Amazon to End Affiliate Program in NC if Web Tax Law Passes

Will terminate NC residents if legislation passes

[farmboy]

Amazon is sending notices to North Carolina Associates that their association with Amazon will be terminated if the state legislature passes a planned Nexus legislation.

FarmBoy

[adamxcl]

Agreeing with FarmBoy in that my purchases would go down. I can get it to my door on convenience, impulse or whatever you want to call it but if I have to go out for it, I'll go my library website, check stock or request it and pick it up for free. Much easier (and cheaper) than going to a real book store and the ensuing hassle.

[farmboy]

I wonder if this creates an opportunity for someone in an adjoining state, such as South Carolina, to open some type of "online property management" business so NC webmasters could become "based" in South Carolina?

FarmBoy

[LifeinAsia]

Then affiliates get to pay income taxes in both states.

Hmmm, maybe maybe this is part of some behind the scene deal between NC & SC...

[farmboy]

The Charlotte Observer has an article today quoting an Asheville couple who earn more than $70K annually from Amazon via their website. They are planning to move from the state if this stands.

FarmBoy

[farmboy]

Then affiliates get to pay income taxes in both states.

You wouldn't have to pay income tax in both states.

FarmBoy

[LifeinAsia]

If you have income in 2 states, and both states have a tax on income, then guess what? You pay to both states. Most states have reciprocal agreements so that you would get a credit for state income taxes paid outside of your home state.

[peggster]

They sent out a warning previously, back when this thread was started.

Yes, I received that email, which basically said they might close my account at some point in the near future if the legislation went through. Um, okay, but when? Then this morning I get notice that as of today they will no longer pay referral fees. That's not sufficient notice, as far as I'm concerned.

I understand that Amazon is trying to make all the affiliates angry at the legislature so that the affiliates will complain and hopefully stop the legislation. But Amazon hasn't exactly treated me as an affiliate very well here.

[farmboy]

Yes, I received that email, which basically said they might close my account at some point in the near future if the legislation went through. Um, okay, but when?

That email, sent on the 17th, indicated the law would go into effect once enacted, that it could happen anytime within the next two weeks and they would have to terminate on or before it was enacted.

That's not sufficient notice, as far as I'm concerned.

Amazon doesn't control when the legislature will vote on a piece of legislation.

I understand that Amazon is trying to make all the affiliates angry at the legislature so that the affiliates will complain and hopefully stop the legislation.

State legislators and the Governor have been told in the past this would happen to Associates if the legislation were enacted. How much notice did you get from your representatives or Governor?

FarmBoy

[ken_b]

But Amazon hasn't exactly treated me as an affiliate very well here.

It sounds more like your state legislature hasn't treated you very well lately.

What did your state senator and representatives say when you talked to them about the issue?
.

[iridiax]

This is also happening right now in Hawaii. I just got the email from Amazon warning me that associates in Hawaii will be dropped unless Governor Lingle vetoes a recently passed tax collection bill.

[tangor]

The desire by legislators to tax on line activity (sales, email, etc.) has been in the works since the late 1980s. There should be no surprise in that regard, ie., developing revenue streams. Things that are popular (like tobacco and alcohol) or media events, etc. are generally taxed. And, truth be told, goods sold (USA) from one state to another should include declared sales tax (but the customers never do). This attempt to collect revenues will not go away, particularly in these recessionary times, so expect more of the same. Should it come down to all 50 States enacting legislation regarding affiliate sales what's next for Amazon?

[JS_Harris]

This isn't a NC only problem. California was just facing the same thing and before that NY did too. I don't blame Amazon for needing to cut out sites that would impact the bottom line severely, which is what this type of legislation does.

When California was under the gun on this issue I can't tell you how many messages I read from non-California webmasters who clearly didn't care. To them I point out that if it works in ONE state it will spread quickly, stand up to the issue and don't wait for it to come to your state.

edit: I wish there was a poll on WW that asked if you'd be willing to relocate to another state if your top performing affiliate program gave you the boot just because of your current state of residence. Personally, I'd relocate promptly if my State severed my income without my having any options.

Divorced parents of young children beware - needing to move to another state to protect income is good cause to be granted a move away order. This legislation has the potential to impact kids lives too.

[edited by: JS_Harris at 11:15 am (utc) on June 27, 2009]

[rickumus]

Our account was closed by Amazon yesterday. :-(

Is this going to affect Google Adsense and CJ as well?

