Wednesday, June 29, 2011

California Tax Plan Will Screw Amazon Associate Sellers

An EPJ reader emails a letter from Amazon that he just received:
Subject: Notice of Contract Termination Due to Potential New California Law
For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred.
This is just one more reason that these states need to default on their debt, instead of scavenging for tax revenue in every nook and cranny of their economies. The tax revenue distorts the economy, grows the state and results in preventing some people from earning an honest buck.


  1. I hear there are around 25,000 affiliates in California that will now lose an important source of income. Way to go Sacramento!

  2. Having just graduated college this spring and being a website owner, who uses Amazon and other affiliates in an attempt to make a living for myself with my fitness website, I was absolutely FUMING when they passed a similar bill in my home state of Vermont.

    I spoke with all of my representatives, to voice my disagreement. And while they were all "concerned," only one was actually against the bill. Still, the governor had signaled he wouldn't sign it. BUT being the grimey individuals that these (and most) politicians are, they slipped it into the larger budget bill right and it was passed.

    My brain hurt for a while after this, just trying to comprehend whether they actually believed their own logic. Here's what one told me:

    > I consider myself a big proponent of a free
    > internet, having run my own political blog for
    > some years now. And for a long time, my position
    > was that taxation and the internet should stay
    > separate concepts. But with internet retail
    > sales now a very healthy percentage of the US
    > economy, we don't have that luxury any more --
    > we need to realize more revenue from online
    > sales, especially at the state level. With that
    > said, I support efforts to collect Vermont sales
    > tax from large-scale out-of-state online outfits.
    > Amazon's response to this effort from the states
    > is, in my mind, a slash and burn response: drop
    > affiliates where the company can afford to do
    > so. And that's a very real risk to weigh. But on
    > balance, that's a risk we can't avoid taking;
    > otherwise, we are literally held hostage. Forget
    > collecting sales tax, or the local affiliates
    > get hurt, is the message, and that's more
    > suitable to a mobster than a good corporate
    > citizen
    > ...
    > Wish we saw eye to eye on this, as you're
    > exactly the sort of person I ran to try to help
    > while in office: young, smart, entrepreneurial.
    > I want folks like you to stay in-state. But the
    > truth is tat we need to bite the bullet and
    > figure out a 21st century tax structure...

    When I first read this, the essence of my reaction was this: - You really expect me to believe that the poor little state government (the one who's already been shaking me down through various taxes and now seeks fresh blood from a new victim) is "literally held hostage" by the big, bad "mobster" known as Amazon (the company that has enabled me to earn a living through them as an associate)? Hmmmm....

    On a positive note, though, it won't go into effect unless/until 15 states enact a similar law. But at the current pace, it seems like this is inevitable. Ugh! At least I live close to New Hampshire and can move there if it comes down to it.

    HOWEVER, I didn't just leave this comment just to rant (that was part of it though :-D). Rather, I wanted to let others know that there *may* be a solution for those affected by this type of legislation; assuming you don't simply move out of state.

    I came across a company,, based in the UK. Basically, it's an intermediary between publishers and the retailers. It is partnered with Amazon, Overstock and a bunch of others. You use Skimlinks as the middle-man to link to affiliate products. Since they're outside the any affected states (and the US altogether), it may be a workaround for those who can't otherwise participate in the affiliate programs. I think they take 25% of your earnings. But keeping 75% or your money is a whole lot better than keeping 0%.

    If anyone knows about Skimlinks or similar programs, I'd like to hear if you know anything about program and/or any legalities related to using it as a way to bypass the affiliate tax.