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Amazon.com is Closing Their Affiliate Program in Certain States

Amazon.com has been closing its affiliate programs in certain states as these states find ways to tax online sales. Your state could be next and your online business could be shut down.

I woke up this morning to an email that said my Amazon Associates account has been closed. Residents of Colorado are the most recent to lose their Amazon Associates affiliates program. No one had any idea this was about to happen. Some people have had online Amazon Associate businesses for over 10 years, only to wake up and find that they no longer have a business and not much if any recourse.

As the United States and each state continues to lose money because of the deep recession and their own mishandling of revenue money, each states legislature has to find more creative ways to raise revenue. A current idea is what is called the Amazon Tax. In June of 2009, Amazon closed its affiliate programs in North Carolina and Rhode Island because of the passing of these so-called Amazon Tax laws.

History of Internet Taxing

In 1967, the United States Supreme Court ruled that a business without a physical presence, like an actual brick-and-mortar building, in their state, would not have to collect those state taxes. This ruling was again reaffirmed in 1992.

For example, if you buy over the telephone or Internet a product from Florida Widgets in Jacksonville, Florida and you live in any state other than Florida, your states taxes do not have to be collected. But, if there happened to be a branch or an actual Florida Widgets building in your state, then those state taxes have to be collected, whether you bought online or at the actual building.

State governments have been trying to collect taxes on Internet sales for years now and it is continually ruled against. Now states are becoming more creative in their ways to get around this. Instead of calling these Internet sales taxes, they call them a remote sales tax.

How This Has Affected Amazon and Other Affiliate Programs

States are now passing laws that include affiliate programs as being an actual brick-and-mortar business. If you are part of the Amazon Associates affiliate program, and you have Amazon.com ads on your web pages, states want to consider this the same as Amazon having an actual presence in their state. Which would mean Amazon has to collect taxes on those sales that result from the affiliate programs in their state.

The most recent state to pass the Amazon tax law is Colorado, enacted on March 1, 2010. The law, HB 10-1193, states that it is presumed that any out-of-state business that has a referral relationship with an affiliate in their state does have the obligation to collect a sales tax. The bill goes on with more specific threats like the power to subpoena records of any out-of-state retailers.

How Amazon Has Reacted

As these laws are being passed state by state, Amazon is reacting by just closing the Amazon Associate affiliate accounts for every person in that state. According to the letter that Amazon sent to its affiliates, Colorado’s new law doesn’t require them to collect sales tax, only to increase the compliance burden to a point where online retailers are induced to voluntarily collect the states sales tax. Something Amazon will not do.

Amazon also states that this new state law is unconstitutional since the US Supreme Court has already ruled and reaffirmed what is and is not a presence in each state for a company. Amazon will continue to sell to Colorado and the other states residents, but will not do so through affiliate programs located in the states that have passed these laws.

There is also a great deal of anger pointed right at Amazon for the way they have treated their affiliate partners in certain states. Just pulling the rug out from under their Amazon affiliate business without any warning.

How Will This End

Most likely, this will have to be decided by either a state supreme court or the US Supreme Court. Making a decision on just what constitutes a presence in each state, is it an actual building or can it be someone with a blog and some affiliate ads on it. Maybe the United States will pass a nationwide Internet tax.

No one had any idea that his or her Amazon Affiliate accounts would be closed each time this has happened. And I am as guilty as most others for not paying attention when the Rhode Island and North Carolina accounts were closed. California, Hawaii, Mississippi, Oklahoma, Virginia and Connecticut among other states are considering similar laws or recently did not pass them, for the time being. And most likely, Amazon will react in the same way. You have to pay attention to these laws before your state politicians pass them, or you could find an email stating that your Amazon Associates account has been closed and all of your hard work gone. This could also affect other affiliate programs like eBay, Overstock and Blue Nile.

© March 8, 2010 Sam Montana

References

Providence, Rhode Island Business News

Wall Street Journal

Colorado Law HB 10-1193

Vermont law

Virginia Legislation

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Comments (19)

Stinking government's always screwing up business.

Robert Guida

Is there much money earned on a website with little traffic? Let's say 100 a week in hits?

For an online Amazon store, you can get at least 3% of the item sale price. And that goes up the more you sell. Some of the Amazon associates ran big online businesses and have been doing so for a long time. And then just to wake up today and find their entire business is probably gone. If you had 5 sales of those 100 hits per week and the items were fairly expensive, it would be a nice start.

Oh- Don't misunderstand- I agree it should not be lost-Just was wondering what type of Moines are made-thanks

Robert, I was actually wondering the same thing today, since I have never seen the stats on this. According to a posting on the Amazon affiliates web site, which came from todays Wall Street Journal (3/8/2010). In 2008, there were about 4,200 Amazon affiliates in Colorado, who earned about $37.5 million. I will go to the library tomorrow and hopefully see the actual stats. Since that sounds like a lot of money.

Ouch! I am in Pennsylvania and have recently signed up with Amazon, I hope it don't happen here. Pennsylvania does like to get their greedy little hands on just about everything, so I bet they are not far behind.

