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Amazon will end affiliate program in California if new law passes
- rishi 15y agoAre they doing this for tax reasons?
- parfe 15y agoSort of. As I understand it this law would require amazon to start collecting sales tax. It does not mean amazon would be paying more themselves. Only that customers final bill would now include the local sales tax.
- Symmetry 15y agoAs an example of how complicated this can get: Many states and municipalities tax "cookies" differently than other food items. For a long time Fig Newton used "A cookie is just a cookie, but a Newton is fruit and cake" as their most prominent add copy, and while some people have referred to Fig Newtons as cookies, the people who produce them don't. Would you like to be the person in charge of figuring out, for every jurisdiction in the US where its relevant, whether or not a Fig Newton is a cookie based on relevant law and precedent? There isn't a consistent answer that applies everywhere. And that's just one product among the many, many that Amazon sells.
- mcollins027 15y agoFrickin fantastic. There goes my business model...
- T-hawk 15y agoWould moving out of California be an option? Or at least doing the minimum to establish residency somewhere with fairly lax requirements?
- archon810 15y agoWhat would prevent one from changing to some fake address if you get paid in bank transfers anyway? Where could this go wrong?
- idoh 15y agoMaybe channel your affiliate links through skimlinks?
- leot 15y agoThey're clearly doing this because they know the affiliate marketers will complain a lot, and not because there's much of a direct relationship financially.
- btilly 15y agoNot at all. They are doing this because they don't want to get into an unnecessary legal fight which could go either way.
- gte910h 15y agoOr do the obscenely complex logic for each of the tens of thousands of jurisdictions each year required to calculate sales tax.
- jbooth 15y ago50 jurisdictions, actually. Less considering that some states don't have sales tax and still more aren't going this route.
- throw_away 15y agoactually there are far more than 50, as many counties and municipalities have their own sales tax rates on top of their state's rate. not only that, but it is far more complex than just one fixnum per jurisdiction as each is able to establish rules on what is taxed and what is not. the prime example is food, where the local laws on what counts as non-taxed food always seem a bit byzantine.
- jbooth 15y agoThanks, you're completely right. I'd still note that every single national retailer manages to do it ok.
- throw_away 15y ago
- krisneuharth 15y agoI received notice today from 4 of my affiliate programs that they are terminating their programs in California. I expect the remaining few to notify me soon enough. I may end up registering again with these program using an Oregon address if I feel like my site is something I still want to work on if this goes down the way it is looking.
- allwein 15y agoPerhaps you'd like to consider a Wyoming shell company? http://news.ycombinator.com/item?id=2708336 http://news.ycombinator.com/item?id=2708336
- deleted 15y ago[deleted]
- nerfhammer 15y agoWith your legal address in Wyoming wouldn't you need a personal address to which Amazon would need to send correspondence? Or if you open a bank account for this legal enttity, wouldn't the bank want an address they can actually correspond to?
- calloc 15y agoThat is why you have that legal address. That is where all correspondence for the business is sent. This is called a statutory agent.
- nerfhammer 15y agoall correspondence? Not just legal correspondence?
- taylorlb 15y agoI got a notice from Amazon as well. Though they specifically said they plan to terminate if and when the law passes, so the program (at least at AMZN) isn't dead quite yet.
- richcollins 15y agoAffected companies will end their affiliate programs so they don't have to pay the tax. This means that the state won't collect the tax revenue anyway. It's obvious that this is just a ploy by competitors (Walmart) of companies with successful affiliate programs (Amazon).
- sabat 15y agoLawyer types: if one were to, say, incorporate in Delaware, and then rejoin the Amazon program from a Delaware address (presuming that's possible) -- would that be legal?
- btilly 15y agoI am not a lawyer, and this is not legal advice. As long as Amazon didn't know you were a California resident, you'd probably get away with it. However you'd be opening Amazon up to the possibility of a lawsuit from California. If they figure that out, they will not be happy with you.
- pavel_lishin 15y agoWouldn't creating a Delaware corp for all of this be massive overkill? Anything purchased through the corporation for an employee's (your) use would then be taxed, too, right? This sounds like a pretty significant hassle, and really only a good idea for someone who makes a lot of money from their Affiliate stuff.
- jarin 15y agoI think as long as your business has a presence in CA (like your office or home office) you still have to pay taxes. Of course, you could register your business in a state that doesn't disclose stakeholder info, like Nevada or those Wyoming shell companies. Edit: definitely not a lawyer
- 15y ago
- btilly 15y agoSome important background on this. At issue here is sales tax. By state law, the tax is owed by the citizens to the state no matter where they make the purchase. To make enforcement easier, the tax is supposed to be collected by businesses. In theory the tax is owed regardless, but as a practical matter when businesses do not collect the tax, customers don't volunteer the information and the state loses revenue. This annoys states to no end. However courts have long ruled that a company that is not in a state cannot be forced to be regulated by that state, even if it does businesses with residents from that state. They can't do that because that is interstate commerce, which the Constitution says is regulated by Congress, not the states. But if the company has a presence in that state, then it can be forced to obey state regulations, even if the actual commercial act crosses state boundaries. This is all old hat, and was settled back in the 1800s with catalog companies. The new twist here, that several states (now including California) have pursued, is declaring that the existence of an affiliate program with state residents is a business presence in that state. Because it is a presence, they can make Amazon collect taxes. Amazon's position is that affiliates are not Amazon employees, and are not a presence of Amazon in that state. And therefore those laws are unconstitutional. However Amazon has chosen to not contest these laws in court. Instead Amazon has chosen to cut off all affiliates in any state that tries this tactic. It thereby guarantees that it no longer has a presence in that state, and it doesn't go about trying to collect taxes from people in that state. The net result is that Amazon loses some business, the state continues to not get taxes, and some residents lose a source of income.
