Amazon Axes 10,000 California Affiliates

Shortly after California governor Jerry Brown signed the budget which includes the affiliate nexus tax, Amazon affiliates in that state received the following email from Amazon:

Hello,
For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state in the near future please contact us for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect their ability to purchase from Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com.

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.

Regards,

The Amazon Associates Team

Affiliates in the following states are now affected by the affiliate nexus tax:

  1. California
  2. Colorado
  3. Illinois
  4. North Carolina
  5. Rhode Island
  6. Connecticut

The Performance Marketing Association advises California publishers and out-of-state advertisers to consult a tax or legal professional regarding this issue.

Are you a California publisher? Thoughts? Comments? What are your plans?

Comments, questions or suggestions? Please leave a comment below!

Cheers,

sig-ros

Comments

  1. says

    That is a pity, and I hope my home state of ND never does this.

    I feel really bad for those who have built up a good income, only to be squashed by big government.

  2. says

    What’s really annoying about the situation is that affiliates aren’t the only basis they’re saying Amazon should collect California sales tax. Amazon has subsidiaries in California, and the bill uses that for nexus as well. Cutting us off isn’t going to help Amazon.

  3. says

    What saddens me is that those who brought these laws into place are probably not witnessing the impact of their decisions on their constituency.

    Fat Wallet can probably afford an interstate move to avoid the falling axe blades and continue their merchant relationships. I cannot, nor do I imagine that many one-person affiliate publishers can afford it either. Just pick up and move across the border to Nevada? You betcha.

    What baffles me is how states expect to gain tax revenue from these laws, when the laws themselves remove the ability to generate that revenue by driving the merchants away. This is like taking out the car engine in order to save gas. Sure, you save gas. Oddly enough, your mileage doesn’t improve.

    These nexus tax laws are perfect for those wondering why their gas mileage didn’t improve. The rest of us would like our engines back, please.

  4. says

    I’m one of those California affiliates. So far I’ve been terminated by two or three other merchants, besides Amazon. And I think Arkansas is also on the list, IIRC.

    I’m going to do what everyone else who wants to keep their business is going to have to do. Flee the state in one form or another, and incorporate in a state where such a thing is unlikely to happen (Oregon, Delaware, Wyoming, etc.)

  5. says

    I have quite a few sites selling Amazon products, and even though I am not in a state currently banned by Amazon, I’m not building any more of them.

    It’s crazy to do business with a company that will just close your account at the drop of a hat. Sounds a lot like Google doesn’t it? Once these companies get to a certain point, they don’t need us any more and could care less. Better to partner with smaller companies that want to work with you.

    If your business is completely dependent on Google, Ebay, or Amazon, you better rethink your strategy. You could be out of business tomorrow.

  6. says

    Hi Ros,

    Yep, I got an email yesterday (or maybe a couple days ago), stating this may happen. Then the final email this morning. Whack, that’s it, game over. This completely shuts down one of our (low performing) sites. Amazon is only responsible for a small portion of our income, but I don’t like the precedence this may set. Don’t get me started on the politics of how the state is (and has been run) :(

    The times they are a-changin’. We’ll just have to stay focused on alternate affiliate sources. But I really hope this does not set a greater precedence that changes the affiliate business for ever.

    Cheers, and thanks for all the relevant and interesting posts!

  7. says

    According to the Amazon Associates’ blog, 80,000 affiliates had their accounts suspended last night. From what I understand, Associates can still log on to their accounts and even create links, but they won’t be paid for further business. Also, if an Associate did not make their minimum quota, they lose any revenue earned since the last payment.

  8. says

    Both my husband and I are affected by this as we both have sites. We weren’t aware the law was even being considered here in CA until yesterday when Amazon and another affiliate sent out notices of would happen if the law was passed. I’m not sure what we’re going to do just yet.

  9. says

    As of right now I am not affected by this law as I reside in Minnesota. I am very interested to find out how affiliates in the above mentioned states are dealing with this issue as well.

  10. says

    I am a Colorado affiliate that is already affected by the same law. I do not blame Amazon. Greedy politicians who can not raise enough revenue to cover their bloated budgets are shooting themselves in the foot. What is next, taxing emails?

    Our federal and state tax budgets need to be brought in line by cutting spending, not looking for more revenue at the expense of hard working people like affiliate marketers.

