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Amazon Ends Affiliates Program for North Carolina

[Breaking news from Lara - Pardon the interruption!]

Just read over at FOX Business that Amazon has decided to close out their affiliates program to residents of North Carolina (USA) due to a proposed change in sales tax for affiliate sales.

“In an email, Amazon reportedly told marketing affiliates in the state that the move was a direct result of North Carolina’s push to levy a tax on purchases made through Amazon affiliates.” FOX Business

I remember there was a similar situation with New York, I wonder which US state is going to be next? There’s more details on Amazon’s calling NC lawmaker’s bluff here.

Interesting what politics and legalities can do to a blogger or affiliate marketer, in just a blink. How do you feel about these laws that are changing the way bloggers effectively handle their income options?

Update: Appears that they also closed off Hawaii, and may be considering California as well. [Thanks, 5starAffiliatePrograms for the tip off in the comments!]

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Comments

  1. It is definitely bad when politics becomes a hindrance to business. Good business activities should be facilitated not hindered.

  2. Rob says:

    California is hurting for coin…I’m sure the governor will love to hear that news.

  3. Jon West says:

    Let’s hope the bill doesn’t pass. They’re being extremely shortsighted, it’s amazing.

  4. Adam says:

    Wow. Luckily, I do not live in NC or I would be pretty mad. I know a few bloggers who currently live there and make a sizable income from Amazon. Would something like this cause some to move out-of-state? This law may end up hurting NC more than helping it. What a shame….

  5. Holy lick. That’s scary. I can imagine there are a lot of people there who make some decent coin from Amazon. Might be worth it for some to move to a different state!

  6. Amazon announced the closing of the program to Hawaii affiliates this morning too. I just blogged about both states and the ramifications and also what merchants should do.

    Amazon also announced in a letter to the Governor of CA that they will also terminate all California affiliates if the law is passed there. Several other states have pending legislation. It’s getting scary out there!

    What this will mean is other affiliate programs will follow suit. The states WON’T get the sales tax revenue they were hoping for, but thousands of small businesses will be hurt and will lose revenue resulting in states collecting LESS income tax revenue. It’s a LOSE LOSE proposition!

    Linda Buquet

  7. Yvette says:

    I don’t think it will stop with NC. I’m sure more states will jump on to this new way to earn money “State Stimulus”.

  8. I am in NC and I was pretty disappointed to find out this news. I can’t imagine what it must be like for people who make a sizable portion of their income from Amazon.

  9. It should not be so bad, I am sure somebody out of state (or out of the country) will be happy to collect the affiliate commission and send it to you for a small fee. Oops, I juts gave up my business idea…

  10. Rocque says:

    These states are foolish. One way or another they get revenue from people who do business in their state. It is a shame that is happening. It is funny that I live in the state where the terminator is governor, and now Amazon might terminate me due to the govenator. Sick!

  11. Michael H says:

    I do not live in NC, but I see this as something that must be rallied against. I participate in Amazon Associates (since 1999) and many other affiliate programs. This kind of taxation must be fought! Who’s with me?

    Is there a petition somewhere that affiliate marketers can join up with and create a movement?

  12. Norman says:

    This is utterly ridiculous, and just like every other tax program this will hurt more than help.

  13. Infinitus76 says:

    This is a real shame. Unfortunately politicians never stop to consider what all of their crazy laws and regulations do to their own citizens. Hopefully laws like this will get struck down by the courts, but I won’t hold my breath.

    This will actually hurt their sales tax revenues. If I made $1,000 from affiliate programs I’d be spending the money in my home state (and thus paying sales tax on my purchases), and much of that money would continue to stay in the region as it is spent by the retailers I visit…. now that $1,000 won’t even make it into the state in the first place.

  14. Yep, just received an email from Amazon today saying they’ll be doing the same thing in my home state of Rhode Island for the same reason.

    These states are ridiculous.

    Heather

  15. Asswass says:

    That’s a shame but I don’t live in North Caroline so fine by me :)

  16. Fern @ Life on the Balcony says:

    Amazon sent me an email (I live in California) saying that my state was considering similar legislation and asking me to contact legislators to veto the bill.

  17. Anastasiya says:

    I live in NC so this news was quite disappointing. I am glad that me and my family are planning to move to a different state and then this problem will be solved.

  18. Lisa says:

    I’m an Amazon affilliate in NC and never got the email. Hmm. It is disappointing.

  19. I was very upset when I heard the news as I live in NC. The only good thing for me is that I was not making a lot of money yet through Amazon. Also got a similar email from CJ but not action there yet.

    It has made me think of moving out of state.

