, the District of Columbia, Florida, Iowa, Maryland, Missouri, Nevada, New Mexico, North Dakota, Pennsylvania, South Dakota, Tennessee, Texas, and Washington.

        It has been widely published that Texas alone has demanded over $269 million in uncollected back retail sales taxes, which they backed down after Amazon's bluff to evacuate the distribution center and cut off affiliates. The way I understand it is that these are crippling penalties, and Amazon is not fighting against having to pay its fair share of taxes, but rather that these actions by the states are illegal and unconstitutional.
        Thats why I say that this whole thing is just a political showdown right now and that the affiliate program is just a pawn for now and probably won't be abolished completely IMO.

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      • Profile picture of the author CDarklock
        Originally Posted by myob View Post

        The problem is much deeper than what seems apparent. I'm not sure of the exact number of states, but perhaps as many as 20 states have always had nexus type laws.
        What is at issue isn't the notion of nexus in the first place, but the question of whether an independent contractor employed by the company constitutes nexus.

        Imagine you run a brick-and-mortar business in Massachusetts. You advertise for a web developer to build your website, and the respondent you hire is from Texas. Since the respondent does not need to be physically on your premises, you make this a telecommuting position.

        Are you now required to collect sales tax from Texas residents?

        Because the way the new nexus laws are written, it is very possible that you are, which would effectively reduce wages for interstate employees.

        In short, it is a crack in the system which could be used to essentially force contractors not to work for out of state companies, which is directly and obviously in line with what states actually want anyway.

        They want companies that hire people in Texas to move to Texas and hire more people in Texas, who will pay Texas state sales and income taxes. And since they can't really make those companies do anything, they're going to line up a reason those companies can't pay as much for an out-of-state employee, so the out-of-state employee will go work for an in-state company instead.

        Now, to be clear: I don't think anyone in government is smart enough to have planned that, or stupid enough to admit they'd do it. This is not a conspiracy. It is simply a short-sighted, moronic cash-grab that happens to have massive implications in the future that nobody is really considering.

        Once the precedent is set, none of the states have a single decent reason to oppose the idea. Hey, it's perfectly sensible and gives us more money and attracts more jobs to our state, what's not to like? Oh, that part where it's harder to get a job? Pfft, no it isn't. In the grand scheme of things, every out-of-state job you can't get is replaced by an in-state job you can - because they can't hire out-of-state anymore. It all evens out.

        Provided the companies you want to work for and the industries you serve are in your state. For everyone in your household. Oh, you're a logo designer living with a cattle rancher? Better start learning to draw cows, because you'll be working for people in cattle country.
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  • Profile picture of the author CDarklock
    Originally Posted by Jon Tees View Post

    Many of these local business owners are up in arms about Amazon being exempt from charging sales tax where as they (the small business owners) are required to charge it by law.
    This is because they think Amazon's web site is a storefront, not a catalog.

    Pick up your latest J. Crew, or Hammacher Schlemmer, or Lillian Vernon catalog. Look at the order form.

    See the list of which states have to pay sales tax?

    Those are states where the catalog vendor has a physical brick-and-mortar presence. A warehouse, or a shipping facility, or a factory, or an office, or a storefront.

    Now, imagine for a moment that the catalog is from Amway (yes, I know they've got a different name now, but I don't care). When you give the catalog to your friend, and your friend buys something, you collect the money from your friend and send it to Amway. They send your friend what was ordered. And what is there on the order form?

    A list of states where Amway has a brick and mortar presence!

    Now, it's not all fifty states, so think about the first one you wouldn't see in the list. It could be any state at all, but the effect is the same:

    The person who works as an Amway representative, hands you the catalog, collects your money, and gets paid a cut of that purchase... does not need to charge you sales tax.

    This is precisely what Amazon is saying.

    So if we change the rules for Amazon, then the rules need to change for Amway too.

    And if the rules change for Amway, they will also need to change for J. Crew and Hammacher Schlemmer and Lillian Vernon.

    In essence, the states are saying that everyone needs to collect sales tax from every customer, and Amazon is quite rightly saying that this is near-impossible even for someone of their size... and will destroy a great many small businesses that simply cannot do it.

