Successful Affiliates Out of Business Overnight

We aren’t doom an gloom here. After all the Internet is a world of opportunity for budding entrepreneurs and online marketers. Sometimes things happen outside of the marketing online world impacting the marketing online world. Such is the subject of today’s post. If you are an affiliate marketer in the United States, or considering becoming one, this is for you.

Successful Affiliates Out of Business Overnight

There is a trend that is gaining momentum that has the power to shut an affiliate marketer down overnight.

In this interview Shawn Collins, of Affiliate Summit, discusses the latest news on revenue hungry states, who are passing legislation that requires affiliates to either relocate, or shut down their businesses altogether.

Learn what the affected states are, and what Shawn says you can do to prevent it form happening in your state.

Expert Interview with Shawn Collins

Can’t see the video? Go here.

Summary of Items Discussed in the Video

Shawn Collins runs affiliate summit with Missy Ward, which they started up back in 2003. State governments are passing legislation to identify affiliates as a sales entities, and thereby classify that as a tax nexus, and thereby obligating them collect sales tax for any transactions that take place in that state.

IL, AR, NC, RI, have passed such laws. And it has resulted in no increase in revenue for states, essentially has resulted in unemployed affiliates as internet based companies like pull their affiliate program from those states.

Tim Storm of moved Company of 55 Employees from Illinois to Wisconsin. Governor Walker said they would not pass a similar law there.

Companies have to leave the states where legislation has passed in order to stay in business.

More than just Amazon kicking out affiliates, hundreds of companies who have affiliates don’t want to pay sales tax, so they shut down affiliates in the affected states.

Now is the opportunity for affiliate marketers to get engaged in the community and organize in order to communicate with states why such tax legislation is bad for everyone.

Contact your congressman, contact local newspapers and publications.

States are calling this an “e-faireness” bill, without considering the adverse effects on businesses.

Neither Shawn or Travis are tax experts or legal professionals.

If your state is considering passing similar legislation, you might need to figure out how to run your business in the state you are in, move it to another state, or sell off the sites.

Walmart welcomes affiliates in Illinois, yet Shawn indicates they only have roughly 50 affiliates, Travis observed their affiliate program is currently hosted by LinkShare.

Leverage resources by organizing with other affiliates in your state.

Resources from the Video

Image Credit: Randy Son Of Robert

Author: Travis Campbell

Husband. Dad. Marketing automator. Author. Educating and coaching others in their online business endeavors. Here's his Google profile.

11 thoughts on “Successful Affiliates Out of Business Overnight”

  1. Ryan-

    Thanks for sharing and chiming in.

    I believe it is a real issue that online marketer’s cannot afford to “wait and see” what happens.

    As stated in the post, we are not legal professionals, but it seems to me there would be a proper way to get corporate setup somewhere to make etailers like amazon less susceptible to new tax regulations. Certainly something worth a follow up expert interview and post.

    Going to read your post now.


  2. Anyone read Atlas Shrugged or seen the first installment of the movie?

    I swear the governmetn is there to encroach on people that work hard and produce. What is the point of this law? Seriously.

    1. Eugene-

      Can’t say I’ve seen that movie.

      I think the point of the law is pretty obvious. Grow revenue. Unfortunately for states, it seems to be backfiring…

      Hope you can help to get the message out, that this is bad for everyone.


  3. This legislation makes no sense. Since affiliate marketers (at least Amazon affiliate marketers) cannot do business in those states, the states cannot collect taxes. This means those companies either disband or go to another state where they will collect the tax revenue.

    1. John-

      Worse than that, the states aren’t achieving their objectives of MORE revenues! They totally don’t get what affiliate marketers do, which is why it is important to be active with local legislators, to educate them, and be voice in your state.


  4. It Is Time to Stop Collecting Sales and Use Taxes On the Internet.
    The solution to this is to level the playing field for everyone. Eliminate sales and use taxes and replace them with a PFs. Everyone including Amazon and its affiliates pays the same PFs (within each state they operate) giving them the right to do business in that state. :

