jaydub

Amazon said Thursday it is terminating its relationship with thousands of California associates because of a new law that would require the online mega-retailer to collect sales taxes if it has affiliates in the state.

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enlytend

Yep - Amazon, Overstock and a slew of others. This in spite of repeated attempts to show the gov't how this unfairly targets web publishers and that it will not bring the anticipated windfall of revenue to the state .

(Merchants terminate the affiliates, state not only doesn't get the anticipated increase in sales tax, it loses income tax from the affected affiliates.)

Brick and mortar stores make heavy use of local resources - police, fire, roads, etc. Sales tax (in theory) helps foot that bill. Merchants who are online and out-of-state do not use these services (well ...trucks drive on roads to deliver merchandise, but trucks drive through states en route to other destinations too.)

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bluearrow

CA affiliates will be to location in some other state if they want to use Amazon. I have no idea who CA plan to earn from this if Big companies like Amazon backs away.

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enlytend

If you do the math, it makes no sense:

California's state sales tax = 7.25%.

A few of California's income tax brackets:

$26,821+ = 6%
$37,233+ = 8%
$47,055+ = 10%

Merchants drop affiliates - state gets none of that anticipated sales tax. If this causes the affiliate to drop to a lower tax bracket, there goes some income tax too. If the affiliate moves to a friendlier state, there goes ALL of the income tax.

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bluearrow

Unfortunately their experts day dreaming about it believing they are going to earn more from this.

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Domagon

I'm not up on all the details, but my first impression is this simply gives Amazon an excuse to dump affiliates and keep more money for itself; drastically reduce the number of small time sellers, similar to what eBay has done over the past couple of years. Perhaps that's way off base, but was what first came to mind when I saw the news articles.

As for the technical side of collecting sales tax, for Amazon it's no biggie, but for small merchants, doing so properly is difficult and very time consuming.

To digress a bit, there are tens of thousands of taxing jurisdictions in the U.S. Yes, really that many - to the point that even knowing the customer's zipcode is not sufficient ...

The seller literally needs to know the purchaser's exact physical address, and then cross reference that against a huge database of sale tax jurisdictions (and a person can often be located in more than one at the same time) - ok, that part isn't too bad with computers...
????: NamePros.com http://www.namepros.com/affiliate-talk/721168-new-amazon-tax-in-california.html

But the real fun begins with all the arcane rules as to what's taxable, exemptions, and collection - filing and remitting payment to all the different jurisdictions; some states make it easier than others, but still, even for an active small-time seller, could easily result filing in a few dozen states.

With local and state budgets stretched the way they are, the push to collect on on-line purchases is going to accelerate over time. Some states are working to simplify collection and filing for on-line sellers.

Ron

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enlytend

If Amazon wanted to drop their affiliate program, they could do that at any time. If they wanted to drop non-producing affiliates, all they have to do is change their program terms. Easy. Merchants drop people (for various reasons) or terminate their affiliate programs all the time

Yep - and that's why it's a problem.

This goes much farther than Amazon - it affects EVERY company that sells merchandise online and has an affiliate program (because that's what establishes the nexus - more on that in a second). There are hundreds of merchants that have dropped affiliates in affected states. Smaller merchants can't cope with the complexity as mentioned above. There is speculation in some places that eventually this will go national and then the payment processors will get in on handling the messy details - for a fee.
????: NamePros.com http://www.namepros.com/showthread.php?t=721168
????: NamePros.com http://www.namepros.com/showthread.php?t=721168

It is having a devastating effect on the livelihoods of people who are in the affiliate marketing industry. Some of the larger ones (like Fat Wallet) simply moved elsewhere, not everyone can do that.

Affiliates aren't employees of they're publishers. Amazon and the like are advertisers. Magazine publishers don't create a nexus for a company if someone buys an issue off the newsstand, sees an ad, picks up the phone and buys something. Affiliates are being singled out unfairly, solely because the advertising channel is trackable. Think about it.

These laws, while labelled with soft-and-fuzzy names like "Main Street Fairness", are being driven by the "big box" stores - the Wal Marts, theBest Buys ... who are well known for their negative effect on those same "Main Street" businesses wherever they pop up. This is one way to drive away their online competition. Meanwhile, all those big merchants already have a physical presence in those states and are already collecting those taxes and filing in those states. (By having a physical presence, they're also using a much bigger share of the municipal services which those taxes help pay for.)

There are already laws that say if you buy something out of state you have to pay sales tax on it. If people aren't doing that, find some way to enforce it. How many of the politicians pushing these laws do you think report all of THEIR out-of-state purchases on their tax returns?

Three states which have passed these laws have looked or are looking into repealing them because they generated no additional revenue.

I'm just thankful that the idiot(s) running my state haven't gone down this road ... yet ...

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