    So they're hitting these states exactly where they should: they are cutting off a revenue stream that leads into those states, and diverting it to other states.

    Meanwhile, do you know what happens at Amazon? Not a damn thing. In fact, they make more money... and they don't have to do the work... and the only people who suffer are the affiliates living in the state that passed this dumbass law.

    And the states keep going "surely we will eventually win."

    Nope. In the end, this just means all of the Amazon affiliates will be in Alaska, Delaware, Montana, New Hampshire, Oregon, and Washington. Because Amazon doesn't really care whether they have affiliates in your state. The only people who do are those affiliates, and the state collecting taxes from them.

    So Amazon will ultimately only have affiliates in states where there is no state sales tax, or where they are already collecting state sales tax anyway.

    And the states will basically have screwed over their own small businesses and their own work-at-home moms for this waste of time and money.

    The only question is whether ALL FORTY-FOUR of the other states are that stupid. I don't think they are. I think right around twelve or fifteen, they'll start saying "wait, we passed this law to make more money, and somehow we lost a lot of money." And the other thirty will go "oh, holy crap, that was stupid - good thing WE didn't do it."
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  • Profile picture of the author richinca
    CA has over 10000 affiliates.

    At the end of May, the CA assembly passed a law requiring sales tax collection from companies that have an affiliate presence in the state (like Amazon). Now we'll have to see what happens in the senate.

    "The tax, popularly termed Amazon or eFairness Tax and similar to others in a number of states, passed the California assembly. Next the bill will go to the state senate. "The state of California could collect more than $1 billion a year by taxing Amazon and other online retailers if a bill approved by the Assembly becomes law," NBC LA reported."

    Hard to believe Amazon will shut down affiliates in CA, but they have said that's what they'll do when states require sale tax.
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  • Profile picture of the author cryst
    ya affiliates are the backbone for amazon.....why do they leave ......i am dam sure that they will work out something .....
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  • This is very disturbing!! I had not heard about this issue before now. I can see both sides of the story. Obviously as an Amazon Associate I am pulling for them. I will have to dig a little deeper into the subject.
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  • Profile picture of the author sbucciarel
    Banned
    It looks to me like they'll shut down the affiliate program before taxing. That's what they've been doing state by state.
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  • Profile picture of the author dagaul101
    If they do lose, I suspect their affiliate program will just become more streamlined and only certain people and sites would qualify
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    • Profile picture of the author thedog
      Does this only effect people in the U.S?
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      • Profile picture of the author barryc1963
        Here's whats happening in your state: Amazon Tax Form an LLC and register in Delaware and keep building affiliate websites
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        • Profile picture of the author Jeff Hampton
          Originally Posted by barryc1963 View Post

          Here's whats happening in your state: Amazon Tax Form an LLC and register in Delaware and keep building affiliate websites

          Exactly. People are talking about shutting down businesses over this. I don't get it. I mean, sure if selling on Amazon is a hobby, then it may not be worth it.

          But it it's your business, are you seriously not going to spend a couple of hundred bucks to maintain it?
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  • Profile picture of the author kencalhn
    It's a shame, because here in colorado, I had just started some fitness-related sites for my wife to start creating amazon affiliate sales from, and that all got shut down with the colorado tax bill (though that may be repealed someday).

    I have done very well with my own sites, was trying to get my wife involved and starting her career online in IM as an amazon affiliate (product-review/blog sites with articles and fitness dvd reviews/amzn aff links), and that's gone out the window.

    maybe creating LLCs in nevada/delaware meets their new tos, regardless of physical location of the amazon affiliate marketer? haven't looked into it, likely worth asking amzn about
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    • Profile picture of the author Jeff Hampton
      Originally Posted by kencalhn View Post

      maybe creating LLCs in nevada/delaware meets their new tos, regardless of physical location of the amazon affiliate marketer? haven't looked into it, likely worth asking amzn about
      Their TOS says that residents of the indicated states are not eligible to participate in the program.

      But it is my understanding that an LLC or coporation is a "resident" of the state where it is incorporated, regardless of where the employees live.

