Amazon Shuts Down Associates Affiliate Program In Connecticut

[travelin cat]

Similar to a move made in Illinois a few months ago, Amazon has shut down its Associates program in Connecticut after the state imposed a sales tax measure that would tax any purchases made online starting July 1

[techcrunch.com...]

[Musicarl]

Here's the letter. They gave us literally NO notice. Not a good way to do business:

Hello,
For well over a decade, the Amazon Associates Program has worked with thousands of Connecticut residents. Unfortunately, the budget signed by Governor Malloy contains a sales tax provision that compels us to terminate this program for Connecticut-based participants effective immediately. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by Connecticut-based affiliates like you - even if those retailers have no physical presence in the state.

We opposed this new tax law because it is unconstitutional and counterproductive. It was supported by big-box retailers, most of which are based outside Connecticut, 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 of the new law, contracts with all Connecticut residents participating in the Amazon Associates Program will be terminated today, June 10, 2011. Those Connecticut residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned on or before today, June 10, 2011, will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of Connecticut. If you are not currently a resident of Connecticut, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state after June 10, 2011, please contact us for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to Connecticut residents and will not affect their ability to purchase from www.amazon.com.

We have enjoyed working with you and other Connecticut-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to Connecticut residents.

Regards,

The Amazon Associates Team

[pawas]

Good thing I don't live in U.S , Here I don't even have to pay tax on income from Affiliate Marketing.

[Edge]

If you can't make money - don't do it....

[travelin cat]

No notice? That sucks. The new law doesn't go in to effect until July 1st. You would think that they would give you at least a week to remove their links.

I'm curious, will your links still work and you will just not get paid? Or do the links break? If they are collecting money from your links and not paying you, that really is unethical.

[Demaestro]

If you are not currently a resident of Connecticut, or if you are relocating to another state in the near future, you can manage the details of your Associates account here.

This almost makes it sound like they are giving you a work around or an out. I am curious how hard it would be to set up a PO box outside state lines and use that as your address.

I never advocate trying to get one over on the tax man because the tax man can make you cry if they come after you... that being said would having an out of state PO box get you around the new tax law or would it put you in breach of the law? If it is the former than it may be worth trying.

[arieng]

It's really too bad, but you can understand Amazon's point of view. If they maintain any affiliates in the state, they'd have to collect sales tax on ALL orders from Connecticut. That would cost a lot them a lot more than they are making from their affiliates there.

How many states have done this now? Are we in double-digits?

[Leosghost]

What you guys need is a federal / national sales tax , a version of VAT..( instead of the balkanised "little hole in the road" Kansas has a different sales tax from "in the middle of nowhere town" Omaha ) ..but you won't do it ..

And I suspect that any politician who put forward the idea would get no votes or a wingnut bullet..

Meanwhile..the "big corps" ( who are behind the winguts ) win..and the little guys congratulate themselves on the system of independent state sales taxes ..and are still doing so when they go to the wall..

[Musicarl]

I understand why Amazon is doing this - they lose a lot more by charging our outrageous state sales tax on every CT sale than they make in sales generated by affiliates. But to cancel without notice - that's dastardly. I'm sure they'll enjoy the commission-free sales while we go about removing their links.

Demaestro, I think you're right that they are implying certain workarounds, of which we are considering some. In this virtual environment, it seems that you can send your links to an account in New Hampshire and that could solve the problem. Amazon isn't the only one doing this, and there's been similar language in the notices from other companies - all of which gave us plenty of notice and helped work with us BTW.

[JackieBlue]

Loesghost - because of the way our constitution is written we cannot do this. It would require an amendment to be approved by congress and then ratified by, I think 2/3 of the state's legislatures before it would be in effect. Not likely to happen due to the interstate commerce clause and the reserve clause. Remember, when rebelled against Britain and won, we became 13 countries who relunctantly gave up some sovernty when the constitution went into effect.

[incrediBILL]

One obvious out might be forming a NV corporation, that's always a possibility but I'd check to make sure it's all legal first.

[ember]

Did the same thing to us in Colorado probably 2 years ago now. No notice, just an email saying the program was done thanks to our state legislature's tax policy.

[mojomike]

I do a small volume of business with Amazon. Reading the above gives me some hope and insight when the do it to my state ( Florida )

First off, try registering a company off shore, like Panama or Bahamas. open a bank account in that country. move my website's registration and my amazon affiliation. Done!

I would think that it should not cost you more than 1200 EURO to have this done.

now on the back end, you need to pay your taxes. that's what your CPA will figure out.

[bwnbwn]

I am almost positive all states are working on this. Won't be long until there is no Amazon affiliate program. Had to fill out a detailed question and answer in Arkansas on sales and number coming from Arkansas. I see it coming probably all States will have a Online Sales Tax in less than 5 years.

[netmeg]

Having a single tax would be great. Even collecting and reporting tax isn't that much of a big deal (for my ecommerce clients who have to do it in their nexus states anyway) The problem comes when you have places that don't just have a single state tax, but it's by county, or region, or whatever so that the logistics of dealing with it become a nightmare.

It's gotta be a flat internet sales tax or no internet sales tax.

[StoutFiles]

I highly doubt the P.O. Box trick would work, and if it did, they'd find a way to close that loophole.

