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North Carolina Close to Enacting Affiliate Taxes; Amazon First to Pull the Plug

It appears that North Carolina is about to follow New York’s lead and implement a tax collection scheme that will see Amazon.com shut down its Associates affiliate program in the state. Today, all Amazon Associates in NC received this gloomy email from the online retailer:

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.

Sincerely,

Amazon.com

Last time I checked, adding new taxes in a recession were a bad thing. Amazon is a huge retailer and many people–myself included–supplement their income using its affiliate program. If others follow Amazon’s lead, then what affiliate revenue will be left to actually tax? NC would still not have any tax revenue from affiliate marketing AND those making a living from affiliate marketing lose their income. Nice move NC….not!

If you’re one of those that will be affected, then you might want to contact your state representative (thanks Scott for that suggestion!)

  • http://www.compellingmarketingblog.com Tracy Needham

    If this goes through it might be a lot more than Amazon. If you look at Senate bill 202, it seems to be ANY retailer that makes more than $10k from affiliate sales in NC will have to start collecting sales taxes from purchases in that state.

    That could prove to be big disincentive for a lot of the big internet marketers as well. Not to mention, the residents who have to pay the sales taxes if they don’t discontinue their affiliate sales. Either way, it stinks and yes does seem to be a stupid idea in a recession.

    Tracy

    Tracy Needham’s last blog post..SEO for WordPress?Wordcamp Part 2

  • http://sayreonline.com Brennan

    Being someone who also has some affiliate businesses set up I am really keeping a close eye on this. This has to be one of the stupidest things a state can do in this economy as they are basically encouraging those who make their income from affiliate marketing to move out of the state. New York thought they were going to get a large bump in tax revenue from their new taxes but instead all of the businesses just moved to Connecticut and other places. I just don’t think it is smart to raise taxes in this economy and this will only end up hurting the state of North Carolina in the long run. I know a few affiliate marketers in Greensboro, Charlotte, and Raleigh who are now looking to move to nearby states. I think North Carolina should look at this again since they were just finally starting to get strong tech sectors in Charlotte and Raleigh and this could really spook some of those companies.

  • http://promote-my-site.com Don Draper

    I’m not the kind of person that writes their congressman, but I did this morning. Just enter your zip code at the NC Legislature website and you can get your rep and sen’s email addresses: http://www.ncleg.net/GIS/RandR07/Representation.html#byZIP

    This won’t affect just Amazon. If Amazon doesn’t think it has the infrastructure to be able to collect these taxes, how are the smaller players going to do it? We’re just going to effectively remove internet marketing as an option for NC Businesses.

    Don Draper’s last blog post..Stupid Twitter Tricks to Get Your Account Suspended

  • Anthony

    Really stupid move for North Carolina. I am a resident of NC and a full time Internet Market who just quit his job a couple months ago to focus full time on my Internet business. I got the message from Amazon in my inbox this morning as well, luckily I don’t rely on any income from Amazon sales — but if this starts a trend and all other affiliates jump on board (which I’d expect they will) then this will end up being a bad state for an online business which rely on affiliate sales. Bad move, especially since North Carolina is always voted as #1 place to start a business. Other states rejected this legislation, why couldn’t NC do the same. I’m originally from New Jersey, been in NC almost 10 years, it’s been good to me, but it might be time to retreat!

  • http://www.treadmill-ratings-reviews.com Fred Waters

    There is no doubt that this tax sucks and makes no sense. What is also aggravating is that Amazon is using us as pawns. If this type of tax becomes a trend then companies like amazon and overstock are going to have to adjust to the reality or otherwise they will lose a significant part of their revenue. I can’t believe that Amazon can afford to terminate all affiliates in every state that takes on this tax.

    Regardless, we need to contact our reps. Most are not aware of the ridiculous impact of these kinds of bills.

  • http://affiliate-blogs.5staraffiliateprograms.com/ Linda Buquet

    For those that want to learn more…

    AffiliateTip.com (not my blog) today has a very long post with tons of resources for learning more or getting involved to fight the NC tax. The Performance Marketing Alliance has detailed info about the advertising tax issue and keeps up with legislature in all the various states. The upcoming Affiliate Summit has 2 sessions devoted to discussing the advertising tax issues that threaten our industry.

    If this bill passes other states will follow and if Amazon drops affiliates other merchants will follow.
    We’ve been doing a good job of beating back the taxes in other states, I sincerely hope NC ends up voting this down.

    Linda Buquet’s last blog post..East and West Coast Affiliate Bashes

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  • http://www.jamiepelaez.com Jamie Pelaez

    This is absolutely a bad idea for the state of NC. Like many stated not only will other affiliate companies follow in Amazon’s foot steps…. This also means a lot of lost income for affiliates in NC, which means that NC’s plan to get more revenue from this will backfire. Not to mention many affiliates will be forced to move elsewhere to maintain their income and lifestyle. It is clear these states are not really thinking this through at all.

    I hope NC gets a wake up call and figures out this will do more harm than good and decides to not put this into effect.

    If not… I guess I am moving to TN or Virginia. I just moved here last summer from FL… I really love it here, planned on moving to the Asheville area to be in the mountains and still have a city life. However, if they pass this, I will be saying goodbye to NC if the projected downfall is true.

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