Will New Tax Laws End Amazon’s Affiliate Program?
On Tax Day (ironically, or maybe intentionally), Amazon will sever all ties with affiliates in the great state of Illinois, including (also ironically) film critic Roger Ebert.
Back in January, Ebert took some flack from Twitter followers who didn’t think it was right that he Tweet Amazon links. The critic explained in an interview with ClickZ that the small amount of income he made from the links went to keeping his website free for all to read and I agreed. A few ads and a few clicks is a small price to pay in order to keep reading articles such as his half-star review of Battle: Los Angeles. Now, we find the fight was for naught, thanks to a new law signed by Illinois Governor Pat Quinn.
The new law requires Amazon to pay sales tax on items shipped to Illinois as long as they have affiliates operating in that state. You see, according to a 1992 Supreme Court decision, online sellers only have to pay local sales tax if they have a physical presence in the town where the product is going. Generally, this is seen as a brick and mortar store, but the new Illinois law says an affiliate who lives in the state qualifies as a “physical presence” and so taxes must be collected.
The original law is called the Main Street Fairness Act and is meant as a way of protecting local retailers from being sunk by lower prices on an internet site. But Illinois’ decision to count affiliate programs isn’t going to help local retailers at all. In fact, it’s going to hurt. Instead of paying out the extra money, Amazon has chosen to cut ties with Illinois affiliates and that’s a big loss for some residents.
Scott Kluth, founder and CEO of Chicago-based CouponCabin.com, told the Chicago Tribune that the new law was “deeply disappointing” and said his company is “actively exploring” moving to Indiana.
It doesn’t end there. Colorado, North Carolina and Rhode Island all have similar laws and Amazon has already pulled affiliate deals or is involved in an active court battle. California and Vermont aren’t far behind.
From a customer standpoint, this new law means business as usual, but for the internet marketer, it could mean the beginning of the end. If enough states switch over to the new rules, will Amazon give in and begin collecting taxes or will they simply end their affiliate program?
If they do decide to cut and run, there will be a lot of poor internet marketers come the end of that quarter.