      Probably not a bad idea to check with Amazon, though. On the other hand, there's no way for them to find out. If they are contracting with a corporation, they don't have the right to demand the home address of every employee of that corporation.
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  • Profile picture of the author showmegreen
    yes,i want to know if this will effect people outside usa?
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    • Profile picture of the author rondo
      Originally Posted by showmegreen View Post

      yes,i want to know if this will effect people outside usa?
      No it doesn't.


      Now why doesn't the US gov scrap all the state sales taxes and introduce a federal GST/VAT, like most other large countries have done? It makes commerce a lot easier.


      Andrew
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      • Profile picture of the author CDarklock
        Originally Posted by rondo View Post

        Now why doesn't the US gov scrap all the state sales taxes
        Because state sales taxes are how states support things the federal government refuses to fund.

        There are no "other large countries" that work the way the United States does. The "other large countries" are either smaller than our average individual state, or have broad unilateral policies that disenfranchise entire areas of their own country.
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        • Profile picture of the author rondo
          Originally Posted by CDarklock View Post

          Because state sales taxes are how states support things the federal government refuses to fund.
          That was the case in Australia too, until we changed to a national 10% GST back in 2000. The Feds collect it and distribute it to the states and territories.
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  • Profile picture of the author Mark Upshaw
    Form an LLC and register in Nevada. You must visit once a year, and what is better than Las Vegas.
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  • Profile picture of the author CDarklock
    Originally Posted by Jon Tees View Post

    If Amazon loses this battle they have going on with local small business owners
    This is not a battle with small business owners. It is a battle with state governments.

    State governments are saying "Our residents are buying on Amazon, then not paying their sales tax. Amazon, you suck. You need to collect sales tax for our state, because... um... you have affiliates here! Yeah! That's the ticket!"

    And Amazon is saying "We're not doing that. It's not our job, and if you try to make it our job, we'll just dump all those affiliates. Then you'll not get your sales tax OR the income tax from those affiliates. You will only make your problem worse."

    And the states are going "Well, this will make other companies do it, too. They won't dump all their affiliates. Screw Amazon."

    So somewhere down the road, the states are going to go "Wait, the other companies still aren't collecting sales tax. We have to go after them." There will be a couple high-profile cases where a small player gets in trouble and probably ends up bankrupt or in jail, and then affiliate programs will start disappearing. A lot of businesses will never start one because they're afraid of having to track the laws, a lot of others will terminate theirs across the board because they're afraid of affiliates lying to them, and the people who keep their affiliate programs will start dumping states just like Amazon.

    The states are basically armouring up to go to war against internet businesses, and tell them it's THEIR job to collect sales tax and file it in all fifty states (well, the forty-five that have state sales tax, anyway) because the states need the money.

    This isn't about "fair to local businesses." What's fair to local businesses is that you charge everyone your own state's sales tax rate, and pay those taxes to your own state, and then the people who paid it can write it off on their state taxes... but they won't. That's what happens at local businesses.

    But the states want the money. The whole "fair to local business" thing is a load of crap. They're using basic, clumsy propaganda to try and get support from community leaders.

    Just like the Yankees did in the war of Northern aggression. They didn't want to admit their PURPOSE was to decimate the economic base of the South so they could seize political control, so they ran around saying "no, no, it's about how slavery is evil." Because it was evil, and Amazon's business is unfair to local business, but that's not why this is happening.
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  • Profile picture of the author GetMoreTraffic
    I can't imagine Amazon wanting to shut down their affiliate program - it must be amazingly profitable for them. They pay tiny commissions, and as soon as that affiliate cookie expires, they get all the repeat business commission free.

    Seems well worth spending a bit of time working around the new regulations.
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  • Profile picture of the author kencalhn
    Why does amazon need usa-based affiliates anyways? I'm sure this is a huge windfall for webmasters in Canada and every other country other than the usa.

    My prediction: All USA states will start taxing internet purchases soon, in a way that dramatically impacts 1099s/affiliate marketing in the USA, because they need the money and because of pressure from local businesses (as they've done in a handful of states already). Amazon will have to adapt their business model if they're to retain US based affiliates.