[diberry]

Demaestro, I think you're right that they are implying certain workarounds, of which we are considering some. In this virtual environment, it seems that you can send your links to an account in New Hampshire and that could solve the problem. Amazon isn't the only one doing this, and there's been similar language in the notices from other companies - all of which gave us plenty of notice and helped work with us BTW.

What about taxes, though? If you're still a resident of CT for tax purposes, but your Amazon 1099 comes to an address in NH (which has no state income tax), then you would still legally owe CT income tax on that earning. But when you pay it, and CT sees a bunch of Amazon 1099s coming down the pipeline, aren't they just going to claim Amazon's operating in their state, and then Amazon will have to ban this practice, too?

[lexipixel]

In the Commonwealth of Massachusetts, (one of the 50 United States of America), the laws regarding paying tax for the privilege of buying or selling stuff in-state or out-of-state are defined in the State Tax Code as a "Sales and/or Use Tax".

The general concept is the State wants the tax whether you buy it in MA, (a "sales tax"), or if you purchase it in another state and use it in MA, (the "use" side of the tax).

To complicate it more, New Hampshire, (another of the 50 United States), which lies just north of the MA state border does not tax many items, and charges different taxes on others, (cigarettes and booze have only Federal tax in NH, but have high State imposed "sin taxes" in MA). Clothing and groceries are not taxed in MA, but "ready to eat prepared foods" (e.g.- a sandwich made in a convenience store do).

I won't go on, as the complexities of interstate / internet taxation in the US is enough to keep 100 Senators and 435 State Representative busy for a whole election cycle.

[Musicarl]

I'm starting to wonder if some General Electric-style accounting is going to become necessary for us Webmasters. Since we can point affilitate links to any account, it might be a matter of making an arrangement with some entity in a state or country where these taxes aren't an issue.

The PO Box in New Hampshire probably won't work, but something has to.

[diberry]

I'm starting to wonder if some General Electric-style accounting is going to become necessary for us Webmasters. Since we can point affilitate links to any account, it might be a matter of making an arrangement with some entity in a state or country where these taxes aren't an issue.

That could work, so long as that entity issued the 1099s to the affiliates in the states where Amazon can't have affiliates. Maybe take 10% of the Amazon earnings and pay the rest over to the affiliates. Could be a lucrative business for somebody.

[Whitey]

If Amazon retained their position they would just increase their liability potential. However they may have a liability now anyway that they may need to pay out on with little hope of recovery. What happens if every State and Territory in the world follows this tax lead ?

Actually, it's very messy still after nearly 15 years of confusion in e-commerce .

The goods and services type of taxes are more easy for tax authorities to administer. Essentially there is a point of sale and a point of receipt, and the goods and services get taxed accordingly on a consistant basis. But for affiliate referral sales it get's more complex and usually relies on the residency element of the contract between affiliate and advertiser.

The best thing is to shift your entity to another place of residence which escapes this. Don't think it is just this State or Country causing headaches, and do remember the tax beaurocrats have an obligation to uphold laws that they interpret support their role.

Shifting to another tax jurisdiction is not without it's headaches. Related feess and business controls come into play. If the local jurisdiction starts to play games some types of business' can find themselves paying a lot of money as well.

Governments and tax authorities are challenged all over the World and really this Amazon thing just highlights " well it's getting too hard " .... "lets move on". Anyone caught in this mess probably ought to consider the same. Affiliates with fine margins on high volumes might need to think along these lines. Business' with good margins may see the benefit of just paying the taxes.

[jbinbpt]

Got my email this morning. How ironic, Amazon headquartered in Washington State...the one state I don't ship direct to because of nexus issues.

[Sgt_Kickaxe]

Good for Amazon honestly, if nobody stands up against nexus tax it will do nothing but spread and grow.

[MsHuggys]

I just posted a new thread after being hit with a letter aimed at Arkansas residents. Same deal. Check the thread listings.

[bw100]

If you're still a resident of CT for tax purposes, but your Amazon 1099 comes to an address in NH (which has no state income tax), then you would still legally owe CT income tax on that earning.

This is absolutely correct. As well as Federal tax, which return would also show your Connecticut address. And the Feds and the States share data.

But when you pay it, and CT sees a bunch of Amazon 1099s coming down the pipeline, aren't they just going to claim Amazon's operating in their state

Yes, and they would be correct ...
You can run, but you can't hide.

[frontpage]

All of the states that lost their affiliate programs have one thing in common. Wait until adsense folks start getting affected.

[Sgt_Kickaxe]

Adsense folk will be affected, as will all advertisers eventually, the fire is lit.

You can plan for that by moving your family to a more friendly environment for advertisers and affiliates (WHO SELL NO PRODUCTS ANYWAY, uncle sam).

[bw100]

@frontpage

Wait until adsense folks start getting affected.

@Sgt_Kickaxe

Adsense folk will be affected

Why is it that you feel that "Adsense folk" will be affected?

[JS_Harris]

They may not, but it stands to reason that a politician will want to jump on board a new tax if there is little resistance in which case this will certainly spread. Affiliates often sell no product, neither do advertisers, so the distinction between the two is thin at best.

[votrechien]

Ecommerce and America's debt are growing exponenitially each year. I can't help but to think the answer to the whole sales tax debate is fairly obvious. Introduce a federal sales tax which is harmonized with state sales tax (ideally so it's the same rate across all states).

The government foreseeably increases its revenues and this whole mess about ecommerce companies in NY or CA having a competite disadvantage to companies in less populated states disappears.