Here's the email they sent out
Dear Colorado-based Amazon Associate:
We are writing from the Amazon Associates Program to inform you that the Colorado government recently enacted a law to impose sales tax regulations on online retailers. The regulations are burdensome and no other state has similar rules. The new regulations do not require online retailers to collect sales tax. Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to “voluntarily” collect Colorado sales tax — a course we won’t take.
We and many others strongly opposed this legislation, known as HB 10-1193, but it was enacted anyway. Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado. We plan to continue to sell to Colorado residents, however, and will advertise through other channels, including through Associates based in other states.
For more info http://affiliateadvocacy.com/2010/did-a … s-and-why/
Check out the link - it is definitely a trend.
In Colorado, Amazon didn't even have to collect the tax. It just had to send the state of Colorado the information on purchases from that state and Colorado would have collected the taxes.
In fact where you live in California, is considered to be an at risk state.
I'm hoping the states will eventually realize that this actually discourages economic activity and will reverse course. It just seems like nobody wins in this situation.
Affiliates need to educate their state reps that companies like Amazon just drop them so they won't need to collect or report the taxes. And the states then lose the income tax that the affiliate would have paid.
If your state rep has some local office hours coming up, it might not be a bad idea to stop by and start the conversation.
California, Iowa, Maryland, New Mexico, Vermont, Virginia, and my state of Illinois are next on the chopping block. I've stopped adding new amazon only hubs and have a good mix of ebay products. If Amazon drops Illinois then I'll drop Amazon.
Even if all the states enact these Net tax laws, ecommerce giants like Amazon need to step it up for the people that drive them traffic. Amazon earned something like $6.9 billion in the last quarter of 2009. Not bad for a company that has no brick and mortar stores.
This really sucks for those who live in Colorado or any other state that is considering this.
Thankfully Nevada is very friendly to corporations and as such it has many corporations incorporated here. I don't believe Nevada would ever do something this stupid. I pray they wouldn't.
It would be somewhat ironic if it comes to the point where the only Affiliates selling US Amazon products were based outside the US!
What if every state decides to enact this tax? Would they have no affiliates in the US at all?
I think Amazon are acting in this way in order to USE the small affiliate to pressure their elected reps. They probably think, we can sacrifice our Colorado affiliates or whoever, to force them to do their dirty work for their bigger goal, which is to avoid tax entirely.
Amazon has a physical presence in some states. Primarily via their corporate headquarters (Washington) and places where they maintain shipping warehouses. I know there's one outside Fallon, NV (I drove past it and it's massive) and there's also one in Tennessee. I think Amazon is "located" in about six states altogether. In those places, they are paying some form of taxes already.
It should be noted that this is more than Amazon. Affiliates in Colorado, NY, and RI have been tossed from many programs.
One strategy to protect your online business is to work with business that already have a physical presence in your state through bricks and mortar stores such as Wal-Mart, Kmart, OfficeMax. They would have to close all of those stores, as well as cut affiiates loose to avoid the law.
I have been researching this issue. Gov. Schwarzenegger is expected to veto the pending legislation in California. If true, this will be the second time he has done so. There are no guarantees about what a future governor would do with this piece of legislation, though. In reading comments from an article in the San Francisco Chronicle, the vast majority of citizens were against the measure for obvious reasons.
California has 25,000 Amazon affiliates. If the law were enacted in California, they would collect a rather measly amount of Amazon -generated sales tax per year -- some estimates are 133 million, other estimates are a more conservative 105 million annually.
I understand that this type of initiative was killed in Vermont recently.
The reality in this situation is that Amazon and all of e-commerce is eventually going to be taxed. There are just too many traceable transactions on the internet for the grubby, self-serving, wealth-redistributing, holier-than-thou socio-alchemists we have in our state legislatures to resist. Amazon is just doing its best to prevent the inevitable. My guess is that when the battle is finally lost, they will reopen affiliate participation in states they closed it in.
The best course of action is to vote for individuals who don't believe in stealing wealth. Good luck with that though. You won't find many in the two parties we currently have.
I realize that the states are loosing out on sales tax revenue and in this economy they're going to do whatever they can to add to the books. The problem is, by being required to collect sales tax it makes these e-commerce sites less competitive to the brick and mortar stores. They're going to have to be even more innovative to stay alive.
I wouldn't be surprised to learn that the major offline retailers are behind the push for the sales tax.
Ebay does not kick out affiliates because of state tax laws, so your safe on that front. But livewithrichard is correct, if your traffic isn't the quality they want, they will kick you out on that.
Although this is a big deal and my suggestion is not meant to down play the situation, but if you are an Amazon affiliate that is making some serious money, why not just incorporate in a state like Nevada or Delaware and reapply for the Amazon affiliate program?
There are actually two sides to your question about incorporating in another state. First, you can incorporate in another state but then you must also register in your own state to operate as a "foreign entity." Doing this will not allow you to bypass the sales tax of your state. Incorporating has many benefits but circumventing the law is not one of them.
Second, you can incorporate solely as an online entity but this will still not let you avoid paying your state taxes because its your shipping address that determines your tax liability. If you have no products at all and are only operating as an affiliate or internet marketer then the point at which your affiliate activities are transmitted or uploaded onto the Internet determines your tax liability.
Basically, if you want to protect yourself as an internet marketer you have to do what Nelle is suggesting above and make thorough business plan. This really doesn't mean much to people that just want to make a few extra bucks each month but for many of us that earn a significant income online it's important to take precautions.
