Amazon Affiliate Tax Is Unconstitutional and It’s Spreading like a Disease

States are broke so they are looking for loopholes to steal some money. When the affiliate nexus tax was passed in Illinois, Amazon dropped all their affiliates here and tons of bloggers and small niche site owners lost their income they count on every month.

When Amazon announced their decision to drop Illinois affiliates it was condemned by the law makers and the Illinois governor even offered a program to provide alternatives for those who got affected by Amazon’s decision.

Give me a freaking break! Did you see their proposed program? You can check it out here.

It’s a joke! I mean not only they don’t provide any substantial answers, they try to tell us that Amazon is exploiting a loophole.

The system is one that is antiquated and needs to modernized for 21st Century commerce as brick-and-mortar businesses are at a significant, competitive disadvantage as they are collecting the tax as required by law, while retailers operating on the Internet are exploiting a loophole that allows them to forgo collecting the sales tax at the point of purchase despite the fact that it is still due.

The only people who are exploiting a loophole are the law makers!

Amazon does NOT have physical presence in Illinois so why should they pay tax on sales made by affiliates. Looks to me like the law makers need a lesson about affiliate marketing.

An affiliate is just someone who gets paid for advertising the merchant’s link on their site.

If you display Adsense on your website you are also an affiliate of Google, but this doesn’t apply to them, why?

Here is another quote from their so called “Stand With Main Street” program.

Online-only retailers are exploiting a massive loophole that puts small brick-and-mortart businesses at significant disadvantage…

Whose fault is that? Why should Amazon be punished for smart business decisions? Brick-and-mortar businesses should have jumped on the internet bandwagon years ago. Now they are whining because they missed the boat.

Here is an example:

Blockbuster went bankrupt because they didn’t get on the internet fast enough. They sat and watched as Netflix crushed them. Blockbuster CEOs should have been fired long time ago!

Everything is moving online so get with the program or perish!

So we should just stay in the Stone Age because some small shops can’t make sales? Maybe they need a different marketing angle to compete. Believe it or not, the really small shops have an advantage over Amazon because they offer something that Amazon cannot.

– Personality (l like going to small shops because I know the people there personally and they provide good service)

– Instant gratification – I pay now and I get it without waiting or taking chances on DOA

So who is really complaining about Amazon’s unfairness? (cough cough…Wal-mart, Best Buy)

What the law makers don’t realize is that Amazon doesn’t need its affiliates anymore. If you go to Google and search for any product Amazon has top search engine rankings almost 98% of the time.

The small affiliates basically were able to get in front of that traffic and presell the customer before sending them back to Amazon.

The proof is in the pudding! When you send someone to Amazon most people will buy stuff you didn’t even promote. I would see commissions for sales of products I never even heard about weeks after I sent people there because they added stuff to their shopping cart. So the fact is that the customers you send to Amazon most likely already purchased from them before.

I highly doubt that dropping affiliates will hurt Amazon in a big way, but I know that it will hurt the people who counted on that income every month. So in reality, since the income made by affiliates is now lost, the state won’t even get any income tax they used to get. Oops!

Now other states are trying to follow and pass similar laws. Outrage!

This law is unconstitutional and some courts are realizing it…I hope Colorado stops this bill.

If you are an affiliate from one of the states that is trying to enforce this ridiculous law don’t give up. There are legal workarounds! Here is a link to an affiliate from New York who didn’t let them bully him.

There is simply no way I would want to promote some other merchants. Amazon’s conversions are killer and people love shopping there.

If you have been dropped from Amazon affiliate program there are a few things you can do to get back in 🙂

– Move to a different state (Like FatWallet taking jobs, income tax to a different state that appreciates your business)

– Set up an LLC in a different state (Establish yourself as employee of the LLC)

– Use someone else’s affiliate link and charge for advertising 😉 (Contextual ads are not affected by this law)

In my opinion this law is an absurd. It’s just a lazy way for the state to try to squeeze some money from their citizens.

We shouldn’t let them do this to us. I encourage you to fight this any way you can. Amazon is being singled out and it’s unfair to them.