If so, I'm moving in July.

[onepointone]

Should it come down to all 50 States enacting legislation regarding affiliate sales what's next for Amazon?

It probably wouldn't need to go that far. If the larger states 'go' along with enough of the smaller ones, amazon & others might just close up the aff program. (as not worth the hassle). In the US at least.

[farmboy]

I just read the pending NC legislation and it seems to say that if one NC Associate earns more than $10,000 in annual commission from Amazon, then they have to start collecting the sales tax.

In case anyone from Amazon is reading this - I would be willing to enter into a new Associate agreement with you that states I can't earn more than $9,995.00 annually from my sales and if I exceed that amount, you don't owe me any more commission on sales in that year.

That wouldn't help everyone, but I would be willing to enter into that agreement for now.

FarmBoy

[adamxcl]

If there is ever a few hold out states down the line, they'll get a lot of new residents and revenue.

I moved between two states in June of last year, pretty much the half way point of the year. Both states have a minimum amount of time (seven months or more) to live in one state, credits for time in their state and another state, etc.

I spent a lot of time doing my taxes the right way and then trying it out as if I was a full resident in each state to compare.

In the end, because I spent six months in each state and not seven like a clear majority, my move made me save about 10k in state taxes. Both states considered me part time. I even overpaid one state just believing the instructions were not correct. They sent the money back to me. Almost makes me want to move every year.

[ken_b]

So which states have no sales tax or personal income tax?

[tangor]

Wikipedia has an article on "state income tax" which answers part of your question. As to sales tax, I believe all states in the US collect sales taxes of some kind.

[iridiax]

Hawaii Amazon Associates accounts have now been closed. :-(

[trueMarketing]

"If you have income in 2 states, and both states have a tax on income, then guess what? You pay to both states. Most states have reciprocal agreements so that you would get a credit for state income taxes paid outside of your home state."

Not for some thank God!

I'm glad I have parents that live in SC just above Myrtle Beach. We live outside of Raleigh, but I'm already seeing this new law trickling down to smaller affiliate programs we use, like Pepperjamnetwork.com affiliates, etc. which ha caused me to set up other alternatives to the NC tax law.

I'm simply going to pay for the LLC setup in SC at less than $150/year. Then, have my dad as the sole member/manager of the LLC. Here's how it'll work for me from this point forward:

1) New SC LLC makes $100k in affiliate revenue for the year from various affiliate programs

2) All funds go into the SC bank where our account is set up and dad is sole owner of

3) Of the $100k we calculate the normal taxes paid (from any earnings in any state which is roughly 31% state/federal for SC)

4) Left over amount is approximately $69k at the end of the year.

5) I give my Dad a ~$1k month for his troubles.

6) He sends me a certified personal check for the remaining amount in the account after taxes each month or I visit and pick it up myself

7) NC tax law can suck it cause they ain't getting jack extra from me ;-)

Having relatives in another state not yet signed up with this stupid NC affiliate tax law seems to be the only real option.

[CarolinaInvestor]

North Carolina government has gone to the loons. The thing that most of you are missing is that you think the politicians think like you do. Thats wrong. There doesn't have to be any logic to the legislation. They are slowly but surely sucking the lifeblood out of the state and its residents. I understand that they are also planning on passing an income tax increase that will make NC second only to CA. Wow thats progress.

[CarolinaInvestor]

truemarketing,
I also am thinking about moving the company to SC. Hey at $150 I'll also save in my yearly corp dues. Not to mention the lower unemployment fees, etc. Half of my B&M business clients have left for SC anyway.

[ken_b]

If you guys don't like this tax, please send your state legislators a list of

state services that directly affect you,

which you would like to give up.

Don't worry about cutting the "other guys" services, just your own.

You know, things like schools and roads and courts and state police.

I'm guessing that wil get your legislators attention.

You can do tis in any state, most of them are scrambling to balance their budgets and would probably appreciate the advice.

[LifeinAsia]

I can do without the salaries for the politicians who aren't doing what they're paid to do. In the private sector, if you don't do what you're paid to do, you get fired. In the private sector, if your company is doing bad, you either get laid off or you take a pay cut to keep your job. The same rules should apply to the public sector.

[engine]

Just to expand upon iridiax's post...

