Drs. Foster and Smith, one of America’s Top 500 E-tailers per Internet Retailer’s famous ranking, has just terminated relationship with all Virginia affiliates. As frequently is the case, the text of the email talks about how much they “value the affiliate relationship with each and every publisher”, but either this is a step made in hope of preventing the passing of Virginia’s affiliate tax bill [more here], or this LinkShare-based, and LinkShare-managed merchant does not value the relationship enough to collect the tax (keeping the affiliates on board).
Here’s the full text of the email [underlining mine] that has just landed in Virginia-based affiliates’ mailboxes:
Dear Drs. Foster and Smith Affiliate:
Here at Drs. Foster and Smith, we truly value the affiliate relationship with each and every publisher, as well as the dedication you have provided the program. Unfortunately, at this time we regret to inform you that we have chosen to remove all Virginia affiliates due to business reasons connected to the pending bill SB 660. Currently, this law is in effect in New York, Rhode Island, and North Carolina. The removal of all Virginia affiliates will be effective immediately as of February 17th, 2010.
Again, we appreciate and value your efforts to date and hope that we may again be able to resume the productive business relationships which we have enjoyed with you. We appreciate your understanding in the sudden decision of this matter and wish you the best.
Regards,
The Drs. Foster and Smith Affiliate Team
It is indeed a “sudden decision” and I am not positive many affiliates will be understanding.
I see that this is a growing issue with states going this route which is hurting affiliates.
Do you know if there is a runaround for this, such as forming a LLC or other business type in another state , would that bypass the tax laws ?
It sucks and I hope they do not do this to my state, because it will be cheaper for me to move then to stay (unless there is in fact a runaround).
Geno – while I certainly understand that it may be a big mistake to remove affiliates for almost any reason (sans fraud or violating the affiliate agreement), do you think that merchants who “due to business reasons connected to the pending [tax] bill” are trying to do what’s best for customers (not collecting tax)…even if that means removing affiliates?
RJ, I don’t believe forming a business in another state would be a solution, as physically you will still be doing business in the state that has the tax law (right now there are only three such states: NY, RI, and NC). If you move out of the state, that will help, but there is no guarantee that your new state will not turn towards such a tax in the coming months.
Patrick, thank you for your question too. I believe that (i) it makes no immediate business sense terminating affiliates in connection with a “pending bill.” “Pending” doesn’t affect them, and unless they are doing this with a hope to influence the legislators, it isn’t a good decision. (ii) Secondly, there is a way for merchants to comply with the law (if it ever becomes one), and keep the affiliates on board. See more here (on a NY example). There always are solutions that are more humane than killing. Unfortunately, the latter is being deemed by many merchants as the only way out.
Thank you for writing about this termination of affiliates without sufficient warning. I find it inexcusable that we are still seeing this reaction by some merchants. We witnessed it in 2008 and 2009. To continue to treat ethical affiliates with such disregard is not acceptable. I hope that affiliates in other states pay attention to these actions.
I understand the business decision to terminate affiliates but the manner in which they are conducted is wrong. All ethical affiliates deserve advance notice.
In addition the removal of affiliates now, before the law takes effect, may not remove the nexus since many of these laws will say nexus is determined by the previous four quarters.
Thank you for your comment, Mellie, and for this blog post too: “Where is the Progress“.