Amazon has now added Rhode Island and Hawaii residents to the list of those not eligible for its affiliate program. Current affiliates in these states have also received emails notifying them of the cancellation of their affiliate accounts. The changes are due to each state’s passage of the so-called “affiliate tax”, which would have resulted in Amazon being required to collect sales tax from its customers who are residents of the states.
While this most recent action only affects a handful of affiliate marketers, the implications are profound for affiliate marketing as an industry. States have been looking to collect sales tax from online purchases for some time now, but declining revenues have pushed several states to step-up efforts to force online retailers to collect and send in sales tax to the states. Currently, online retailers are only required to collect sales tax from customers that live in states in which the retailer has a “physical presence” (ie warehouse or processing center). Affiliate tax bills have been introduced in several states as a method to change the definition of “physical presence” to include any sort of sales agents which would include affiliate marketers.
New York was the first state to actually pass such a bill, which went into effect during Summer 2008. More than 200 different affiliate programs have since been closed to New York residents as a result. So far, I believe that affiliate tax legislation has been passed in New York, North Carolina, Rhode Island, and Hawaii. California is also considering an affiliate tax bill currently.
Personally, I’m afraid that this trend will continue to spread to other states in the near future and could really hurt the incomes of affiliate marketers around the US. As much as I hate the idea of paying sales tax on my online purchases, I’m afraid that it is going to be a future reality. My guess is that states will eventually need to band together to come up with some sort of method for taxing online purchases in a less complex, affordable manner. If affiliate taxes continue to spread on a state-by-state basis, it will become a significant threat to the affiliate marketing industry as a whole.
Given that I personally have several websites that rely on affiliate marketing to generate revenue, this is an issue that I am keeping an eye on. I’ll keep you all updated with any major developments that I come across in the future.
