This guest post is by Yasmine Mustafa of 123LinkIt.com.
The Business Insider recently reported that ten thousand affiliates were recently dropped from Amazon’s Affiliate Program with little warning.
How much income would you lose if you were no longer permitted to use the program?
This is an issue that bloggers in California, Colorado, Illinois, New York, North Carolina, Rhode Island, and Connecticut are currently facing. They were instantly cut from Amazon’s affiliate program due to a new affiliate tax law.
Update: Amazon dropped the ballot fight last week and cut a deal with California on the collection of sales tax. According to CNN Money, they have not stated whether or not they will reinstate their CA affiliates.
How did it happen? What can you do to avoid this law from passing in your state?
All about the affiliate tax law
Online retailers such as Amazon that do not have a physical presence are not required to collect sales tax like brick-and-mortar businesses. Big companies like Wal-Mart who are taxed see this as an unfair advantage and are paying lobbyists to push what is now called the “Amazon tax” or the “affiliate nexus tax.”
In short, this affiliate tax states that online merchants can in fact be taxed if they have a “nexus” or connection within the state. Affiliate marketers are one of the groups of people viewed as a connection. As a result, state governors in the above-mentioned states are signing a law that taxes Amazon and other online vendors through its affiliates. They are now being treated as having a physical presence and are subject to pay taxes.
Amazon has reacted immediately. Wanting to avoid being subject to costly tax inquiries from the government, they are cutting connections to every state that passes the affiliate tax by terminating agreements with all affiliate marketers, leaving many bloggers with decreased incomes and some with no incomes from their blog. As long as there are states that do not tax its sales, Amazon has stated that it will continue to avoid affiliate marketing in the states that do. As of June 30, 2011, California, Colorado, Illinois, New York, North Carolina, Rhode Island, and Connecticut have been affected by the nexus tax.
How you can make an impact in the Amazon tax battle
The war is not lost and bloggers can make a difference in fighting back or preventing the affiliate tax law from passing in their state.
- Visit the Performance Marketing Association (PMA) Tax Nexus site to further educate yourself and join one of their state-specific Google groups.
- Join PMA’s fight in the reversal of the tax currently underway in certain states. To learn more, visit PMA’s contribution page.
- Bloggers can write their state representative and explain how the legislation will harm their income. The best letters are concise and honest, and include supporting examples. About.com has a great structure on how to write letters to Congress that is worth checking out beforehand.
What are some Amazon Associates alternatives in the meantime?
If you have been affected by the affiliate tax, there are other options consider.
- Find other affiliate programs to join. Some of the most popular that can fulfill Amazon’s inventory include Barnes and Noble, Buy.com, Best Buy, Newegg, the Apple Store, Wal-Mart, Target, and Sears.
- Sign up for an affiliate tool that aggregates all the affiliate programs and automatically embeds affiliate links in your blog. These include 123LinkIt (Disclaimer: I am the Founder of 123LinkIt), Skimlinks and Viglink.
- Relocate. This is a drastic step but worthwhile if your revenue warrants it.
Questions to consider about the affiliate tax law
Will national standards for taxing online retailers be implemented? How will all this affect bloggers and small businesses? Let us know in the comments!
Yasmine Mustafa is the Founder of 123LinkIt.com, a service that allows WordPress bloggers to earn affiliate revenue from product keywords in their content. It is currently the #1 downloaded affiliate plugin in WordPress.