  20. Boris says:

    CJ has been sending out emails for us (CA residents) to write our representatives against the tax. Never thought that an affiliate program would actually end at a location because of one, especially a giant like Amazon. @livetruly

  21. I’m in California and getting really antsy about this stuff. I have already contacted various representatives.

    I get the problem. Strictly speaking in California at least, they are due the money, but in the form of use tax, not sales tax. It’s just that almost no one pays it.

    The trouble is that it’s too big a burden for businesses to manage it, as well as being likely illegal for states to require this of businesses. The challenge isn’t in collecting the taxes, really, as that’s a software issue that somebody would come up with a solution to if necessary. Pretty complex solution in some places to be sure.

    It’s paying the taxes to the appropriate localities that I believe would be the worst burden. It’s getting all the right paperwork and having things properly filed. Lots of work for accountants!

    These bills as things stand will only hurt businesses, not help the states bring in more money.

  22. Chris says:

    I sent this to the NC Legislators after seeing an article online last week. If you guys live in NC you can do the same, not sure it will work or not, but is worth a try.

    EMAIL TO:

    [email protected]

    [email protected]

    [email protected]

    06/19/09

    Sen. David W. Hoyle

    Sen. Daniel G. Clodfelter

    Sen. Clark Jenkins

    300 N. Salisbury Street

    Raleigh, NC 27603-5925

    Subject: OPPOSITION to SB 202, Section 27C.2

    Dear Senators Hoyle, Clodfelter and Jenkins,

    I am a small business owner with a website, and I am in strong opposition to Section 27C.2 of SB 202, which could specify that sales tax is due and to be collected by an online retailer when the online retailer uses an in state affiliate to sell its products.

    I am opposed to this Section of the bill because it would substantially harm my small business by reducing a large source of revenue that I rely on to survive. This revenue results from providing advertising on my website as part of an “affiliate” or “associate” program with out-of-state retailers. [Describe how your business model is set-up and what you contribute to the local economy.]

    If retailers believe that doing business with me will result in their having to collect sales tax on all North Carolina sales, they likely will sever ties with my business, putting the viability of my business at risk. Such was the case in New York State where Overstock dismantled its affiliates program and I am told by my colleagues that hundreds of other businesses followed Overstock’s example. This left thousands of affiliates – most of which are small- and medium-sized businesses – with a major loss of income.

    For these reasons, I respectfully oppose Section 27C.2 of this legislation.

    Sincerely,

  23. Ethan says:

    I am a NYer and I was shoved out of a number of merchants programs over at CJ. I am still allowed to use Amazon thought. If they do cut NY, chances are I will just move my address to my university address in another state.

    Cutting the CA program would be terrible considering the number of websites and tech firms located there who make a decent cut of money from affiliate marketing (i.e. HubPages…)

  24. Katherine says:

    How stupid! Given the average affiliate program participant’s sales, such a tax program would likely cost far more to administer than it would bring in. Only a small percentage of affiliates actually sell in significant volume. And aren’t the states ALREADY taxing the affiliates via INCOME TAXES?

    Government officials never cease to innovate new ways to make life more expensive and more difficult for the people and companies paying their salaries. Of course, the tax might be worthwhile if it were used to convert elected officials to a pay for performance compensation plan. Then, the more they screwed things up, the poorer THEY would become. I’d vote for that! ;-)

  25. Mikko says:

    Taxes are necessary. Why should affiliate marketing revenues be exempt from taxes?

  26. Add Rhode Island to the list — we just got the notice from Amazon yesterday that they are poised to withdraw from Rhode Island if pending legislation is passed.

  27. I do not belong to any of state above but i am really thinking about what will this affiliates do after getting suspended from Amazon.

  28. Luckily I’m from Indonesia so it won’t change anything in my blogging world.

  29. Lara,

    I just woke up, checked my email – pretty shocking news to read this early in the day! :-)

    Actually this feels like yet one more (major) example of 20th century concepts trying to be forced by desperate people onto a 21st century world. (newspapers, auto industry, and all those govt bailouts).

    I’m really happy that Amazon took this stand, yet my heart goes out to every single person who will suffer from the lack of business income.

    I have no sympathy for the lawmakers.

  30. Julie-Ann says:

    I’m in California (and can’t wait to get the heck out of here). What legislators don’t seem to get is that they’ll lose the income tax generated from affiliates as a result of this type of legislation.

  31. I live in NC and I was surprised to get this email. I don’t make a significant amount from affiliate marketing but being denied a known and reliable source of income seems extremely unfair. I think Amazon and legislation should have worked something out. I’m sure there are some households direly affected by this.

  32. Tom Justin says:

    Those of us concerned about such things should become respectfully vocal and take the time to write to not only our representatives but to others. Blogging maybe?

    Let them know that these tax grabs won’t be tolerated. If you have contacts in those states, Hawaii or SC, let them know what’s happening. Invite them to contact the politicians too.

