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

Will terminate NC residents if legislation passes

     
3:16 pm on Jun 17, 2009 (gmt 0)

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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

3:59 am on June 18, 2009 (gmt 0)

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NC state legistlators are considering taxing Internet transactions. Amazon sent it's NC affiliates an email warning of the impending end of the Amazon affiliate program if the law passes.

News coverage here [news-record.com].

5:39 am on June 18, 2009 (gmt 0)

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I gather that the legislature in actually taxing the sale of a book or whatever, but the value of the click? Is that right?

I don't think they thought this through very well. Most of the affiliates are selling used books, low prices with razor thin margins.

I don't know where they get the idea of how much money they can raise. It seems a fantasy.

6:55 am on June 18, 2009 (gmt 0)

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The guberment is money hungry these days. They fantasize about everything ka-ching.

And when all the money sites move off-shore they will try to figure out a way to tax the letter "a" or "y" or "z" in email messages...

Mark my words. :)

3:30 pm on June 18, 2009 (gmt 0)

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they will try to figure out a way to tax the letter "a" or "y" or "z" in email messages

Only the dumb ones. The smart ones will try to tax the periods in e-mail messages. :(
5:38 pm on June 18, 2009 (gmt 0)

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Is this the state where the governor wanted to turn down the federal stimulus money they were offered?
6:45 pm on June 18, 2009 (gmt 0)

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Is this the state where the governor wanted to turn down the federal stimulus money they were offered?

Nope, that was South Carolina. North Carolina voted Democrat this year, hence taxing the Internet.

7:27 pm on June 18, 2009 (gmt 0)

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There is a petition set up to try to fight this tax. You can probably Google it or find it via twitter where lots of people have been RTing it.
3:06 am on June 19, 2009 (gmt 0)

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So, state by state passes this law, .com's continue to drop affiliates from each state that passes this law. That sucks for people who make a living from this.
6:05 am on June 19, 2009 (gmt 0)

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why not just form an LLC in a state that does not / will not have the sales taxes? You could then continue to work from wherever you were on 'vacation' in.
6:23 am on June 19, 2009 (gmt 0)

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I guess I don't understand. How would dropping affiliates help combat the new taxes?
2:04 pm on June 19, 2009 (gmt 0)

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Because having affiliates in that state defines the business as having legal presence in that state -- which means Amazon has to pay NC taxes, too. So they simply drop all affiliates from that state. No affiliates from that state, no legal presence, and Amazon doesnt have to pay taxes in that state.

Or something to that effect

4:49 pm on June 19, 2009 (gmt 0)

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No affiliates from that state, no legal presence, and Amazon doesnt have to pay taxes in that state.

Yes, the best way for a large business to protest state taxes is to pull out of that state.
5:08 pm on June 19, 2009 (gmt 0)

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Surprised this is happening in North Carolina before NY
5:24 pm on June 19, 2009 (gmt 0)

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I haven't been keeping up with what's going on in NY, but I seem to remember that Amazon is suing the state about the issue. Perhaps they're waiting for the outcome of that before terminating NY affiliates? Perhaps by terminating NC affiliates (probably a smaller base than NY affiliates), they're sending a message of what will happen if the NY suit fails?
7:48 pm on June 19, 2009 (gmt 0)

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They have so far lost their lawsuits in New York. All their affiliates in New York are already gone.
8:08 pm on June 19, 2009 (gmt 0)

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Kind of odd that they are carrying on like this, as they are based in WA, IIRC, and WA has some of the scariest sales taxes in the country.

of course, WA also has no income tax.

And also on this deal, it is probably not just Amazon doing this. It is just that Amazon is the biggest one doing this.

5:58 pm on June 20, 2009 (gmt 0)

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So a single banner ad or book review placed on a blog by a single person in a given state in the USA constitutes a "business presence"?

The law has not caught up with the internet and the nature of the digital age yet.

