Listen to one professional affiliate marketer explain the importance of diversifying your income streams. Putting all your eggs into one basket can be financially devastating if tax laws are arbitrarily changed. If you are interested in affiliate marketing, I highly recommend that you follow Lisa on YouTube, because she offers a lot of useful tips on how to succeed and avoid the pitfalls.
The Amazon Affiliate program has benefitted webmasters and Amazon alike: affiliates get revenue, and Amazon gets product-specific deep links, along with strong editorial content to socially encourage purchase and use of other Amazon products, such as Kindle readers and books.
California is only the latest victim in the affiliate tax wars: Amazon has been forced to cut affiliate ties with Texas, Colorado, Connecticut, Arkansas, Illinois, Hawaii, Rhode Island, and North Carolina.
As a longtime Amazon Affiliate, small business owner and a published author, I'm one of the many people that will lose significant business over Amazon's withdrawal of its affiliate program from California. So will bigger fish, such as Adam Carolla, whose podcast gets a significant income from the program.
It is estimated that at least 10,000 Amazon Affiliates - small business owners, like me, already paying state and federal tax on the affiliate income - have lost their revenue stream. Not to mention the potential growth opportunities for expanding California businesses.
At 12:21 PST, all Califiornia Amazon Affiliates received an email including the following:
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.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.
The "big-box retailers" they're referring to specifically incude Wal-Mart. Three hours after the email went out, Governor Jerry Brown signed ABx1 28 into law.
To call it an ignorant and short-sighted move is an understatement so massive, it's frightening. While I don't depend on my Amazon Affiliate revenue, I know a good many California small business owners that do, including ones that have put man hours and significant investment into curating, maintaining, and promoting Amazon storefronts - and not just the "A-Stores."
Unintended consequences, indeed.
UPDATE: I received an Associate email from Amazon at 9:41 PST including this - the stoppage of California Associate revenue is effective immediately - and my heart goes out to those I know that have just had their income taken away literally overnight:
Unfortunately, Governor Brown has signed into law the bill that we emailed you about earlier today. As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective today, June 29, 2011. Those 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 before today 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.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. As mentioned before, we are continuing to work on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.
Additionally, Richard Soderberg points out to me that part of this law (AB 28X) may be applied retroactively "pursuant to these agreements is in excess of $10,000 within the preceding 12 months" (PDF link).
SEE ALSO: Search expert Danny Sullivan from Search Engine Land has written an angry, brilliant post that captures the anger of Affiliates that have now been dumped by Amazon in An Open Letter To Jeff Bezos On Terminating The Amazon Affiliate Program In California. It's a must-read.
UPDATE June 30: The American Bookseller's Association has sent a triumphant email to brick and mortar retailers - bookstores - calling the passage of AB 28X a victory for e-fairness bills against companies like Amazon and Overstock.com. In their statement, they claim that Amazon's firing of its Associates was unnecessary:
AB 28X is a broader law than affiliate nexus laws passed in other states and, as such, will require Amazon.com to collect and remit sales tax to the state because of its subsidiaries in the state.In a statement, Assembly Member Nancy Skinner, sponsor of the affiliate nexus portion of AB 28X, said, “This is a great day for California business. With the signing of e-fairness, California employers are no longer at a competitive disadvantage with out-of-state, online-only companies. Amazon.com and Overstock.com should do the right thing and play by the rules just like our California businesses do. Severing affiliate ties won’t change the fact that under our e-fairness they will still need to collect sales taxes. We hope that Amazon and Overstock rethink these bullying tactics.”
Image by Kevin Dooley, under Creative Commons 2.0 Generic license, via Flickr.
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Quoted from http://www.zdnet.com/blog/violetblue/amazon-drops-california-in-growing-e-commerce-affiliate-tax-law-war/485
Quoted from http://www.zdnet.com/blog/violetblue/amazon-drops-california-in-growing-e-commerce-affiliate-tax-law-war/485