Rob B

Did you know?..........

1)That this bill only passed by one vote in the state House and that there were only 4 dissenting Democrats that were against the legislation (Party Politics at its best).

2)That this affects not only associates connected to Amazon, but also associates connected to any other company (like Overstock.com) that decides to take the same action in response to the new law that Amazon did?

3)That other state governments will eventually follow suit. State governments are so desperate to raise money any way they can (instead of looking first to cut wasteful spending) that I’m afraid this kind of thing will continue.

4)Colorado isn’t the first state to do this, because other states have already enacted similar laws. According to Denver Fox 31; New York, Rhode Island, Connecticut and North Carolina have passed (or are close to passing) similar laws. In those states, Amazon will or already has ended its affiliate programs.

Governor Ritter responded in an interview with Denver CBS4 that, “Amazon has taken a disappointing and completely unjustified step of ending its relationship with associates. While Amazon is blaming a new state law for its action, the fact is that Amazon is simply trying to avoid compliance with Colorado law and is unfairly punishing Colorado businesses in the process. My office worked closely with Amazon’s affiliates and associates to modify House Bill 1193 to specifically protect small businesses, avoid job losses and provide a fair, level playing field for on-line retailers and Main Street, brick-and-mortar retail shops alike. Amazon’s position is unfortunate, and Coloradoans certainly deserve better.” Well, I’m disappointed that he signed the stupid legislation in the first place because it won’t make any difference to the budget deficit in Colorado. They shouldn’t have gotten the state into this trouble in the first place and they should be making cuts in wasteful spending instead.

Amazon behaved like a rational company in the face of government regulation that had no upside for them and substantial downside. They are not based in Colorado and should not be forced to comply with these reporting requirements. Also, this has zero impact on consumer purchasing activity as this doesn’t impact the end customer of Amazon products in any way.

On the other hand, there are those that think that Amazon is going after the affiliates even after the affiliates were exempted from the legislation. Those who hold to this opinion just don’t understand the Constitution of the United States which allows for companies NOT based in a certain state to NOT charge a sales tax. Amazon is not based in Colorado as well as many other online giants. So I applaud Amazon for the stand they are making for their rights under the Constitution of the United States. Wake up America (and legislators in our states), it’s a brand new world now with the internet and it is only becoming an even bigger influence every day as brick and mortar businesses are beginning to understand. In case you haven’t noticed, these same businesses are expanding their sales to the internet as well (and not charging sales tax either).

I have emailed my opinion to each of the legislators as well as the Governor. I would suggest that everyone do the same until their stupid server breaks down so that they have to fix it which will drive the state further in debt!! Maybe THEN it might just sink in that they made the wrong decision in passing this piece of legislation.

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Rob, I also saw this on several news channels last night and I don’t understand Ritter saying he didn’t know this would happen. Yes he did know it would happen. Sooner or later this will have to be decided (again) by the Supreme Court, just what constitutes a presence in a state. In the new law, it also mentions catalogues and advertising. Ritter also said that Amazon still has to pay the tax, which they said they wont do. What is interesting is the very last part of this bill says this “The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.”

I saw the news where I live in Virginia recently ( I think it was just last week) that they're trying to pass a bill to charge state tax on online purchases. This is very upsetting! I haven't been signed up with Amazon affiliates long so I don't have much to lose, but this is awful. It is very upsetting to see they just cancel your account with pretty much no warning, but I guess they had to since the legislation passed. I feel very sorry for the Amazon Associates who have made a business out of this and have now woke up to their business being gone. I'm definitely against taxing online purchases, it's going to do more harm than good. The people passing these bills must not realize or understand that.

There is a lot of anger and unhappiness today in Colorado, anger at both Amazon and the Governor. There is confusion as to what exactly the law means now. Does Amazon still have to pay state taxes now even though there aren’t anymore associate affiliates, which means no presence. But Coloradans can still see the ads on their computers and still buy from Amazon from those Internet ads. Rather typical of politicians, pass a law and sort out the details later. This will probably be overturned when and if a republican becomes governor in November. Mostly there is talk of starting a dba business with an out of state address. That seems to be the idea today.

You would think the government would want to encourage people to dig their way out of the economic slump not make it harder to do so.

I can see how many people would be affected by this. On the other hand, I have two blogs that don't make a dime with Amazon, so I won't exactly be upset if I lose the option.

I had heard about this move. It doesn't affect me, but I keep an eye on such things.

never knew that

-Probably will say '...it's NOT a tax, it's a 'user fee.' If you use it you pay a fee but no-no-no. -it's NOT a TAX!' :-\ Excellent presentation.

I wouldn't count on a Republican to overturn this law. That's naive, especially in this economic climate.

By the time the November elections get here, the Amazon affiliates will have been forgotten and the old affiliates will have moved on. It happened and not another word about it from Amazon.

And the hard truth is, Amazon affiliates are not a political constituency. The vast majority of people are not even aware of this program.

I had no idea - a good warning to Amazon affiliates

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