Maybe I'm dumb, but no money changed hands in NC.

How is a nationally targeted website maintained by an NC resident different than a magazine sold with an ad that generates an NC sale?

It isn't like NC residents still won't make those same purchases through Amazon or its affiliates who happen to be in other states.

I see opportunity for someone to set up a site/blog blasting the latest news on the these developments. Perhaps helping small affiliates navigate the LLC process in a "good" US state and charging a reasonable fee.

Wish I had expertise in US taxation!

Israel

11:04 pm on June 21, 2009 (gmt 0)

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I just want to point out that California is about to pass a similar law:
[webmasterworld.com...]

There is still time to fight!

11:01 am on June 22, 2009 (gmt 0)

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Crazy town gone mad if you ask me!

What if you buy a magazine in NC and respond to an advert. Does the company selling the goods now have a legal presence in NC? What if the magazine publisher was based in NC?

Is the internet any different from a magazine? Should it be any different? Ok the commission per sale model is slightly different but there's nothing stopping a newspaper or magazine running an offer and making a commission per sale per se?

Perhaps if Amazon switched to a CPC model instead of comission this would no longer align it with these tax laws. The CPC can then be based on the affiliates performance.

5:10 pm on June 22, 2009 (gmt 0)

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In regards to the current issue in California- the original bill has stalled. However, the language of it has been added to the current budget bill. One senator I contacted apparently had no idea about that. So it is imperative that you educate your representatives about this attempted deception!
11:22 pm on June 22, 2009 (gmt 0)

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Today, Amazon also announced that it will terminate its relationships with ALL California web publishers (associates/affiliates), if the budget bill passes with the AB 178 "Amazon Tax" language.
5:07 pm on June 23, 2009 (gmt 0)

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They have so far lost their lawsuits in New York. All their affiliates in New York are already gone.

Not true. Amazon Associates in NY are still in the Amazon program. I believe that Overstock dumped their NY affiliates, but Amazon did not.

These laws are ultimately going to be dealt with by the Supreme Court. Real problems with the commerce clause, IMO.

12:35 pm on June 26, 2009 (gmt 0)

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Received notification from Amazon this morning that they've closed my account as of this morning. Thanks for the warning, A. I'm actually more frustrated with Amazon than with the state. NC is trying to recoup the sales taxes they're losing on purchases made via the internet vs. bricks and mortar stores, and I can't say I fault them for that.

I've been pondering whether to close my site down, and I think this is the final straw.

1:55 pm on June 26, 2009 (gmt 0)

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Thanks for the warning, A.

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

I'm actually more frustrated with Amazon than with the state.

I'm more frustrated the state of NC can't control its spending and live within its means the same way a majority of the individual citizens within the state are doing with their personal budgets. The constant spending creates the constant need for more revenue - thus this legislation.

NC is trying to recoup the sales taxes they're losing on purchases made via the internet vs. bricks and mortar stores, and I can't say I fault them for that.

They are not losing unless the item purchased at Amazon would have been purchased at a local brick & mortar store anyway. It's probably impossible to accurately measure that across the populace, but the majority of things I have purchased from Amazon I wouldn't have purchased from a local brick & mortar store.

FarmBoy

2:09 pm on June 26, 2009 (gmt 0)

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the majority of things I have purchased from Amazon I wouldn't have purchased from a local brick & mortar store.

So if there was no such thing as online shopping, you just wouldn't have bought them at all? They were luxury items, impulse buys? I think that makes you unusual. Most people buy things they need online, whether at Amazon or some other company. In some places, that has had a real impact on bricks and mortar stores--I live in New York, and there have been several specialty bookstores closed due not to competition from Barnes and Noble but to loss of sales from Amazon. And that's just one example.

If current trends continue, it's possible to imagine companies like Amazon locating in friendly locations (like banks do in Delaware) and gradually draining sales tax revenues from other states while also killing off B&M businesses.

