Amazon firing all Illinois associates

wondering how Google Affiliate Network will react

[dibbern2]

The brainiacs in our state legislature passed a bunch of new tax levies yesterday. Both houses voted yes, and our Governor is scheduled to sign the bills today. This is all part of a lame-duck session that is trying to deal with the massive debt Illinois is carrying as we enter the new year.

One of the new taxes -called the Internet Sales Tax Bill, and referred to in short as 'The Amazon bill'-- is similiar to taxing schemes set up in New York, Rhode Island, and Colorado.

Amazon sent email notices this morning that it will cancel all assoctiate accounts within Illinois when this new measure becomes law.

I have a small associate business with Amazon, and am unhappy to see this minor part of my business go away.

On a much more serious note, however, I am concerned with how Google will react. On one level, I have a serious involvement with several marketers through the Google Affiliate Network. Whats going to happen?

Even more scary, though, is how this might effect AdSense.

You might think at first "well Amazon is involved in selling things through its Affiliates, and AdSense is not, it's commisions on advertising." But before you take that opinion, remember that Amazon classifies its affiliate payments as advertising fees.

Any ideas or comments?

[Lapizuli]

I'm somewhat hazy on this, but about New York: I think the New York case has been appealed, countersued, or is still in court - unresolved in some way, anyway - and Amazon pretty much has to pay the tax while it's happening. As I understand it, Amazon's hands are tied while the case is going on - they can't let themselves bow to other states until the New York case gets settled, or they weaken their legal position there and in other states.

[blogs.wsj.com...]

[thiefware]

The states that institute this sort of stupidity are losing more now than if they did not institute such dumb state bills. If you want more information on these bills see the following links:

The specific bill (HB 3659 — Amendment 3) [ilga.gov] (look at lines 22 through 26 of Page 9 and lines 1 through 8 of Page 10)

It's called the Amazon.com tax [247wallst.com]

More info on the tax [abestweb.com]

It appears as though big corporations are behind these stupid manuevers because these big corps have brick and mortar stores that pay taxes and don't like that internet stores are tax free. So they are attempting to punish the internet retailers to gain advantage. In Illinois, it was said that Walgreen's was one of the instigators of the Illinois advertiser tax bill.

These advertiser tax bills hurt the affiliate and the state because the affiliate gets dropped and loses income and the state loses income tax revenue from affiliate. The big corps are the only ones who stand to profit.

[LifeinAsia]

The big corps are the only ones who stand to profit.

And yet they most likely won't. The affiliate companies will just fire their affiliates in the state and pretty much continue business as usual. They may lose a few sales, but I don't think it would be a significant amount. (If it were really significant, they would keep the affiliates and charge the sales tax.)

[lgn1]

The affiliate companies will just fire their affiliates in the state and pretty much continue business as usual

If you read between the lines, amazon is basically urging the affilliates to purchase a PO box in a different state, to have their cheque delivered.

[UserFriendly]

Why don't the feds just require all companies to collect federal and state taxes at transaction time? That would level the field.

[thiefware]

lgn1 said:

If you read between the lines, amazon is basically urging the affilliates to purchase a PO box in a different state, to have their cheque delivered.

How do you have your mailings to that outside PO Box delivered to a location within reasonable reach? (There maybe a way I'm not aware.) Also, many have direct deposit to their local banks. Affiliate networks usually require actual physical residence address for tax purposes (i.e. sending 1099's). Besides that, when the state receives your year-end state income tax with 1099's and they cross check with sales taxes collected, the figures won't jive. State will know something is amiss.

[lgn1]

With the PO Box comment, I realize its more complicated. But what I was basically saying, is Amazon gave you a warning, and if you have sizable income from the Amazon affillate program; it may be time to move your business out of Illinois (whether it be a physical or virtual move, and all the complications that go with it).

[azwebguy]

Increasing the taxes is not going to solve the problem either - it is a pyramid scheme approach to money management that will cave in someday.

[onepointone]

There are at least 2 (that I know of) affiliate setups that let affiliates in these states continue to get paid.

What they do is sign up as a sort of "sub-affiliate" under the main affiliate. The merchant is partnered with the main affiliate. (who lives in an affiliate friendly state).

The affiliate code is changed and the sub-affiliate is paid by the main affiliate (who takes a small cut of the commissions).

I have no idea what the long-term viability or legality of this is, but these kind of schemes will probably continue to pop up though.

[plumsauce]

... it is a pyramid scheme approach to money management that will cave in someday.

Priceless ... you just described most of the internet.

[plumsauce]

...
It appears as though big corporations are behind these stupid manuevers because these big corps have brick and mortar stores that pay taxes and don't like that internet stores are tax free. So they are attempting to punish the internet retailers to gain advantage. In Illinois, it was said that Walgreen's was one of the instigators of the Illinois advertiser tax bill.

