Earlier today Colorado-based affiliates participating in the Amazon Associates program (Amazon’s affiliate program) have received a notice of immediate termination. Shawn Collins posted the full text of it here. Here’s an excerpt:
Dear Colorado-based Amazon Associate:
We are writing from the Amazon Associates Program to inform you that the Colorado government recently enacted a law to impose sales tax regulations on online retailers. The regulations are burdensome and no other state has similar rules. The new regulations do not require online retailers to collect sales tax. Instead, they are clearly intended to increase the compliance burden to a point where online retailers will be induced to “voluntarily” collect Colorado sales tax — a course we won’t take.
We and many others strongly oppose this legislation, known as HB 10-1193, but it was enacted anyway. Regrettably, as a result of the new law, we have decided to stop advertising through Associates based in Colorado. We plan to continue to sell to Colorado residents, however, and will advertise through other channels, including through Associates based in other states…
Your Associates account has been closed as of March 8, 2010, and we will no longer pay advertising fees for customers you refer to Amazon.com after that date… [key points underlined by me]
The law Amazon is referring to is the Colorado Internet Sales Act signed by Governor Ritter on February 25, 2010 [more here]. What surprises me is that amazon is intending “to continue to sell to Colorado residents”, but not through Colorado-bases affiliates. Upon reading Brian Strahle’s post on the matter, Melanie Seery’s post, and this article at TheDenverChannel.com, I was under an impression that this law affects all online merchants doing business with Colorado residents. However, Amazon is making it clear that they are not withdrawing from Colorado altogether, but are ceasing relationships with their Colorado affiliates only.
Is Amazon doing this to draw the Colorado government’s attention to the matter once again, and do this through affiliates (again)? It certainly seemslike it, as the above-referenced letter to Colorado-based affiliates also says:
…we repeatedly communicated to Colorado legislators, including those who sponsored and supported the new law, we are not opposed to collecting sales tax within a constitutionally-permissible system applied even-handedly. The US Supreme Court has defined what would be constitutional, and if Colorado would repeal the current law or follow the constitutional approach to collection, we would welcome the opportunity to reinstate Colorado-based Associates.
You may express your views of Colorado’s new law to members of the General Assembly [http://www.leg.state.co.us/Clics/CLICS2010A/csl.nsf/directory?openframeset=] and to Governor Ritter [http://www.colorado.gov/cs/Satellite/GovRitter/GOVR/1177024890452], who signed the bill.
I thought affiliates have already expressed their views loud and clear [more here], and it was because of their effort that the focus on affiliate marketers has been removed from the bill. Yes, it is true, that a law like this makes things extremely burdensome for the merchants that sell to Coloradans, but why remove the affiliates? Does a step like this resolve the issue, and make a merchant non-responsible for the compliance with the new Colorado law? Nothing in what I’m reading is pointing to this. Please correct me if I’m wrong.
There is more benefit to amazon and other big online retailers this way. 🙂
It’s crazy because it solves absolutely nothing. You’d think that Amazon didn’t even read the new legislation with this kind of move.
@hackcorp: How is there benefit to Amazon in it?
@Trisha: Exactly! It solves nothing, and definitely hurts Amazon in affiliates’ eyes (not just Colorado ones, but all).
BTW, the Colorado Online Marketing Association has just reported that Oriental Trading Co. and Terry’s Village have also terminated Colorado-based affiliates from their programs.
I wonder exactly what they are doing here, and it keeps coming up shallow and unexplained. Do they think all 150 of us are going to go back to the capital and start meetings with the legislators again? Unless this is about getting us back to the legislature, then this is nothing short of crazy shock.
Affiliates of Amazon are cannon fodder in the much bigger fight between them and all the states, and the residents and their lawmakers. We as affiliates are now totally not a part of the deal since we were removed from the bill before it was passed.
http://affiliates-make-money-online.blogspot.com/2010/03/why-terminate-affiliates-in-colorado.html
Above is my rant, and if I keep writing I will probably get arrested or something.
Governor of Colorado has issued a response to Amazon’s unexpected termination of Colorado-based affiliates. Performance Marketing Association has just posted the full text of his response here.
Perhaps this action by Amazon was design strictly to draw attention to this ridiculous legislation. I have been busy lately and not following as much news. I hadn’t heard about this until Amazon took this action. Sorry about the affiliates getting caught in the middle, but perhaps their fight should have been against the entire legislation, not jut the part that might affect them. Consumers lose too. Consumers will not only be the ones to foot the bill of the burden to online merchants but are expected to track all online purchases and file yet another !@#$% tax form!?!?!?! Unbelievable! Why didn’t you guys get the word out before it was too late? Use the power of the internet?
@Geno: Tax is tax, no matter how sneaky a state can make it with sending customers a paper at the end of the year on how much they own. Many people shop at amazon because of the taxes, and amazon will lose in the long run if they approve it. Besides the fact, it is an example for the rest of the states who are thinking about passing the bill. After all, affiliates making $100 a month from amazon don’t mean much but if they make a good living from amazon, most will figure something out on how to make a business WA based.
Besides, amazon was always like that. As far as I know, they can cut commission and cookie time whenever they feel like doing so. 🙂
I believe Amazon is doing this to show other states what might happen if they pass a similar law. Amazon didn’t leave NY when an affiliate law passed there because NY is to big, but Colorado is small so it won’t hurt Amazon that much. Unfortunately many smaller merchants will see what Amazon did and feel that they need to leave the state as well. We’re already seeing that.
@Mtnmuse: I am not sure what you mean by saying that we didn’t “get the word out before it was too late”. The affiliate marketing community has been writing, and talking about it since November 2007 (when the State of New York Governor attempted to institute a plan to tax all online transactions of non-NY-based companies).
@hackcorp: True, much of this is politics, but it is certainly ugly of Amazon use as cannon fodder… BTW, moving a business to WA (or any other state) is not guaranteed to safeguard an affiliate from a similar tax in another state. There are only two states that don’t face budget deficits this year, and many other ones are expected to look towards a similar tax.
@Luke: Yes, it is sad that some of the smaller merchants will look at this step by Amazon as an authoritative enough decision for them to mimic it even though it makes absolutely no sense. Amazon saw that the Colorado government has listed to affiliates once, and they are trying to use them again.
Geno,
My understanding is that Amazon is terminating all relationships with Colorado that might be interpreted as creating a nexus there. They are also preventing employees from traveling to CO, speaking at conferences in CO, etc.
(See this comment from the defrag conference.)
The language of the bill was ultimately silent on whether affiliate relationships create nexus. However, in doing so it left the rationale for nexus-based taxation open for interpretation.
It looks like Amazon is responding in an entirely rational way and ensuring that CO has no shred of a claim on nexus as they fight the tax in the courts.
I certainly don’t have all the information, but it doesn’t look to me like Amazon is treating affiliates as political pawns.
Dave, thank you for your comment. Interesting. Unfortunately, the link you posted isn’t working (as neither is the whole website where that blog is hosted). I’ve checking it back for a couple of hours already. Hoping it’s just temporary.