The issue won't be solved by state-by-state action, though. I understand there is legislation in Congress that would create a framework for dealing with this--which would probably benefit us, because it would remove the incentive for companies like Amazon to stop working in individual states.

2:29 pm on June 26, 2009 (gmt 0)

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A couple more thoughts:

1. Those monthly checks to NC Associates constitute taxable income. Now NC has lost that revenue.

2. In Raleigh, there is an AP history and government teacher who is a somewhat noted blogger. She notes on her site that her commission checks from Amazon are used to purchase related materials for her students/classroom. Now, that's gone unless she pays out of her pocket, the students pay direct or she gets tax dollars to make the purchases.

It's not easy to measure the total gain/consequences of something like this.

FarmBoy

3:04 pm on June 26, 2009 (gmt 0)

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Duplicate post delete.

FarmBoy

[edited by: farmboy at 3:06 pm (utc) on June 26, 2009]

3:04 pm on June 26, 2009 (gmt 0)

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So if there was no such thing as online shopping, you just wouldn't have bought them at all? They were luxury items, impulse buys? I think that makes you unusual.

Maybe. Maybe not.

Most of what I buy from Amazon is books - usually How-To or Reference books that I've read about in an article, blog, etc.

Where I live, there is only one brick & mortar bookstore with any degree of selection of new books - a small Waldenbook store in a small shopping mall about a 20-25 minute drive away. They seldom stock the books I purchase, so I have to call or go there and order the book, wait for them to call and let me know it has arrived, then drive there to get the book.

With Amazon, I read a few reviews of the book from the comfort of my home then do the one-click ordering thing and a few days later the mailman leaves it at my door.

Faced with those two options, if not for online shopping, I would purchase fewer books.

I live in New York, and there have been several specialty bookstores closed due not to competition from Barnes and Noble but to loss of sales from Amazon.

That's part of the dynamic marketplace in which we live. A hundred years ago, upwards of 95% of Americans has to work in food production/agriculture. Due to technological advances, now that number is a distinct minority.

After Henry Ford came along, a number of horse buggy manfacturers went out of business.

If current trends continue, it's possible to imagine companies like Amazon locating in friendly locations (like banks do in Delaware) and gradually draining sales tax revenues...

You and I view revenues to government bodies in a different manner. I don't view activities by citizens as opportunities for government bodies to generate income for collective uses. I view government revenue as needed to pay for the necessary services associated with the activity.

Suppose 1,000 people in a NC city today decided to purchase a copy of the Michael Jackson CD "Thriller". If they did it online via Amazon, they would make the purchase from their home computer and the USPS delivery person would deliver it a few days later as part of his regularly scheduled route. That creates relatively little demand for government services and need for government revenue.

Now suppose those 1,000 people decide to get in their vehicles and drive to a B&M store to make the purchase. That increases the wear & tear on government infrastructure, creating the need for government revenue. The presence of the B&M store increases the need for government services.

Plus, that's 1,000 more vehicle trips belching exhaust that so many people seem concerned about these days.

FarmBoy

3:21 pm on June 26, 2009 (gmt 0)

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Those monthly checks to NC Associates constitute taxable income. Now NC has lost that revenue.

That's the argument I made to all the politicians I contacted. I also pointed out that I have additional streams of revenue, so if I (as well as others) am forced to leave the state to protect that stream of revenue, the tax on those other streams of revenue will also be lost to the state.
Plus, that's 1,000 more vehicle trips belching exhaust that so many people seem concerned about these days.

Not only that, but that's 1000 more vehicle trips adding to the already congested roads slowing EVERYONE down that much more, which adds even more exhaust from the thousands of of other vehicles affected by the incremental increase from the 1000.

It's also that many more potential vehicle accidents- and those really DO use up a lot of government resources! Especially if one of those vehicle trips results in a death.

Oh, and guess what politicians- that death means even FEWER tax dollars coming into your state in the future because dead people don't generate revenue or buy things!

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