    Now California gets to join the states you have listed by losing income tax revenue on the lost sales of affiliates. Does anyone think about the consequences of their actions? Our country is screwed up.

  11. says

    This is the same letter that NC recipients got a few years back. (save a different governor) It is just heart wrenching to say the least. I feel really bad for Californians who are going through this. Arnold kept the tax from passing there for years, but with him gone and CA in such dire straights financially, I’m not surprised that Gov. Brown did this. When it happened in NC, I had thousands of Amazon links on my site to remove. (All thanks to Beverly Purdue, whom I helped vote into office! Grrrrr!) They are all a bunch of back stabbers who have been bought by the folks who own the brick and mortar businesses in the state! IMHO

    Feeling like ‘clicks’ were a safer bet for me, I joined shopzilla.com to replace some of the income I lost. (And I lost big time!) Why should someone buy products from me and pay taxes on it, when they can just go to the site and not pay taxes?

    Its a real dilemma for affiliate advertising and there is no ‘one size fits all’ answer. Sorry CA! But I sure know how you feel!

  12. says

    A friend of mine lives in California and at my continued urging, had just signed up for an Amazon account when this happened. Here in Texas, the state wanted to start charging Amazon taxes and they threatened to pull out their distribution center here so the state backed off.

    Now the state of California will also have to do without the revenue of the 10,000 Amazon affiliates who would have paid California state taxes on their earnings.

  13. says

    As yet this doesn’t affect me…yet anyhow! as internet sales taxes have been mentioned over here in the UK, but I know a fair few people who it does affect and it’s not right and action like this should be opposed, partitions handed out for people to sign.

    As it really aggravates me how Governments can be so greedy, because you just know they’ll start implementing this worldwide eventually and then they’ll tax us on how much Oxygen we breath and how much sleep we have will also be taxed!!!

    Governments!? Who’d ave em!??

    On a separate note Ros! I finally got my WordPress blog up and running thanks to Affiliate Blogger pro,all them useful videos were a great help, so cheers!

  14. says

    I am in California, and I got the notice shortly after the bill was signed, my Amazon associate account was terminated.

    I was not currently active in the program, so the highest profile bit of the situation, at least by news standards, hasn’t affected me. But it remains to be seen what other ways I will be affected.

    Technically, every US based affiliate program should be under the boot of this overreaching and unconstitutional law. I do not yet know whether I will see other problems stemming from the illegal tax scheme. It’s possible that most or all of the other affiliate relationships are too small for California to know or care about. On one hand, one of the few things overbearing governments are actually good at is collecting taxes, but on the other, they may not have anywhere near enough knowledge about how this industry works.

    It would be rather ironic if they do make effort to go after every single little affiliate program possible, as they would undoubtedly spend far more money on the enforcement of their ridiculous policy than they could possibly gain.

    Anyways, I already had firm intention to leave this state of super-inflated government and insanely high taxes which get spent on everything but what’s useful. Now I just need to hurry up.

  15. Kelly K says

    I can’t even begin to tell you how negatively this will impact my business. Just the thought of all those websites I now have to find new sources for and update links. Does anyone know of a good alternative to Amazon?

    What I especially liked was the one-day’s notice they gave us to prepare for this train wreck. I guess they figure they’ll still make money on sales from all the links we won’t be able to update instantly — the Associates just won’t be receiving any of it!

    I wonder if CA legislators gave any thought to the income tax they’ll be losing by the lost revenue? To my way of thinking, the sales tax is considerably less than most of us pay in income/self employment tax.

    Way to go.

  16. says

    I shut down my 10 Amazon sites last night so that Amazon cannot profit off me while refusing to pay me for service. I suggest all affiliates from affected states either shut down their sites or remove Amazon promotions from them (might be hard to do).

    another option is to form an out of state LLC and operate (remotely) from there to collect revenue. this was suggested by Danger Brown who does this because he is located in one of the states affected earlier by a similar law:

    http://dangerbrown.com/amazon-drops-all-ca-affiliates-what-to-do-if-you-are-affected/

    but unless you are making a heck of a lot of money from Amazon this does not seem to be worth the effort. i prefer to fold for now.

    i’m more worried that as a California affiliate i’ll soon start finding that i am no longer welcome in the affiliate programs of other vendors as well.

