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Amazon will end affiliate program in California if new law passes

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Re: Amazon will end affiliate program in California if new law passes

#11

Post by btilly »

Some important background on this.

At issue here is sales tax. By state law, the tax is owed by the citizens to the state no matter where they make the purchase. To make enforcement easier, the tax is supposed to be collected by businesses. In theory the tax is owed regardless, but as a practical matter when businesses do not collect the tax, customers don't volunteer the information and the state loses revenue.

This annoys states to no end. However courts have long ruled that a company that is not in a state cannot be forced to be regulated by that state, even if it does businesses with residents from that state. They can't do that because that is interstate commerce, which the Constitution says is regulated by Congress, not the states. But if the company has a presence in that state, then it can be forced to obey state regulations, even if the actual commercial act crosses state boundaries.

This is all old hat, and was settled back in the 1800s with catalog companies.

The new twist here, that several states (now including California) have pursued, is declaring that the existence of an affiliate program with state residents is a business presence in that state. Because it is a presence, they can make Amazon collect taxes.

Amazon's position is that affiliates are not Amazon employees, and are not a presence of Amazon in that state. And therefore those laws are unconstitutional. However Amazon has chosen to not contest these laws in court. Instead Amazon has chosen to cut off all affiliates in any state that tries this tactic. It thereby guarantees that it no longer has a presence in that state, and it doesn't go about trying to collect taxes from people in that state.

The net result is that Amazon loses some business, the state continues to not get taxes, and some residents lose a source of income.

Re: Amazon will end affiliate program in California if new law passes

#12

Post by btilly »

leot wrote: post #4

They're clearly doing this because they know the affiliate marketers will complain a lot , and not because there's much of a direct relationship financially.

Not at all. They are doing this because they don't want to get into an unnecessary legal fight which could go either way.

Re: Amazon will end affiliate program in California if new law passes

#13

Post by [deleted] »

allwein wrote: post #8
krisneuharth wrote: post #5

I received notice today from 4 of my affiliate programs that they are terminating their programs in California. I expect the remaining few to notify me soon enough. I may end up registering again with these program using an Oregon address if I feel like my site is something I still want to work on if this goes down the way it is looking.

Perhaps you'd like to consider a Wyoming shell company? http://news.ycombinator.com/item?id=2708336

[deleted]

Re: Amazon will end affiliate program in California if new law passes

#14

Post by gte910h »

btilly wrote: post #12
leot wrote: post #4

They're clearly doing this because they know the affiliate marketers will complain a lot , and not because there's much of a direct relationship financially.

Not at all. They are doing this because they don't want to get into an unnecessary legal fight which could go either way.

Or do the obscenely complex logic for each of the tens of thousands of jurisdictions each year required to calculate sales tax.

Re: Amazon will end affiliate program in California if new law passes

#15

Post by btilly »

sabat wrote: post #7

Lawyer types: if one were to, say, incorporate in Delaware, and then rejoin the Amazon program from a Delaware address (presuming that's possible) -- would that be legal?

I am not a lawyer, and this is not legal advice.

As long as Amazon didn't know you were a California resident, you'd probably get away with it. However you'd be opening Amazon up to the possibility of a lawsuit from California. If they figure that out, they will not be happy with you.

Re: Amazon will end affiliate program in California if new law passes

#16

Post by ddlatham »

btilly wrote: post #11

Some important background on this. At issue here is sales tax. By state law, the tax is owed by the citizens to the state no matter where they make the purchase. To make enforcement easier, the tax is supposed to be collected by businesses. In theory the tax is owed regardless, but as a practical matter when businesses do not collect the tax, customers don't volunteer the information and the state loses revenue. This…

How many affiliates are they willing to terminate? All of them (besides the 5 states it already collects for http://www.amazon.com/gp/help/customer/display.html?nodeId=4...) ?

Re: Amazon will end affiliate program in California if new law passes

#17

Post by jarin »

sabat wrote: post #7

Lawyer types: if one were to, say, incorporate in Delaware, and then rejoin the Amazon program from a Delaware address (presuming that's possible) -- would that be legal?

I think as long as your business has a presence in CA (like your office or home office) you still have to pay taxes. Of course, you could register your business in a state that doesn't disclose stakeholder info, like Nevada or those Wyoming shell companies.

Edit: definitely not a lawyer

Re: Amazon will end affiliate program in California if new law passes

#18

Post by flyt »

ddlatham wrote: post #16
btilly wrote: post #11

Some important background on this. At issue here is sales tax. By state law, the tax is owed by the citizens to the state no matter where they make the purchase. To make enforcement easier, the tax is supposed to be collected by businesses. In theory the tax is owed regardless, but as a practical matter when businesses do not collect the tax, customers don't volunteer the information and the state loses revenue. This…

How many affiliates are they willing to terminate? All of them (besides the 5 states it already collects for http://www.amazon.com/gp/help/customer/display.html?nodeId=4... ) ?

yes, all of them.

Re: Amazon will end affiliate program in California if new law passes

#19

Post by jbooth »

gte910h wrote: post #14
btilly wrote: post #12

Earlier quoted context omitted.

Not at all. They are doing this because they don't want to get into an unnecessary legal fight which could go either way.

Or do the obscenely complex logic for each of the tens of thousands of jurisdictions each year required to calculate sales tax.

50 jurisdictions, actually. Less considering that some states don't have sales tax and still more aren't going this route.

Re: Amazon will end affiliate program in California if new law passes

#20

Post by dablya »

ddlatham wrote: post #16
btilly wrote: post #11

Some important background on this. At issue here is sales tax. By state law, the tax is owed by the citizens to the state no matter where they make the purchase. To make enforcement easier, the tax is supposed to be collected by businesses. In theory the tax is owed regardless, but as a practical matter when businesses do not collect the tax, customers don't volunteer the information and the state loses revenue. This…

How many affiliates are they willing to terminate? All of them (besides the 5 states it already collects for http://www.amazon.com/gp/help/customer/display.html?nodeId=4... ) ?

They probably don't make enough from affiliate traffic to make up for the lost sales if they have to collect the tax.
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