Because that is illegal and ineffective. The nexus is whether or not you're a resident of the state. Your place of incorporation doesn't change where you yourself reside.
Both my attorney and cpa have advised against it. So far this doesn't affect me.
But I'm not going to wait for it to. So I'm developing a business plan in advance that doesn't depend on Amazon or any other company that cuts affiliates lose. I've seen friends lose 90 percent of substantial incomes overnight.
Eventually, a few states will not pass the law to give their citizens an advantage. This is why so many corporations incorporate in Deleware, better laws, taxes, etc.
I just learned that Connecticut is seriously considering this as well. So one of my neighboring states, Rhode Island, has passed it. And another probably will. That's why I can't stop planning for it.
There is no way that I'll write another Amazon-based hub. Ebay and Adsense are the long-term solution for me.
And I'm creating niche sites now for Sears, Kmart, and OfficeMax - all of which I'm an affiliate - because they all already have a physical presence in Massachusetts in their bricks and mortar stores. So not only would they have to get rid of their affiliates, they'd have to shut down their stores as well.
'So not only would they have to get rid of their affiliates, they'd have to shut down their stores as well."
Not really Nelle, all they need do is get rid of their affiliates to eliminate their online presence in those states the stores already collect the sales tax. The entire issue is about collecting sales tax from online purchases. The only affiliate programs that will be safe are those that are already collecting sales tax which many of the brick and mortar major players already do.
No no Richard, ANY physical presence in the state requires them to collect online sales tax - a bricks and mortar store, a wharehouse or an affiliate, as these tax laws are currently written. It's not just in relationsip to onlnine sales. The only way that would change is if they write the law to exclude a brick and mortar store as a physical presence.
So Amazon affiliates in West Virginia should be safe because Amazon has a wharehouse there.
But these are very uncertain times.
There are also merchants who have continued to work with NY, RI, and NC affiliates and I'm promoting those as well.
I wonder if they don't expect to see some of these repercussions when they pass laws like this. Can't they think of legislation that enhances productivity and entrepreneurship and brings in more taxes that way?
Well I was referring to the stores you mentioned in the previous post having to close and for any brick and mortar store that also has an affiliate program.
The issue is about collecting sales tax from online purchases. The stores you mentioned all charge sales tax already so they are safe no matter what. It's the stores that do not charge a sale tax for online purchases or instate purchases in order to gain a competitive edge that will be affected.
The physical stores would remain open because they are complying with the sales tax laws. The stores that have affiliate programs and are not collecting sales tax would have to eliminate their affiliate programs or start collecting sales tax on purchases because in the language of the legislation the affiliates in those states would constitute a physical presence.
Amazon could easily change their affiliate model to resemble Ebay's CPC model and be done with this mess.
I'm normally not very alarmist when it comes to this sort of thing, but my "uh-oh meter" is working overtime on this one.
Time to diversify. I have entirely too many properties monetized strictly through Amazon.
Go sign up at linkshare to become an affiliate. Find affiliate programs of large brick and mortar retailers and apply then create hubs and or other online properties to promote their products.
You name the program and I'm likely already participating. Some are more effective and/or useful than others, but there are quite a few now in my affiliate "goodie bag"
What I have always liked about Amazon (and eBay before it) was the accessibility. Once approved the entire catalog is available for promotion. Most other programs require merchant-by-merchant application with often tedious delays in approval, or non-approval for undeveloped or test properties.
Time is my most valuable tangible asset. I like to jump on an idea right when it hits me or the research proves profitable. I just hate wait times or not being approved. I consider them a waste of that most valuable asset and a drag on my inspiration.
That being said, it may be time for me to temper that approach.
Don't just look at Linkshare, go to Commission Junction, Google Affiliate Network, and Shareasale and find companies that have a physical presence in your state.
Then go to Affiliate Future and look at Foreign Companies to promote. Let's see our states get their mits on those guys.
That last tip came from my lawyer today. I don't like promoting foreign companies over American. But if the American companies are going to treat us like crap, then I'm fighting back.
And if you don't have your own site, this might be a good time to start one with Affiliate Friendly Companies.
The nice thing about some of those networks is the generous banners they provide. Given a good target and a well formed pitch page they can be extremely effective in my experience on non-Hubpages landing pages.
Conventional links can be created for Hubpages hubs, but it becomes rather tedious when combined with the various approval processes and may ultimately be less effective and more time consuming than Amazon or eBay.
Lots to consider. Within every major philosophy shift however lies opportunity.
You don't have to do it all at once. But depending on your state, I would start building up a state tax resistant portfolio.
Mike don't forget about Golden Can. It's free for a lot of merchants or you give up 1 click out of 4 for others. It lets you work easily with Sears, Kmart, OfficeMax and other major merchants, that have stores in almost every state.
I spent some time today working on a site with them and Golden Can, super easy to add great products quickly. And these three stores cover a ton of niches similar to Amazon.
Thanks for the tip, Nelle. I seem to remember dismissing Golden Can for some odd reason a while back for some likely random program point. I'll take a closer look on your recommendation.
I think what I personally need to do is start filtering through the entire portfolio of independents and larger programs and see how well it correlates to what I have established as good profitable targets.
I have a feeling I'll find quite the nice fit.
I just got laid off. How do I get started doing this?
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