- ddlatham 15y agoHow many affiliates are they willing to terminate? All of them (besides the 5 states it already collects for http://www.amazon.com/gp/help/customer/display.html?nodeId=468512#which http://www.amazon.com/gp/help/customer/display.html?nodeId=4...) ?
- novaurora 15y agoThere's an open letter on Votizen opposing the Amazon tax and requesting a veto: https://www.votizen.com/letters/27/ https://www.votizen.com/letters/27/ You can sign it yourself as a California voter, or simply tweet out a link and ask for retweets to get more signatures.
- dailyrorschach 15y agoCan I add/posit that, perhaps the reason Amazon is also taking this pretty passively other then just shutting down and waiting to see if the law changes - is that the affiliate marketing programs are perhaps just not that valuable to them any more with their market position?
- richcollins 15y agoAlso see: http://news.ycombinator.com/item?id=2711202 http://news.ycombinator.com/item?id=2711202 (Veto the law that will end affiliate programs in California)
- Hisoka 15y agoI suspect Amazon secretly wish they could just get rid of their entire affiliate program. If it was so profitable, they wouldn't be getting rid of affiliates left and right. If you think about it, most people who buy thru an Amazon affiliate link probably would've bought it from Amazon anyway (due to its huge brand recognition, dominance in Google, etc). So, when an affiliate refers a sale, sometimes they're losing money, not making money.
- chc 15y agoIs there something preventing Amazon from doing so?
- crag 15y agoI agree. Amazon loved their affiliate program while they were growing. Now that they're the biggest in town, and don't need the affiliates; they looking for any excuse to drop them.
- dangrossman 15y agoThe reason for Amazon to continue running an affiliate program isn't to drive awareness of the site but to provide the massive number of deep product links that push Amazon results to the top of search results. Amazon's search traffic is in part dependent on the affiliate program.
- dazzla 15y agoIt's probably simply more cost effective to drop the Affiliates as it is for all the smaller businesses with affiliate programs that are also dropping affiliates.
- DanLivesHere 15y agoThis is incredibly unlikely. Bringing people to a store, virtual or otherwise, is incredibly valuable for that store. Amazon has literally 1000s of people doing that, constantly. Instead of finding a good/best price on an iPod, I send people to Amazon, etc. Don't underestimate that value.
- 15y ago
- bennesvig 15y agoAdam Carolla's Podcast gets a good source of it's income from Amazon's affiliate program.
- kposehn 15y agoUpdate Governor Brown just signed the aforementioned affiliate nexus taxes into law minutes ago. They took effect instantly.
- silencio 15y agoCouldn't find any news stories that weren't just reporting on the "what ifs", but the press release from the governor's office is available here: http://gov.ca.gov/news.php?id=17101 http://gov.ca.gov/news.php?id=17101
- ellisd 15y agoThis sounds like a terrible idea from a technology standpoint as each county and city seemingly has different sales tax rates. To comply with taxation, every out of state company will now need to pull the active sales tax rates for the shipping destination and then apply this to the order. What happens if the rate isn't kept up to date? Are states like California actually ready to supply this data in a form that is easily consumable as a web service rather than a PDF file, to avoid hindering interstate commerce? Personally I don't think Amazon is completely the victim in this situation. Their attorneys spend quite a bit of time and money figuring out how to avoid paying tax. I interviewed once for an Amazon.com company who's "primary" development offices were in California, yet their checks came from their "legal" headquarters in Nevada. Shady at best... for example: http://www.lab126.com http://www.lab126.com
- chrisbolt 15y agoThere are companies out there like http://www.avalara.com/ http://www.avalara.com/ that exist to help deal with the complexities of state, county and city sales tax rates.
- bxc 15y agoits interesting (to me) that they avoid collecting sales taxes in various US states, but that (at least for AWS) they are compelled to collect VAT for all EU states because they have a presence in at least one of those EU states...
- abalashov 15y agoSo, what exactly is deemed "presence?" Apparently an Amazon distribution center in Texas was deemed "presence" a while back. On the other hand, surely Amazon operates a fairly extensive network of data centers, warehouses, and other fixed-location logistical inputs in California? Is that "presence?" Where is the distinction lie?
- 9999 15y agoYes, I'm really not clear on that either. Can someone with a legal background provide some clarification?
- phirephly 15y agoAlright guys, so we all lost our Affiliate programs. What are the legal implications for just putting down an out-of-state friend's address in our Amazon account information?
- 37prime 15y agoI am pretty sure the payment made to Associates Program is classified by Amazon as "advertising fee". I'm not sure how it would hold up against any accounting audits by IRS, for example. Amazon do send 1099-MISC to Associates Program member.