    Amazon is big and getting bigger. They have unfair advantages over small businesses and are even hurting big businesses. You can’t fault their use of technology and the advantages it gives them in making sales. But they are killing small businesses and will continue to do so until they eventually collapse under their own weight and success.
    Not collecting sales taxes is an unfair advantage that Amazon has and must stop. I like to keep things simple and I trust people to do the right thing. Here is how I propose we level the playing field for everyone who sells anything on the Internet. Admit that Amazon has won the sales tax battle. It is too expensive and time consuming to continue fighting them. Ever seen a movie where someone opens a new business and shortly after it opens the owner is visited by “gentlemen” who offer to keep the business safe, for a price? It was the Mafia or their local chapter. If the store owner complied he (or she) was left alone. If he didn’t he suffered the consequences. It was brutal and unfair but it worked. Why not apply that “successful” model to the collection of taxes? I propose the following: 1. Eliminate all sales taxes. (That would immediately remove Amazon’s unfair advantage and make everyone, big or small, equal in the eyes of the Taxman.)  2. Replace online sales tax fees with what they really are, “Protection Fees” which I will refer to as PFs. If you pay your PFs the state will leave you alone and not put you out of business.3. Online merchants would be responsible for sending their PFs to their state based on the gross amount of money they earn for a given period of time. 4. No exceptions, everyone selling on the Internet is subject to the PFs.5. Non-Profits and other tax exempt organizations would not receive special treatment. Everyone who is selling anything on the Internet pays their PFs. It is time to end the unfair advantage that non-profits have in the marketplace. Churches and other organizations need to setup separate sales entities and compete fairly with other merchants. That is the Dr. Laura version of my idea.Now for the details.If a state currently has no state sales tax then merchants in that state are off the hook and are left alone by the Taxman.If a state currently has a state sales tax that is the % that each online merchant, no matter how big or small, will pay to their state as their PFs.A home based operation would pay their state based on where the owners live, A retail shop where the shop is located. Chain stores pay based on where their stores are located. (I know lawyers will make this very complicated, but it doesn’t have to be.) Drop shipments shipped directly from foreign countries to US customers would have to be dealt with separately.There are two main types of sales on the Internet. Tangible products that you can touch and non-tangible products and services that you can’t touch. Some merchants ship their own products, others never touch their products and have them drop shipped.Electronic Products and Services:These are eBooks, other products that are delivered electronically, and services (SEO, online training, etc) that are provided remotely. PFs should be paid by the online merchant making the sale. Clean and simple. The environmental impact of these sales is negligible. So the PFs should be paid by the online merchant to the state where he (or she) is located.For example: customer is located in Texas, merchant (affiliate) is located in California, servers hosting software downloaded to customers are located in Florida and backup CDs (when ordered by a customer) are shipped from a warehouse in New Jersey. The CA merchant is responsible for the PFs on the software sale. If the customer also orders a backup CD (instead of making his own), a PFs must also be paid to the state of New Jersey for the additional amount paid by the customer to obtain a backup CD for his software purchase. Online merchants would pay PFs based on every penny collected from their customers. This will prevent creative pricing strategies to reduce the merchants PFs. (i.e., if shipping and handling expenses were exempt from PFS, merchants could charge a penny for their product and the rest would be exempt shipping and handling fees.)Drop Shipped Products:The PFs should be paid by the company doing the drop shipping. They have a warehouse and employees. They are consuming local resources and impacting on their local community. The merchant making the sale will be free of the PFs for those sales but will still report the income on his (or) her Federal/State etc income tax forms. The drop ship business pays all PFs to the state or states where they have drop ship locations.This would ensure that Amazon and other giant online sellers would pay their PFs based on where their warehouses were having an effect on local communities. They cannot be allowed to setup sales offices in non PFs states, or in other countries, to avoid paying their PFs.Tangible Products:Companies stocking and shipping their own orders, or operating retail stores would pay their PFS to the state where they are physically located. If they are in two or more states they pay PFs to every state in which they have a physical location. What makes my proposal different from what we already have? 1. Amazon pays the same PFs as everyone else – a level playing field. (No exceptions, no back room deals.)2. PFs are paid on everything that is sold on the Internet. No expectations. If you sell (make money) on the Internet, you pay your PFs.3. PFs are collected where the environmental impact is the greatest. If companies are unhappy with their PFs they can move to another state.4. Online merchants have a SIMPLE set of rules to follow and a payment system that anyone should be able to understand. They compete equally with brick and mortar merchants.5. Customers will be able to order products based on cost, speed of delivery and reputation of merchant. It is the merchant’s responsibility to determine how to price his products and services to be able to pay his PFs and still make a profit.6. Closed sites like ETSY where sellers have a store, but do not have a website of their own; will have to report the sales generated by their online merchants to each state where their online merchants are located. It will be up to each state to determine how aggressive they want to be to collect PFs from mom and pop sellers.7. States will receive more revenue from PFs collections than from their existing Sales and Use taxes; since most people either ignore Use taxes or are not aware of their existence.Is my idea perfect? No it isn’t. It is just a start. If you like it pass it on to someone who knows a lot more about Internet commerce and retail sales than I ever will. If you have a better idea add it to this posting. That is how progress is made. Eventually, with enough input, the end result is better than any one person’s idea. But someone has to start the ball rolling which is what I am trying to do with this post.If you know a politician (from any party or an independent) who is looking for something to make his or her name known prior to the very important election coming up; please pass this post and your ideas on to that persons staff.Ron  NixonOwner RWR Innovations LLC

  5. That is just crazy that some states are doing this. Would it help if you have your online business registered in a state that does not take taxes for affiliate marketing? Is that even possible?

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