#rsrh Amazon ready to end California affiliate program.

A friend and colleague of mine just got this email:

Subject: Notice of Contract Termination Due to Potential New California Law

Hello,

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com [ http://www.amazon.com/ ], Endless.com [ http://www.endless.com/ ], MYHABIT.COM [ http://www.myhabit.com/ ] or SmallParts.com [ http://www.smallparts.com/ ]. Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here [ https://affiliate-program.amazon.com/gp/associates/network/your-account/payee-info.html ]. And if you relocate to another state in the near future please contact us [ https://affiliate-program.amazon.com/gp/associates/contact?subject=&ie=UTF8 ] for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect their ability to purchase from Amazon.com [ http://www.amazon.com/ ], Endless.com [ http://www.endless.com/ ], MYHABIT.COM [ http://www.myhabit.com/ ] or SmallParts.com [ http://www.smallparts.com/ ].

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.

Regards,

The Amazon Associates Team

Background: AB 27 X1 is an omnibus Amazon tax bill that would effectively “tax all Internet purchases made in California;” it is not yet the state law for the single reason that it was part of the completely unworkable initial budget vetoed by Governor Brown earlier in the month.   Background on the Amazon tax here: the really short version is that the Supreme Court decided that vendors only had to charge, collect, and provide sales tax to a state if the vendor has a physical ‘nexus’ in the state.  Amazon taxes typically declare that in-state affiliates count as a nexus.  Amazon.com typically responds by ending its affiliate program in states that pass Amazon taxes.  Which is what promises to happen here: which effectively means that the 200 million/year in tax revenue that California legislators promised would be generated by this law will not materialize.  For that matter, California collected $124 million in income tax from affiliates in 2009; that number will take a nosedive, too.

Again, this was predictable.  Democratic legislators apparently thought that Amazon.com would not drop out of California… just like Democratic legislators in Illinois, Arkansas, and Connecticut (all three of which have passed Amazon tax legislation, and all three of which have seen Amazon.com immediately drop its in-state affiliate programs*).  The truth?  Amazon.com doesn’t need affiliates to make large amounts of money by selling things online.  It’s pretty much sufficiently well-known enough by now to sustain itself.  Offering a reasonably good commission on sales done through its website is a great way for the company generate revenue and goodwill, but it’s not the centerpiece of their business model.  Trying to apply pressure to Amazon.com as if affiliates were the centerpiece is unlikely to be successful.

Fortunately, Maryland currently has better sense than to try an Amazon.com tax, so my affiliate status is unaffected by this.  So far.

Moe Lane

*People seem to keep making the mistake of thinking that Amazon.com‘s choice to not disengage from New York state – yet – is an indication that they’re bluffing about ending their programs in the truly big markets.  In NY’s case, the company is not bluffing; it’s simply of the opinion that it can win an existing and ongoing court case in the New York courts.  If they lose, the affiliate program ends.  It’s that simple.