  17. Anna says

    I Just Started My New Website http://www.CouponAnna.com . I’m Really Disappointed Because Not Only Did I Lose Amazon I Lost 2 Other Big Name Stores. who Knows How Many More I Will Lose. This Is My Only Source Of Income Right Now. I’m A Substitute Teacher , But work Has Been Terrible. How Much More Are We Going To Lose . Anna

  18. Kit Elliott says

    Do you think that internet companies should charge a sales tax for each state and send it to the state? Right now, it’s a big mess. I was registered in all 50 states to collect sales tax for one of my companies. Every month I received $10,000 fines and penalties and most of the tax collected was $5 to $10 per state. They were so unorganized that they didn’t know if I was filing monthly, quarterly, annually.. – I finally closed that down and cancelled all permits for that company. THANK GOD!

    But that got me thinking – what if – you had one centralized company called Tax Collector and it either collected and forwarded the sales tax or collected directly from the sales form.

    What is the solution for the financial problems of each state?

    OR do we go after the unnecessary govt spending, the perks, the oil subsidies, the big business tax breaks?

    Curious to hear your ideas!

    Kit

  19. says

    Looks as if Texas may be spared. Here in Nevada where I am, looks as if we’ll soon be on the no-Amazon list. Our greedy legislators are pushing hard for the Amazon tax. One of Amazon’s largest distribution centers is in Fernley, northern end of the state. If Nevada taxes Amazon, Amazon has already said it will close down the plant and move it elsewhere. As for us, looks as if options that don’t leave us at the mercy of Google or Amazon are the future. I’m no longer investing time in my Amazon sites but looking at other avenues (offline, domain name selling, etc.).

  20. says

    Folks,

    Let this be warning shot across the bow to all of us. This tax will go nationwide eventually. My advice is that somebody might want to start lobbying Congress now.

    Here is my reasoning….we have states far and wide that are desperately starving for tax revenue. Getting it this way is an easy, low risk way for them to do it. It’s a lot easier than pulling cops off the street or cutting teachers pensions. Basically, we are an invisible workforce…let’s face it, that’s part of why we do it.

    However, we better start waking up…because as California goes, so goes the nation in many many things. Once states and the Feds wake up to the “low hanging fruit” of this kind of tax revenue, there are all going to try it.

    Good luck everybody.

    Neal Coxworth

  21. says

    I am a Colorado resident and had just gotten approved for the Amazon affiliate program when Colorado was axed – literally within one week!! I was really bummed as I was still brand new to affiliate marketing and thought of all the thousands of things to promote through Amazon. I am still floundering but determined!

    Either all of you who can still earn commission thorugh Amazon will flourish, or perhaps Amazon may see a down-turn in business?? Who knows.

    Best wishes to all of you : )

  22. Corinne says

    Most of my sites have Amazon links on them and I just can’t see going back and replacing them with other affiliate links (if I could find them) from other sources. This is a huge mess. Luckily I do not rely solely on Amazon for product links.

    I am considering establishing an out of state LLC or corporation or since I do split my time, establishing residency for Amazon in UT. Does anyone know if Amazon will work with you to keep your account if you do ‘sell’ from another location?

  23. Celeste says

    Sorry, CA — I feel your pain. I’m in Colorado and this happened to us a while back. I wasn’t making much with Amazon, but that income was growing. It’s a bummer. With new plugins and training courses, it’s easier than ever for most marketers to promote Amazon products.

    I’ve also been dropped by other programs because of the nexus tax in my state. Be sure to read the fine print before you promote: some CJ programs (since the tax) have accepted me but won’t pay referrals to Colorado affiliates.

    No doubt, the nexus tax makes it harder for many new affiliates. Hopefully, there is a silver lining. Perhaps those affected will build more robust business models from the start and weather future storms more successfully.

  24. Dacia says

    I’m not from California, but I am really saddened that individuals that’s trying to make an honest living have to suffer financially because of an idiotic decision that’s made by a politician.

    We’re living in the middle of the recession and they (politicians) should be encouraging Americans to become financially independent because the ratio of people looking for work compared to the jobs that’s available is ridiculous.

    I just hope there is a way that this decision will be overturned because this is really unconstitutional.

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