States Forcing Amazon To Cancel Affilaites. Will eBay be The Next Target?
June 19th, 2009 by Skip McGrath
No. Carolina trying to force Amazon to collect sales tax on affilaite sales
It is no secret that state budgets are under pressure. States get their revenue form many sources but income tax, property tax and sales tax are the big three. As people lose their jobs there is less income tax. As proper values fall and homes are foreclosed on, then the property tax falls and of course as people buy less the income from sales tax falls.
When our income falls like it has this year, we spend less. But governments can’t seem to do that. So rather than tighten their belts they just look for new sources of revenue.
Some brilliant bureaucrat in North Carolina discovered that several of their citizens were earning affiliate commissions from Amazon. So they decided to change the law so NC could collect sales tax on those affiliate commissions.
Here is the text of the email that Amazon sent
We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates. You are receiving this e-mail because our records indicate that you are an Amazon Associate and resident of North Carolina.
Please note that this is not an immediate termination notice and you are still a valued participant in the Associates Program. All referral fees earned on qualified traffic will continue to be paid as planned.
But because the new law is drafted to go into effect once enacted – which could happen in the next two weeks – we will have to terminate the participation of all North Carolina residents in the Amazon Associates program on or before that same day. After the termination day, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com nor will we accept new applications for the Associates program from North Carolina residents.
The unfortunate consequences of this legislation on North Carolina residents like you were explained in detail to key senators and representatives in Raleigh, including the leadership of the Senate, House, and both chambers’ finance committees. Other states, including Maryland, Minnesota, and Tennessee, considered nearly identical schemes, but rejected these proposals largely because of the adverse impact on their states’ residents.
The North Carolina General Assembly’s website is http://www.ncleg.net/, and additional information may be obtained from the Performance Marketing Alliance at http://www.performancemarketingalliance.com/.
We thank you for being part of the Amazon Associates program, and we will apprise you of the General Assembly’s action on this matter.
Well, Amazon is of course fighting this but if they lose they have already told associates (affiliates) that they will have to stop paying affiliates in North Carolina. So the action by the legislature will not raise any money but will kill a viable income stream for their residents. Since that income could be used to purchase products that would generate sales tax for the state, passing this law will actually hurt revenues. But governments generally don’t care about unintended consequences.
If laws like this pass, it will not only affect Amazon. You can be sure that major affiliate companies like eBay, Wal-Mart and even affiliate management firms such as ClickBank, Commission Junction and Sharasale will also be affected.
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Posted: June 19th, 2009 under Amazon.