    But. Amazon doesn't need you.

    What'll more likely happen is, since there's plenty of webmasters Outside of the USA that Amazon can count on to deliver leads and sales, Amazon may well fold it's usa-based affiliate program altogether. I know I would, if I were in Amazon's shoes. Why use USA-based affiliates when there's hundreds of thousands of bloggers and webmasters in non-USA countries, that are all online? You've just been outsourced.

    It's not like usa-based affiliates generate a huge percentage of amazon's sales anyways, since many of us just go directly to amazon without clicking some bloggers' link.

    That's yet another reason why I run dozens of sites myself and don't do hardly anything with affiliate marketing. The handwriting's on the wall.

    More importantly, beyond Amazon, folks. I won't say that local state taxation of internet sales is the death of affiliate marketing in the usa, but it will have a big impact. And this has huge ramifications for all USA-based webmasters with affiliate programs as well.
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  • Profile picture of the author Conrad Stuart
    I don't see why affiliate programs would shut down if retailers were required to start charging sales tax.

    If everyone who sells online has to start charging sales tax, will that stop people from buying online? Definitely not.

    This is the type of thing that sounds bad now but will be forgotten or adjusted to once it goes into effect.

    Remember when everyone was saying nobody would go to bars anymore once they banned indoor smoking?
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    • Profile picture of the author Blackbelts
      Originally Posted by Conrad Stuart View Post

      I don't see why affiliate programs would shut down if retailers were required to start charging sales tax.

      If everyone who sells online has to start charging sales tax, will that stop people from buying online? Definitely not.

      This is the type of thing that sounds bad now but will be forgotten or adjusted to once it goes into effect.

      Remember when everyone was saying nobody would go to bars anymore once they banned indoor smoking?
      Good point here...But i think its still worth looking at how things will be turning out..As of now, i just got to know about this from this thread...
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  • Profile picture of the author weblink29
    I have one major gripe about the whole sales tax thing. If I buy something online and they charge me sales tax that product should be located in my states and ship from my state. How can they get away with charging me sales tax when the product isn't even located in my state?
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    • Profile picture of the author Conrad Stuart
      Originally Posted by weblink29 View Post

      I have one major gripe about the whole sales tax thing. If I buy something online and they charge me sales tax that product should be located in my states and ship from my state. How can they get away with charging me sales tax when the product isn't even located in my state?

      That's the whole issue.

      I run an ecommerce store and we only charge sales tax to residents in our state. It's never stopped anyone from buying either!
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      • Profile picture of the author vphoner
        Reasons Amazon should not shut down its U.S. based affiliate program:

        [1] Free advertising. All of these thousands of websites that refer them business would stop. Millions of dollars in free revenue would end. Companies like Coca Cola pay millions to have their trademark name advertised. Its done for free for Amazon by millions of web pages because of the affiliate program.

        [2] Competitors would benefit from the thousands of affiliates. Amazon's name will no longer be front and center as it is now. A new competitor could emerge that would get huge and threaten Amazon's dominance. Right now the affiliate program assures that Amazon is number 1. So its not just lost revenue, but lost dominance.

        [3] It has been proven that advertising a product that goes directly to Amazon does not convert as well as going to a well thought out affiliate site that makes the case for buying that product first, and then going to Amazon after the reader is convinced that this is the product to buy. Amazon will lose the support of all the review sites. Best Buy, Walmart, JandR, B&H, and others will greatly benefit from Amazon's disappearance.

        [4] Eventually they will have to pay sales tax, so why destroy something that took years to build up and is keeping them dominant in the field and keeping the Amazon name front and center.
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        • Profile picture of the author myob
          Amazon has already publicly announced and demonstrated that it will drop affiliates in any and all states that pass the nexus retail tax law. This is the issue Amazon has been contending is that it is unfair and unconstitional because they don't have an actual physical presence in nexus-contending states. Other major affiliate programs are being adversely affected as well such as Overstock, CJ, Linkshare, Shareasale, etc.
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          • Profile picture of the author Imrich
            How fantastic, I was just going to start with Amazon, this is weird.
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