Why is Amazon Associates Killing CA Affiliates?
UPDATE: The state of California has reversed this awful law! Hurray!
Were you watching the budget news yesterday? Unless you are an affiliate located in the state of California, you might have missed it. But if you were an affiliate from California, around 2pm PST yesterday your life might have changed drastically and without much notice.
In a matter of a few hours we received four emails threatening to remove us for being California affiliates. By 11pm last night, we had been removed from those programs. As a last effort to balance the California budget, Jerry Brown signed into law “ABx1 28”, a previously tabled and much debated tax law that directly impacts online pure play advertisers who do not collect state tax for the purchases made in California. It is also dubbed by some as the “Amazon” law due to the huge disruption it causes Amazon affiliates.
ENGLISH: California tells websites they have to pay state taxes because affiliates are like mini-stores within the state. Websites are responding by giving California based affiliates the axe. Take that California. Less tax for you!
California not the First to Pass this Law
This law is not new to affiliate marketing by any means. States like NY, RI, and NC have passed versions of this law in previous years, and many other states have either debated or tabled similar laws. I think what has the affiliate world by surprise was the speed and lack of communication behind the law change in California. In previous years this was a major political upheaval from affiliates, advertisers and platforms which included multiple visits to the state capital, and even Arnold Schwarzenegger calling Overstock directly and stating he would not be the one to bring this law into effect. But in a matter of hours yesterday, the tabled law was debated and signed. It seems if you called in sick yesterday you would have no idea that your affiliate links are no longer earning you credit for key advertisers.
ENGLISH: Why didn’t you tell this to us earlier! I have 30 affiliate links and all are useless.
But Why the Heck Would They do That?
There are many arguments, political and otherwise, as to whether or not this law should be passed. Advocates state that it can earn as much as $200 million a year in income for the bankrupt and indebted state and evens the playing field for the small businesses in California. The protestors state that it is unconstitutional and it does not make sense to just target this one area of online marketing to be assured that taxes are collected. Both sides agree to some degree that a national internet tax would be the more effective and would cause far less income and time waste.
But unfortunately the affiliates have now become pawns in a war between these large advertisers and local state governments. The advertisers threaten mass removal of the affiliates located in California (already done), and yet still see the income generated from those links. You can hear the expressed anger all over the affiliate forums, and most of it towards the advertisers who refuse to implement the tax. Amazon might have been a little crass in explaining to all of their affiliates that it was still possible to continue and purchase from them in California. Knowing that these affiliates are individuals, possibly making their entire income from affiliate marketing, that didn’t seem like the important point to highlight.
ENGLISH: You’re a PAWN! Let’s hope we are used well.
What Should I Do Now?
What is an advertiser to do? The law was mostly tabled until VERY recently, and it is a major technical undertaking to implement tax for a single state. The state is asking the advertisers to start collecting taxes immediately, and report their first taxable earnings August 24th. The legal battle once these laws have passed is long and tedious, and Amazon is still battling the NY law that started this trend in 2009. Most will just remove their California based affiliates and make up the revenue loss from other channels.
And what is an affiliate to do? Most will actually just move their “home business” address to another location. . For those suddenly left with dead affiliate links and banners, quickly find replacements! Google Adsense could be a quick temporary fix, or better, go find advertisers in the same industry with similar products and quickly replace them. For example, were you an affiliate of Zappos and Endless (both owned by Amazon by the way) and was given the axe? Find alternatives like our very own Bootbarn (shameless plug). LeadQual was lucky that none of our advertisers were affected by this change.
ENGLISH: Change out your links ASAP with an alternative. You won’t be paid for it!
Final Thoughts on the “Amazon Law”
So what is the conclusion of this misguided budget decision? Well doubtful it will be $200 million in revenue for California. There is more potential of affiliates slowly but surely removing their income from California as opposed to the advertisers implementing a new sales tax. Rhode Island actually reported a tax loss when implementing this law, and still many states continue to follow suit without actually paying attention to the emotional statistics. And so what is more likely is that California will see a rise in unemployment rates, mixed with a loss in tax revenue from the small businesses that decided to take their business elsewhere.
ENGLISH: This sucks.
• How has this sudden new law affected your business?
• Do you side on Amazon on California on this?
• If you don’t feel like commenting at least put “this sucks” or “this rocks” in the comments