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?

[LifeinAsia]

AFAIK, Google (AdSense) hasn't done anything differently in those states. Individual advertisers in GAN (Google Affiliate Network) may drop affiliates in those states, as they may have done with the other states.

[Brett_Tabke]

This is posted in numerous places on the web now:

Greetings from the Amazon Associates Program:
We regret to inform you that the Illinois state legislature has passed an unconstitutional tax collection scheme that, if signed by Governor Quinn, would leave Amazon.com little choice but to end its relationships with Illinois-based Associates. You are receiving this email because our records indicate that you are a resident of Illinois. If our records are incorrect, you can manage the details of your Associates account here.

Please note that this not an immediate termination notice and you are still a valued participant in the Amazon Associates Program. But if the governor signs this bill, we will need to terminate the participation of all Illinois residents in the Associates Program. After that point, we will no longer pay any advertising fees for sales referred to amazon.com, endless.com and smallparts.com nor will we accept new applications for the Associates Program from Illinois residents.

The unfortunate consequences of this legislation on Illinois residents like you were explained to the legislature, including Senate and House leadership, as well as to the governor's staff.

Over a dozen other states have considered essentially identical legislation but have rejected these proposals largely because of the adverse impact on their states' residents.

Governor Quinn's office may be reached here.

We thank you for being part of the Amazon Associates Program, and wish you continued success in the future.

Sincerely,

Amazon.com

This e-mail was sent to {}.

Please note that you must use this e-mail address to access your account in Associates Central or when contacting Associates Customer Service.

To manage your e-mail preferences, update your account settings.

Message Category: Possible Termination Because of New Illinois Legislation

© 2011 Amazon.com. All rights reserved. Amazon.com is a registered trademark of Amazon.com, Inc. Amazon.com, 1200 12th Ave. S., Suite 1200, Seattle, WA 98144-2734, USA.

[maximillianos]

I got one. Though I am not an active Amazon affiliate I do feel sorry for those folks who are.

[ember]

I'm in Colorado and was terminated as an Amazon affiliate awhile ago, thanks to our wonderful legislature. We all ranted and raved but nothing changed.

[wheel]

You can vote in people to make changes.

And in Chicago, probably do so more than once!

[Rugles]

And in Chicago, probably do so more than once!

..and the dead too.

They have to close these massive budget gaps somehow I guess. It won't be long before even more jusisdictions want to tax the Internets.

[UserFriendly]

Can someone sum up what this new bill has changed, and why it has irked Amazon so much?

[ken_b]

This could probably have been avoided if the people of Illinois had made it clear to the state legislators that rather than have any more taxes it would be OK with them if the state did away with school funding, or maybe any and all health care funding.

Oh hey, even better, close the prisons, who needs those anyhow!

Illinois has a beautiful capitol building and complex, maybe they could just sell it and run the state from a bunch of laptops at Starbucks.

That would save some money.

[edited by: ken_b at 10:43 pm (utc) on Jan 7, 2011]

[LifeinAsia]

Basically, it's saying that Amazon's Illinois affiliates create a nexus for sale tax purposes. So Amazon (or any affiliate program with affiliates in Illinois) would have to start collecting sales tax for all orders shipped to Illinois.

If Amazon (and other affiliate programs) fire their affiliates in Illinois, they no longer have a nexus there and would not be required to collect sales tax.

[wheel]

It puts Amazon at a competitive disadvantage. Buy from their competitors, no sales tax. Buy from Amazon, pay sales tax. What one are you going to pick?

The only way this makes sense in the long term is if all the states harmonize a system where all vendors charge tax based on where they're shipping to or where they're located - and everyone uses the same system nationally.

[dibbern2]

For those discussing the Illinois tax situation instead of the affiliate issues which are the real point behind this thread, chew on this: the "Amazon Tax' is only a small part of our tax increase. These dolts have voted to almost double our state income tax, from from 3% to 5.25%.

[maximillianos]

When I lived in Illinois the town I worked in had close to 12% sales tax.

[creeking]

Basically, it's saying that Amazon's Illinois affiliates create a nexus for sale tax purposes.

so, what states have a definite amazon nexus? WA,......?

do WA's amazon affiliates get taxed or compensated in a special way?

[martinibuster]

It's popular to blame the politicians for the fiscal mess the states are in. However a large part of the blame can be placed on the voters themselves who year after year approve of bonds to pay for roads, police, schools, etc. And another part of the blame can be placed on the voters who vote to have various taxes cut but still demand pre-tax cut levels of municipal service. If you voted yes to a bond, any bond, then you are as complicit in the debt problem as the politicians.

This is a problem that has been growing for decades and it goes beyond Amazon. Will they go after a piece of the AdSense pie? If there's no more credit, the money has to come from somewhere.