Here are some other interesting links I found that you should check out:

Illinois will crush affiliate marketing if you don’t act now (Perry Marshall’s blog)

Hawaii Governor Vetoes Amazon Tax Law (Keep it up)

Supreme Court: Sales Tax on Mail Orders (Similar case ruled in favor of out of state publishers selling subscriptions)

Performance Marketing Association Sues State of Illinois over Affiliate Nexus Law (Way to go!)

So I am glad to see that this is not going to go down without a fight. This law has only crippled the small business owners and affiliates that are looking for ways to generate some extra income.

Anyway, don’t give up on Amazon so easily and find a way to get back into their affiliate program. Don’t let them take away your income.

Instead of going after small US affiliates the law makers should impose some kind of laws on affiliates outside of USA who are raking in the money because they don’t need to obey some of the ridiculous laws we have to. International affiliates get away with not disclaiming they get paid for recommendations. They don’t have to pay income tax in some cases, but yet they advertise in US and making money hand over fist from sales made by US citizens.

But I guess they would rather screw you than try to help you.

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8 thoughts on “Amazon Affiliate Tax Is Unconstitutional and It’s Spreading like a Disease

  1. I have been working hard on my Amazon site for months. They terminated me from their affiliate program a while ago, so I stopped adding content now. The site was making almost $400 per month and now the income dropped to barely $100 with Adsense. I am thinking about moving out of Illinois down south closer to my family.

  2. Now, Anita: I don’t blame you one bit. But let’s look at the REAL big picture: You are 1 person. Who lost revenue. You will not pay as much taxes now, and you will spend less money in the meantime, so less sales tax and less revenue for other business in Illinois who may have gotten your spendable money. Therefore the government will get less taxes from that business/those businesses you may have spent money with. Follow me on this. What happens when numerous people are in the same boat with you and the government losses on tax revenue are exponential because of such stupid laws? And what happens when many move out of state to friendlier states? Now what happens when other businesses are affected by such a downturn and go under too? And more revenue lost? And what happens when business moves out of state just to survive? More revenue lost. See the viscious circle here? Government has to now think of more taxes and fines and fees to cover their arrogance and stupidity, which further hurts business, people, and revenue. All because government is way too big and would never consider downsizing. And what I’m describing goes on in states across America, and on the federal level, it drives business overseas. It’s no wonder we’re in a depression. Now you see how one thing affects so many other things, and the cumulative effect. You are now a victim of government. And this is NOT what America was founded to become. I wish you the best of luck.

  3. That totally sucks! I don’t know what kind of site you have but try applying to some CPA networks outside of USA like Neverblue for example.

  4. That is why America is in the shape it is in. Other countries taking from here without following the same rules that apply to us as Americans. Something needs to change. Thanks for posting this.

  5. Hi Pawel, I found this post very interesting to read and very informative on what is happening in the USA. I am from the UK but to be honest what ever happens in the USA always creeps over here eventually as our government also tries to implement tax generating changes. There is huge point to be made here that although the sale is basically free from a tax like a physical store the governments still collect tax on the delivery method as a purchaser cannot take the product home with them. Also there is the case that Amazon contributes to the taxes in a country or state by having depots there for their network system. Therefore how can it be justified for Amazon and it’s affiliates to pay taxes like they are trying to implement now. Poor management by the governments and banks caused this tax hole to happen and not any so called missed tax revenue by Amazon or it’s affiliates. It really gets me going on this subject as hard working affiliates still contribute taxes and not at all like we are being painted as. Sorry I had to sit a few feathers on this subject but it really bugs me even in the UK. Thanks your post Rob

  6. I agree with you. The state will actually lose more money with this new law in place. They might not realize it yet but they will soon. I have been dropped from some good paying affiliate programs on Commission Junction because I reside in Illinois. If they keep pushing somebody will eventually push back…that’s how it works 🙂

  7. You’ll be pleased to learn than on Friday (March 30, 2012) Federal Judge Robert Blackburn ruled the affiliate nexus tax to be unconstitutional. More in my above-linked post.

  8. I wholeheartedly agree- We are only advertising the companies products not selling them for conmission. So assinine, so redundant, so vile, so indifferent, so malicious, so atrocious! America’s definition of FREEDOM is DIVERSITY and the ability to Succeed in life by many means.I will Fully support Federal Judge Robert.

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