Amazon and Blue Nile [uk.reuters.com]

Amazon.com has closed its third Internet associates program in a week, in Hawaii, as the online retailer steps up an effort to skirt new sales taxes in several U.S. states.
Amazon's move follows the cancellation of associates programs in North Carolina and Rhode Island, under which the world's top online retailer pays websites -- its associates -- a portion of sales that are channeled to Amazon.com.

In a sign that other Internet retail sites are following Amazon's lead, online jeweler Blue Nile Inc said on Tuesday it had also severed its relationship with affiliates in North Carolina and Rhode Island.

[trueMarketing]

I'd just like to follow up and point out a few things becoming evident in just a matter of a couple of short days since NC passed this new affiliate tax law.

In just two days I've been told by several affiliate friends in NC that they (as well as myself) have set up their new affiliate LLCs, S corps, etc. with other family members in either Va. or SC. (one set up in Pennsylvania since his parents were located there). Now their parent(s) will be the sole member manager of their business. ;-)

These were just a few short Skype conversations I had but I'm sure this is happening by the masses as affiliates will find ways to set up their LLCs, C corps, or whatever, outside of NC boundaries to avoid this tax.

What does this mean for NC. Well, to name a few:

1) Just from the people I know this means tens of thousands of dollars not funneled back into NC as paid state dollars (state or other business related taxes).

2) I was also told that a couple of friends of my affiliates, who were themselves sub-affiliates, were not going to be able to carry on with their business, so they will be filing for unemployment.

This means more dollars out of NC tax payers pockets to pay for the more unemployment in NC because they some affiliates will simply close shop that were barely breaking even to begin with while operating their affiliate business.

3) from #2 above, the new unemployed affiliates will obviously not be paying any taxes back into NC. You get the revolving/mounting problem here for NC?

What I can't understand is this scenario below and why it means a tax has to be paid back to the state:

1) Let's say I run a website about LCD TVs and I live in NC.

2) On my website I have a banner ad that points to Overstock.com.

3) My site ranks well for "Phillips 42" LCD TV" so I get clicks from all over and from people in all states or Internationally.

4) Someone from Texas visits my site and clicks on the Overstock.com banner, lands on Overstock.com's website, and decides to buy an LCD TV from them.

So, to recap -- someone from Texas visits my website and I'm an LLC based in NC. Then they buy a TV from Overstock where their location in actually in CA (where the product is shipped from and the Overstock.com company is located).

It makes no sense to me that Overstock would have to pay for sales tax in NC for an online purchase from a resident in Texas where the sale was simply started from a click from my website.

Am I missing something here? Seems retarded to me. But maybe I need more coffee. :-(

[LifeinAsia]

Yes, you're missing something (I made the same conclusion a few months back). Overstock would only collect sales tax on orders shipped to NC if they have affiliates in NC. (The same rule would apply to other states trying to enact this silly legislation, if Overstock has affiliates in those states.)

So Overstock (and other companies running affiliate programs) basically have 4 options:
1) Take the states to court to rule the new legislation invalid.
2) Terminate affiliates in those states to avoid the nexus argument.
3) Collect the sales tax for orders to those states.
4) Stop delivering to those states.

All 4 scenarios are costly to the companies. Affiliates would be adversely affected by all 4 scenarios as well. Scenarios 1 & 2 are costly to the states, 4 would probably be worse PR for the companies than the states, and 3 is exactly what they are hoping for (although some people will change to buying from companies that don't have to charge sales tax, so the revenue the states actually get will be far less than they were expecting).

[trueMarketing]

@LifeinAsia -- Thanks for clarifying. I knew I was missing some small variable here. Still makes no sense despite the clarification ;-)

[Go60Guy]

I don't know if this has been posted yet, but California, at least for now, is rejecting the so called "Amazon Tax" by way of veto by the Governator.

[gov.ca.gov...]

Seems Arnold actually "gets it". Kudos to Overstock for carrying the ball. I don't think it's necessarily over in California, since another bill is still pending, or it could be tacked on to some other piece of legislation that Arnold desperately needs to have enacted. Don't underestimate the zeal of legislators when it comes to things political.

[LifeinAsia]

It does sound like he gets it. However, take with 1 or fewer grains of salt. This is the same Gov. who promised no new taxes to get elected when Davis was recalled, and has since then make California the highest taxed state in America.

This (and other press releases) have stated his opposition to any new taxes. But like I've pointed out before, this would not be a "new" tax- simply a new way of trying to collect the existing tax that has been on the books for years.