[mhansen]

I think it's only referred to as the Amazon Tax since the name stuck a few years ago. It actually applies to ALL businesses that have affiliates or associates in the state, where physical products are shipped. (Which as I understand, is why it does not affect adsense... yet)

Amazon is just the biggest name to try and curb it, by getting their affiliates to get behind and try to block it. Amazon dropped us affiliates in NC over a year ago... and it's not changed. I doubt it will. They simply moved on. In NC, the state legislature is in the midst of a battle now, trying to get Amazon to disclose all purchasing records for several years, so they can go after the buyers who did not report the out of state purchases on state tax returns. (Breaking the tax laws) (link [mcclatchydc.com])

Loopholes or creative workarounds like this are going to become far more widespread as states need to find ways to fill the shortfalls in budgets. As more and more states pile on... something will have to be done, or online commerce will be considered the black market.

[iThink]

Isn't this an incentive for people to incorporate businesses offshore and avoid all kind of taxes and not just the sales tax?

Big corporations like Google are already operating through tax efficient jurisdictions and paying negligible taxes. Now it is the turn of smaller businesses?

[UserFriendly]

So the way it currently is, customers are supposed to dutifully fill in a tax return to declare what tax they owe on items purchased from online vendors? And this bill is forcing Amazon to collect the tax at time of sale and pay it direct to the state?

Have I got that right, or have I misunderstood?

[jwolthuis]

Now it is the turn of smaller businesses?

Tell me more about how this works. I too want to 'do no evil'.

[MLHmptn]

What simply needs to be done is every state needs to join in on the Streamlined Sales and Use Tax and the federal government needs to divy it up to all the states so us merchants aren't wasting our time and/or money collecting taxes for states we are not responsible for nexus. END OF STORY!

If you don't know what the Sreamlined Sales and Use Tax initiative is you can find it here: [streamlinedsalestax.org ]

I hope this is alright to post mods as everybody in e-commerce needs to know about SST!

[frontpage]

Trivia challenge - anyone know the common denominator between all the states that imposed the tax requirement on Amazon associates?

Let's see, what do all these states have in common besides causing a net exodus of businesses to more business friendly states?

1) New York
2) California
3) Illinois
4) Rhode Island
5) Hawaii

Whatever could it be? Hmmmm...

What was the genesis of the tax to begin with?

Oh, disgraced former Democrat NY Governor, Elliott Spitzer.

The issue is collection of sales taxes – several states are trying tactics developed by then Governor Elliot Spitzer in New York to try to force Amazon to collect sales taxes on online sales made in their states.

[wingslevel]

The irony of the whole thing is that the state legislatures will look at amazon sales - lets guess $1 billion in Illinois - and assume they'll be able to extort their 6% of that, or $60 million - problem is that is a static model and you can't use static models for forecasting because taxes cause people and businesses to change their behavior, which requires dynamic modeling - even i learned that in econ - so, like they have already promised, amazon will terminate their associates in IL and the state will see a goose egg for revenue - worse, the poor associates, won't be able to replace all of their revenue and so they will have less income and then pay less income tax to the state - so, in the end, illinois ends up with less revenue than before - what complete and utter morons...

[wingslevel]

oh, i forgot, in order to be able to enforce this new tax that won't see any revenue, illinois will have to hire a cadre of new bureaucrats - of course they'll have to rent some more office space at $30 a foot in chicago and give them all health insurance and pensions - that'll really compound the stupidity of the whole thing

[ChanandlerBong]

but this is a tax on purchases from amazon, not on associate earnings, right? Why should dropping associates result in zero sales for amazon in IL? Due to tax increasing prices, sure, it will hit some sales, but the state will make revenue from this. I assumed the dropping of associates was only a way of getting pressure onto the state government.

[wingslevel]

Here's how it works. The constitution forbids states from regulating interstate commerce, so they can't charge sales tax on goods shipped in from out of state. If, however, the merchant had a presence in the state (called a nexus), then the state could tax the sale. In the case of amazon, they claim no nexus in Illinois, so they currently do not collect any sales tax on sales of product destined to that state. Illinois is trying to claim that, by virtue of having associates in Illinois, amazon has established nexus and must, therefore, collect sales tax and remit it to Illinois. So, by terminating their associates, amazon will no longer have a nexus and will not have to charge the tax. Make sense?

[wingslevel]

My reference to income tax on associate's earnings was a side point. Sorry if it was confusing.

[onepointone]

Even though these laws have damaged me as an affiliate, I could see the point of them if they actually worked, and generated revenue to "even the playing field" etc.

But what from I have seen, and read, they don't work. Merchants just close their affiliate programs to affiliates in certain states. Plus, there are 'workarounds' for affiliates. If you are affected, just look around for them.

Does anyone know of a merchant that started to collect tax based on one of these laws? *

Amazon?, no sympathy here for them either. They seem to fight to the death to avoid it, but will, can, and do collect tax when forced to.
[amazon.com...]
Other similar merchants (example B&N) somehow manage to collect tax.

*amazon caught off-guard in N.Y. and had to start collecting sales tax.

[wingslevel]

B&N is a different kettle of fish. Since they have physical stores everywhere, they have nexus and must charge the tax. Walmart too.

[wingslevel]

A little color on the bleak situation in illinois:

[nytimes.com...]

[NatronZero]

Its scary to think about where we'll end up if Illinois finds even a modicum of success. Won't all states want a piece of the pie? if the revenue they seek is based on purchases due to nexus, it may be of advantage to live in a state with a smaller population...