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

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.

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.

@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.

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.

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.

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.

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.

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.

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