More and more Amazon affiliates are getting the beat down as Amazon attempts to dodge paying taxes on sales it’s affiliates drive to the site. So far I’ve found that Rhode Island, New York, North Carolina and Hawaii affiliates are all getting “the letter” indicating that they’re being dropped, or at the very least suspended, as affiliates. Based on the huge amount of revenue cash starved states are missing out on by not collecting sales tax on affiliate sales, I’m guessing we’re going to see a rash of states follow suit. Rhode Island alone estimates it’s losing $3 million in sales taxes for online sales.
If Amazon represents a major portion of your business model, a letter along those lines could really put a crimp in your revenue stream. Here are 3 things you could consider doing if you need to punt and change:
1. Change Affiliate Income Focus
This is an obvious one, but probably the one with the least amount of pain from a business standpoint, but the most amount of pain time-wise. With the millions of products in other affiliate networks like Clickbank, you have a lot of options to choose from. It will take some retooling, but going with digital products like those in Clickbank can help you avoid the sales tax issue for at least a while.
2. Change Affiliate Income Sources
Another option that is time intensive, but doesn’t impact your business structure as much is to change review sites and references to specific products to eBay links. This could allow you to drive traffic to specific products, still earn a commission, and hopefully avoid being dropped as an affiliate for being in an online sales tax hungry state. Of course the big question is how long before sites like eBay have to follow suit.
3. Move Your Business To Another State
I’ve read a number of posts suggesting incorporating your business in Delaware (this one seems to be the most popular suggestion) or Nevada where the business climate is friendlier. Both of these states have long been considered THE place to incorporate any new business providing some advantages over incorporating in your home state. I honestly don’t have much experience or knowledge about how the process works, so it’s something you would want to research. If you decide to go this route, there are a lot of companies that can help you do it quickly, easily and pretty inexpensively.
Overall, this latest trend should encourage all of us give more consideration to the types of sites we set up, and especially how we monetize those sites. Oftentimes I think Internet Marketers, Affiliates, etc. just throw up sites that seem good at the moment without much thought to a longer term plan or potential consequences. I know I’ve been guilty of that (and still am at times).
This is a great time to evaluate your current project launch plans and consider potential implications such as online sales tax laws. They could make or break your earnings potential!
July 13th, 2009 at 9:54 pm
Great post. Awesome information. The only thing that concerns me is, would it be difficult to move your business to another state. In this economic climate it may be very hard to change your location, as I'm sure most businesses have worked hard to uphold and sustain strong customer relationships.
July 14th, 2009 at 10:12 am
I've found your post really informative and interesting. With the actual economic crisis, many businesses are being hugely affected and hence suffer from breakdowns. As far as I've seen, many business websites are sustaining the hard blows provoked by the economic imbalance around the world. I for one, just hope the situation gets better sooner rather than later.
July 14th, 2009 at 10:20 am
I was an amazon affiliate a long while ago until recently when I quit with them. They have a lot of limitations for affiliate and I really don't like that!
July 14th, 2009 at 11:31 am
Sooner or later, no matter where you locate, the state tax problems will catch up with you on just about any business where you are driving inter state business. Your other advises are certainly useful but I believe that they too will give only short term benefits.
July 14th, 2009 at 12:13 pm
Or just ignore Amaon alltogether. I mean if they're going to ignore their affiliates just to avoid taxes why should you work with them? There are othere services you can utilize.
July 14th, 2009 at 2:22 pm
You know it's too bad that this is going on. Especially in this economy things are getting harder harder. I guess it would have happened sooner or later.
I know plenty of people who have incorporated in Nevada and it is definitely the way to go.
July 15th, 2009 at 5:53 pm
Indeed the affiliate marketing is very lucrative but in the initial stage needs more hard works my many friends are doing the and they are rolling in the money.
July 16th, 2009 at 6:15 am
[...] them a couple of weeks ago here: Earn Money with RevResponse) sent me an email after reading my Amazon Affiliate Slap post. She brought up a great point that I thought I’d share with [...]
July 16th, 2009 at 8:03 am
So Amazon is closing down affiliates becasue they do not want to pay lots of tax?
Does anyone think this will happen in the UK or does it not apply here?
July 16th, 2009 at 10:54 am
While I still use Amazon as an affilliate, it isnt that profitable for me. The 24 hour cookie window is really to short . So if you are promoting high dollar items (think HDTV's) people usually shop around. Even if Amazon is the lowest price, they propbably shopped around for longer then 24 hours so when they return, you lose the sale.
July 18th, 2009 at 3:38 am
It allows you to actually display products on your website – they're added to a shopping cart on your website – but the payment is processed by amazon. You get commission for sales.
July 19th, 2009 at 1:49 pm
Problem is, I have a feeling that Amazon will be a big looser as well as more and more people will move to other affiliate networks or will stop promoting Amazon products! So, a lose-lose situation?
July 19th, 2009 at 6:43 pm
First of all Thanks for such wonderful information, It is very hard stuff to change current business location. It has an effect on on business.
July 20th, 2009 at 8:35 am
this is really unfair, i have used this for years and years, thanks for the heads up though
July 21st, 2009 at 7:31 pm
It's nice to live in Texas which would probably be the last state to institute a tax.
July 22nd, 2009 at 5:00 pm
I hope the taxes issue in those mentioned states will be resolved soon. However, it seems Amazon doesn't like affiliate marketers as before. One major sign is prohibiting PPC campaigns.
July 24th, 2009 at 1:45 am
I still don't understand why Amazon is just cutting loose it's valuable affiliates that reside in the states that are now being hit with online taxes. I wonder how much amazon losses by doing that.
Do you think they are trying to pull a tactic against the states?
Till then,
Jean
July 25th, 2009 at 3:44 pm
Amazon affiliate program is very effective I think as you get big time money by giving clients products that they want.
July 31st, 2009 at 7:52 pm
There is alot of scope of affiliate marketing in coming time because all businesses are going to be virtual.
August 14th, 2009 at 10:06 am
I wonder how much amazon losses by doing that .i think as get big time money by giving clients products that they want thank for the heads up though
August 17th, 2009 at 8:17 am
they have a lit of imitations for affioliates and i really don`t like that is really . i have used this for year and year thanks for the heads up though.thank you
October 8th, 2009 at 4:33 am
in the arena of enhecing the business, the internet plays vital role in the favor of customers in conjunction with entrepreneurs. the best thing about this trade is that. the advertisement can be done at globbly. and focus products get popularity in all the domain of the world. this maximum wealth can be accumilated through the internet marketing.
November 22nd, 2009 at 8:46 pm
I’ve been included in taxations for longer then I care to admit, both on the private side (all my employed lifetime!!) and from a legal viewpoint since satisfying the bar and following tax law. I’ve offered a lot of advice and rectified a lot of wrongs, and I must say that what you’ve posted makes utter sense. Please uphold the good work – the more people know the better they’ll be armed to cope with the tax man, and that’s what it’s all about.