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

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?

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

Probably. They've already done that here in Illinois.

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.

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.

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.

"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.

If not for affiliates Amazon would never have been successful.

Their business model is built around FREE LABOR offered by affiliates.

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.

CJ has followed Amazon. They no longer accept affiliates from NC, where the nexus laws do apply.
Deb

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.


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.


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.

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.

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.

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.

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.

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.

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?

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

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.
_____
Bruce

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.

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.

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."

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.

ya affiliates are the backbone for amazon.....why do they leave ......i am dam sure that they will work out something .....

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.

It looks to me like they'll shut down the affiliate program before taxing. That's what they've been doing state by state.

If they do lose, I suspect their affiliate program will just become more streamlined and only certain people and sites would qualify

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

yes,i want to know if this will effect people outside usa?

Form an LLC and register in Nevada. You must visit once a year, and what is better than Las Vegas.

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.

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.

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.

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?

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?