Amazon Associate Accounts Closed in NC

Affiliate Tax Updates

8.5.09 - Unfortunately the tax package has been approved, and the affiliate tax (sales/ use nexus clause) is included. Now we really need people to get in touch with their local Representatives and urge them to vote no on the measure. You can get a template for what to say or write in this affiliate program tax article.

7.29.09 - The affiliate tax law has been vetoed in CA by Arnold Schwarzenegger, and was also not included in the tax package in Hawaii, so Amazon has reinstated its affiliate program there. However, in NC, the NC Use Tax (online sales tax) item was still in the tax package, which was ready to be passed when at the last minute governor Perdue halted it. She raised objections to a proposed 2 percent surcharge on all income tax brackets, and said she wants to raise $200 million more in taxes.

As a result, the tax package deal has been delayed, giving NC affiliates more time to act. Whether or not you reside in NC, if you're at all involved in affiliate marketing or online sales - please take the time and write to your local representatives. You'll find a template on this affiliate program tax article. If the law passes, it may well set a precedent for other states. 

The Letter from Amazon

We recently received a letter from Amazon announcing that our affiliate account (our Amazon Associates account) had been closed as of June 26, 2009. They stated that this was "a direct result of the unconstitutional tax collection scheme expected to be passed any day now by the North Carolina state legislature (the General Assembly)". They go on to say that in the event that North Carolina "repeals this tax collection scheme", they will be happy to reopen associate accounts.

Live in NC? Was Your Amazon Affiliate Account Closed?

Recent NC legislation, that supposedly will take effect any day now, aims to impose an additional tax on affiliate incomes earned by residents of North Carolina. Sales of affiliate products, such as those offered by the Amazon Associate program, will be taxed not only as income tax (when you as an affiliate pay your taxes), but also as sales tax when the actual product or service is sold.

This affiliate tax will affect not only affiliates in states where this tax is imposed, but also merchants that operate in these states. Hence the decision for Amazon and other affiliate providers to cease business in states that impose this affiliate tax.

What Does This Mean to Internet Businesses Based in North Carolina?

It's bad news for NC businesses, because affiliate providers such as Amazon have discontinued business with states that impose this affiliate income tax. Other merchants that have closed their programs in anticipation of the bill passing included Blue Nile and Overstock. What this means is that affiliate marketers in North Carolina have had their revenue streams from Amazon and other affiliate providers completely nixed.

Are Any Other States Affected by This Affiliate Tax?

Yes. States strapped for cash are doing what they can to fluff their budget during these tough economic times. The law was passed last year in New York and this past June in Rhode Island. However, at the same time, the law has been turned down in several states, including Connecticut, Hawaii, Maryland, Minnesota, Tennessee, and most recently, the governor of California has promised to veto the tax initiative in support of the many affiliate marketing businesses in the largest state in the nation.

What Can I Do to Help?

Whether or not you currently reside in NC and potentially face this new affiliate tax law, you can do your part and help prevent the law from being passed in your state in the near future. Simply write or call your local Representatives and express your concerns. You can use the template provided in this affiliate program tax article. For those of you that do live in NC, we need you to act today! Every single letter can make a difference.

Dozens of letters have already been handed and mailed in. It's grassroots efforts such as this that have helped turn over the law in the above mentioned states.

What If the Law Passes?

If the law goes into effect, short of moving to another state, you'll want to make sure you diversify your stream of affiliate incomes. Those that were relying solely on Amazon, for example, are now down crap creek without a paddle. It's important to note that the law usually only applies above a certain threshold of income per state - for example, in New York, $10,000 in gross sales tax. If an online retailer collects an amount below this, they are not obligated to pay sales tax. Of course, just about any affiliate will be making more than this in one particular state. However, there are a few small outfits, particularly individuals, that are not.

So affiliates in states affected by the affiliate tax law, instead of moving to another state, can focus on diversified streams of income (focus on Google's Adsense or Yahoo's YPN in the interim), and build up affiliate relationships with individuals or small companies that don't meet the gross sales thresholds.