    Instead of going on Twitter and saying that I just fixed a peanut butter sandwich, go there and make a useful noise!

    Tom Justin

  33. fas says:

    I guess the government thinks they can leverage money from affiliate marketers. Sigh!

  34. I live in Rhode Island. I got an email that stated they were going to stop all residents who are affiliates in the state from being Amazon Associates.

    I am just starting out online and wanted to do more because I like working for myself and not having to depend on taxpayers, because I am disabled. I plan on going back to university and maybe moving back home to Louisiana, and that is one of the worst places (economics) to live. but I came here a few years ago to start a new life and before I get a business going, it will be cut down.

    I emailed
    Donald L. Carcieri (R-RI) Governor
    Harold M. Metts (D-RI 6th)
    Joseph S. Almeida (D-RI 12th)

    I hope that they understand this is not going to bring the state out of a rescission, but prevent businesses from growing and kill the “entrepreneurial spirit” here. we already have a Death Tax, we do not need anymore.

  35. Ebizel Diary says:

    Its waking up to find that u r jobless … do post abt avoiding such situations !!

  36. Yikes!

    This bill was also introduced in MARYLAND earlier this year. We got a message from Commission Junction and a few other affiliate hubs about the pending legislation and wrote our state senators and delegates. Fortunately, the law wasn’t passed last session, but I fear it may in a future session.

    It is evident that across all forms of tax, North Carolina will collect EVEN LESS money than before. They will lose all of the state income tax associated with affiliate revenue for NC.

    We really need to make our legislators aware that sales taxation on the internet is a VERY DIFFERENT THING than when you tax brick and mortar stores.

    For those of you wondering why Amazon is willing to pull the plug so fast:

    Most of Amazon’s sales come from two sources:

    (1) People who surf directly to amazon.com to get their products, bypassing affiliates.

    (2) People who use a search engine (read: google) to find a product and purchase it, bypassing affiliates.

    the remainder of the sales come from Amazon’s large affiliate network that’s spread all over the world.

    If I’m Amazon, it’s VERY easy for me to pull the plug on affiliates in NC… in fact, it’s a no brainer. Do I want to collect 5% or 6% sales tax on all of the products people purchase from sources (1) and (2) just to maintain affiliates in that one state? NO! In fact, even if EVERY state passes the same legislation, it’s probably better for me to just shut down the whole domestic affiliate program altogether. The sales generated from sources 1 and 2 would suffer too greatly if I keep the affiliate program running, and they represent the bulk of my sales anyway.

    It’s a painful business reality, but it is, nonetheless, a reality.

    If you read the text of these bills carefully, the issue is that the state redefines having a local presence to include affiliate marketers. There’s no way a company is going to trade 5% of their revenue (which is likely 20-40% of their profit) for a handful of affiliates, when they aren’t even the primary source for driving customers to their site!

    If only all of our lawmakers could see the impact of this on business in their states… They should focus on how to grow the total economic footprint of their state, instead of trying to boost the take on existing sales.

  37. No problem, they close but we can find other website program like what they offer, it has been a new time, it means we have more..
    warp machinery, sock knitting

  38. Mark Finch says:

    Affiliates and Taxes is something I have been watching for awhile, even have a post that has been in the works for months that should be out soon.

    It is easy for us to blame the lawmakers. This issue is very complex and involves laws that date back a hundred years in some cases. The problem is as was stated by Stephanie the States are loosing millions of dollars in taxable revenue, that should be paid as a use tax.

    Because of a number of laws they can’t directly interfere with interstate commerce. Thus it is up to the consumer to pay the Use tax. Few people do, even large businesses avoid paying it until they are audited and get a nasty fine in addition to the tax on the million in PC’s they bought from Bobs Computers in Texas tax free.

    The states have a valid argument about Affiliates creating a taxable nexus for the companies. The question is what is the nature of the connection and does it meet the requirements as stated in federal law?

    This comment is already long, but if your interested subscribe to my RSS feed on my site http://markfinch.info, I will have finished my analysis in a week or two and broken the post up into digestible pieces.

  39. BLOGERCISE says:

    It would be good to see a follow up post with an explanation of how things work for us non US citizens who have an interest in what is going on over there.

    Is this like a sales tax on that affiliate income then (I assume you have to pay an income tax on that sum too?).

    So it would be a bit like if our UK government enforced VAT (our sales tax – “value added tax”) on affiliate commission perhaps?

    This means that if you live in NC you can nolonger earn money from Amazon, but if your cousin lived over the state border they could happily put their links on your site?

    I always believe that simple taxes help stimulate economies, this will just put a lot of people off surely.