These advertiser tax bills hurt the affiliate and the state because the affiliate gets dropped and loses income and the state loses income tax revenue from affiliate. The big corps are the only ones who stand to profit.

And if you, or Amazon, or Google could gain an edge in some way, would you care if your state benefited?

Does anyone remember that Google specifically arranges all of its affairs in order to pay the least tax it can? And that they have been spectacularly successful at it. Those are potential tax revenues that might have benefited Illinois, and therefore, avoided the specific action at hand.

So, why aren't you calling down Google?

Everytime someone avoids paying a dollar in taxes, it is a dollar that will be recovered from some place else. Perhaps, your pocket.

States did not have this problem with factories employing workers in state. The problem arises because of the ability and strong preference of internet based businesses to say that they are actually domiciled in places like Cyprus or Malta. At that rate, there must be two Starbucks shops on every block of every street in those countries.

[thiefware]

plumsauce said:

...Everytime someone avoids paying a dollar in taxes, it is a dollar that will be recovered from some place else. Perhaps, your pocket. ...

But these nexus taxes won't help Illinois at all because the affiliate network will simply cut me loose. I lose amazon referral fees, Illinois loses taxing my lossed affiliate income. It's plain stupid on Illinois' congress' part to tax this way. The only ones who benefit from this are large brick-and-mortar corps--the ones who are likely behind this garbage. Illinois does NOT benefit by setting up this nexus tax.

IT'S A "STUPIDITY STATE TAX" that benefits only the brick-n-mortar businesses.

If Illinois would kill this tax, they'd continue to tax my affiliate income at the state income tax level and when I make purchases within the state (sales tax).

[dibbern2]

update: I met with my attorney yesterday to inquire about incorporating outside of Illinois and keeping my residence here in Chicago.

answer: its incredibly easy and perfectly legal.

[bears5122]

This officially was signed into law yesterday. Sad news for affiliates and have already received the termination letter from Amazon. It got some publicity in the Chicago papers and they quoted some local coupon sites (CouponCabin.com being one) based in Chicago that said they'd look into moving to Indiana. Not sure how this will effect Groupon.

Illinois just doesn't want businesses or jobs. They want money. Sad to see the state turning so anti-business, especially when it comes to small ones. We'll just see internet businesses shift out of state to ones that want them.

[berto]

I am an Illinois affiliate whose Amazon contract is due for imminent termination.

Even though I will no longer make money from the Amazon relationship, I want to retain the hundreds and hundreds of links to Amazon products at my website. Why? Because I run a special-interest portal, and linking to those products serves my visitors (even if it doesn't any more directly benefit me).

I have removed my associates tag from all of my site's product links, but I have kept the links. Does anybody see any problem with this? The Amazon e-mail says the affiliate relationship must now end, but it doesn't advise yanking all links.

Thoughts?

[Jane_Doe]

I have removed my associates tag from all of my site's product links, but I have kept the links. Does anybody see any problem with this?

How about I give you my Amazon associates ID to put in the links and then pay you advertising fees to to advertise on your site. :)

If it were me I would at minimum have an out of state friend or relative open an account and collect the refferal money.

Or do like Dibberns and open a business in another state and have the business be the associate.

I think a good business layer or CPA could find a million ways around this law.

[berto]

The money loss is not substantial. It is not worth my while to set up my small-potatoes "business" elsewhere in order to save my relatively paltry Amazon revenue.

My Amazon product links are, in part, in the form of sidebar product thumbnails that serve as eye candy. Without them, my site would be much more visually drab. And what would I replace the colorful Amazon product thumbnails with? Even drabber Adsense text ads? (Adsense image ads do not work well at this site.)

Ultimately, I want to keep the links (with associates tag removed) in order to better serve my site visitors, and to promote our common "cause", not really to make money.

My concern is: Might I still run into trouble with this arrangement? Whether with Amazon or the State of Illinois -- even though I am no longer an Amazon affiliate, much less do I directly benefit financially from any remaining ties (via the remaining cleaned-up links) to Amazon.

There must be hundreds of non-affiliate sites within Illinois that casually link to Amazon products. Except for my large number of links, I am now no different from these other incidental, occasional linkers. And presumably we have nothing to fear. Correct?

[mslina2002]

berto, if it is a regular link, I don't see a problem linking to amazon if it is helpful to your visitors.

If you see your visitors visiting a particular product/merchant from Amazon, perhaps you can
(1) sell direct ads to these merchants, or
(2) see if these merchants have an affiliate program and add those links instead and not go through Amazon.