Affiliate Marketing & Programs

News Roundup: Amazon vs. California Nexus Tax


Amazon vs. California Nexus Tax News Roundup - affiliate programsYesterday, I covered alternative shopping programs that California affiliates could use to substitute for the loss of revenue they’re facing because of Amazon’s decision to pull out of the state.

Today, I want to provide a quick update on a few issues surrounding Amazon and the California Nexus Tax.  Readers have discussed these issues in comments and private emails to me. There are many issues out there, and most of them revolve around what California affiliates could, and should, do to protect their businesses.

Amazon’s push for a referendum

The Christian Science Monitor discussed Amazon’s push for a statewide referendum on the affiliate tax earlier this week.

This article raises an interesting theory about Amazon’s challenge. In essence, even if Amazon loses the referendum, they win:

“There are benefits to Amazon even if the referendum and other efforts fail,” says Mr. Liedtka. “This is because Amazon is sending a message to every state that efforts to raise taxes will be met with expensive, drawn out public battles and outcry from a subset of voters.”

He adds that the financial stress on California’s erstwhile Amazon affiliates could also have an impact. “Even if it is only short term, if eliminating affiliates in California causes tax revenue to drop slightly, Amazon and advocates for no sales tax will have a powerful argument in their arsenal,” Liedtka says. “Politicians who are secure in their jobs have incentive to avoid controversial actions.”

States are certainly cash strapped and will have to consider the cost of lengthy legal battles related to placing a new tax on affiliates.

An open letter to Amazon

While this is a bit old, I think it’s interesting and worth sharing today. It hasn’t received much coverage or notice on affiliate blogs.

Fox News published this letter as an open editorial to Amazon CEO Jeff Bezos. The letter was written by Danny Sullivan, who has earned about $150,000 in the past seven years through the Amazon program. Even though he’s earned that much through Amazon, he claims that Amazon’s retreat from California won’t impact him much.

Sullivan also rails against Amazon and the short notice they gave to affiliates before pulling the program.

One interesting angle in this piece is that Sullivan notes that Amazon will be pocketing the sales coming from California affiliates too busy or too out of the loop to remove their links. He even hints at a class-action lawsuit of affiliates against the retailer.

Alternatives for California affiliates

Chris Guthrie provides an informative post about what’s happened with Amazon in California, and goes into detail about an idea we’ve discussed in the comments at the blog … that California affiliates can set up their business in another state. While legal experts have differing opinions about using this strategy as a workaround, it is something that super affiliates will definitely want to consider.

In the same post, Guthrie also discusses the idea of selling your site. If you’ve got a high-performing site and you’re unable to move your business from California, it could make good sense to sell your site. If selling your site is an idea that interests you, check out the marketplace at Flippa.

Over the next few weeks, you can expect quite a bit of additional activity around this story. Stay tuned to the blog and we’ll keep you up to date.

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4 Responses to News Roundup: Amazon vs. California Nexus Tax

  1. Greg July 29, 2011 at 7:51 pm

    Wow. Danny really doesn’t have a clue. If it were purely about collecting sales tax, there would be no issue. Danny does speak about fairness, which is exactly what the issue is.It is unfair to claim a company has a nexus simply because they have an advertising outlet in the state. It is unfair because other internet retailers who also have no business entities in the state do not have to collect sales tax if they don’t have an advertising contract in the state. It’s about equal taxation, NOT collecting sales tax.
    Danny must be living under a rock somewhere if this all came as a total surprise to him.

    • Jeff Greer July 29, 2011 at 8:19 pm

      I couldn’t agree more with you Greg. Thanks for your comments.

      I also find it odd that Fox News is the outlet for this letter, but maybe that’s just the conspiracy theorist in me.

      • Greg July 29, 2011 at 8:52 pm

        Ironically, as the law is written, Fox News (well domiciled in CA with several offices) is a nexus. So, any company contracted with Fox News for advertising must now collect sales tax for sales in the state. But Jeff, forget Amazon for a moment. My biggest question is, what about Google? Has this been addressed? Since Google is HQed in CA the law also applies to AdWords. Are any advertisers pulling out of AdWords because of this?

        • Jeff Greer August 2, 2011 at 5:32 pm

          The State of California has made a distinction between selling goods and selling information. And I think that’s why this probably won’t hold up if challenged in the courts.

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