  40. Sharon says:

    I’m just wondering who is determining where a website is “located”, given that it’s pretty much located in cyberspace. For many of us, isn’t it simply a matter of using a Mailboxes Etcetera address in another state, or even incorporating in another corporate-tax-friendly state such as Nevada? I just can’t quite figure out how a state can prove just where many internet businesses really are. Any thoughts on this? I’m a NC resident but I don’t have a problem moving my websites to a SC PMB! (I won’t be able to do this with my health insurance biz, since my contract with BCBSNC requires that I be a resident of NC – but I’m working on other web businesses).

  41. I live in CA. I got laid off 2-1/2 years ago and have been living on my affiliate income. It would be devastating to me if CA pushed that affiliate bill through and have my vendors pull out.

    I’m glad to see companies stick it to the states doing this, but obviously there are some very painful ramifications.

    As for the companies that did pull out, I would like to see some reports on how these business have dealt with the sudden lose of income due to less affiliate sales. Seems like cutting off the hand that feeds you.

  42. Mark Finch says:

    @blogercise it isn’t a sales tax on income. It is a sales tax on all products sold in the state because a company has created a nexus/connection by having an affiliate. If you subscribe to my RSS I have a very detailed series of posts coming out on this subject I have been working on.

    @sharon Amazon and other affiliates have to file income tax forms with the state when they send your check. That is what creates the nexus that the states are using to create these laws. Don’t try to avoid the tax by simply changing your PMB. If the state figures out what you have done they will fine you heavily and make a big media deal about how you were trying to avoid the states taxes. You are a NC resident and so you have a nexus in NC. You need to go talk to a tax attorney about how to legally get around your personal nexus if it is even possible in your state. Unless you get significant income from Affiliate sales chances are it is best to focus on other income streams or think about moving to another state.

    If you move you should call the local news and see if you can make a big deal about how this crazy law is tearing up your life and forcing you to leave the place you love… Pitch the idea as a news series, where first you announce your intentions, then a follow up on your progress of finding a new home, then a packing up the kids and car and waving goodbye. It is a very powerful image that might help make a difference. Also be aware that many states are considering similar legislation no need jumping out of the frying pan into the fire.

  43. Taxes are necessary. Why should affiliate marketing revenues be exempt from taxes?

  44. Piggy says:

    arac,It is not the affiliates taxes that would be affected because we already pay taxes,it’s the store owners who would be taxed to do buisness with the affiliates…..So they leave understand?

  45. Sharon says:

    @Mark Finch Thanks so much for taking the time to answer my question. I still have great reservations about the state’s ability to establish a “location” for my business. I live in Charlotte, which sits right on the border of SC so I know tons of people who live in SC and have businesses here and vice versa.

    Since you seem knowledgeable about this, let’s look at another scenario (and any others feel free to join in with your thoughts!):

    If I owned a brick-and-mortar store just over the border in SC, my customers would pay SC sales tax – not NC. Let’s say I establish an office (not just a PMB) for a couple hundred bucks – albeit a rented closet-size space – in SC for my online business for purposes of a legal business address. I just don’t see how the location of my residence enters into the equation since it doesn’t for brick-and-mortar businesses.

    Right now, this is a moot point since I’m just barely starting my website and have NO revenue (although I definitely hope somebody follows thru with your great PR idea) but, since Obama seems intent on killing my health insurance agency, I’m looking at alternative revenue streams.

  46. Sharon says:

    Just another thought…where, exactly, does the sales tax line get drawn as far as a “product” is concerned. If I write an e-book or e-course, it’s delivered digitally so no sales tax. If I turn the very same info product into a physical product (dvds, etc.), it becomes taxable? It seems this is a very slippery slope!

  47. Piggy says:

    Since Rhode Island passed the anti-affiliate tax, I have had Amazon,and only 3 other vendors terminate me. Thousands of others out there to work with and better if I create my website for a local audience like Advertising for lots of local businesses also.

    I was told if and when the State overturns this tax, I will be reinstated.

    I didn’t know If I wanted to go further with Affiliate Marketing and investing money in websites or advertising,but I decided to keep going with it.

    If all vendors leave.. I will leave this state… I wont live in a state where I cannot work.

  48. John Pugh says:

    NC resident here, who used to pay income tax on my affiliate income but no more. This is an utterly ridiculous and incredibly short-sighted bill passed by our legislature.

    Let’s do the math.

    $X dollars of affiliate income taxed at 7% = monies for the state

    OR

    0 dollars of affiliate income taxed at 7% = 0 monies for the state

  49. I’m glad to see companies stick it to the states doing this, but obviously there are some very painful ramifications.

  50. Dean says:

    What’s after Amazon, what is the next best affiliate to work with that is very similar to Amazon? Can someone please help a brother out?