The Affiliate (Amazon) Tax— Q & A About How to Protect Your Affiliate Income
19. Sep, 2011 
0 Comments
As an affiliate marketer, there is little doubt that you have heard about the affiliate (Amazon) tax situation that is having a major impact on affiliate marketers in certain states in the United States. I will say at the outset that this is a huge issue with many ramifications. In this article my goal is to lay out the “Amazon tax,” issue, how it effects you, and share some practical steps that you can take to protect your income as an affiliate marketing professional.
Q: What is the “Amazon tax,” issue about?
A: The affiliate or “Amazon tax,” issue is about collecting Internet sales taxes on goods and services sold over the Internet.
Currently, retail businesses are required to collect sales tax on the sale of their products in states where they have a physical presence, (“nexus”) such as a retail store, a warehouse, or an employee working in that particular state. When you buy an item online that is taxable, but it’s from a retailer located in another state which is not collecting the sales tax at the time of the transaction, you are required to report that transaction and pay the tax all at once each year when you file your state taxes.
The challenge that states are facing from a revenue collection standpoint is that less than 1% of consumers report their purchases and pay the state tax. This represents billions of dollars in lost revenues to the affected states. The “Amazon tax,” represents the states diligent efforts to collect those taxes by trying to require merchants to collect it for them.
Q: Isn’t it against federal law to require one state to collect taxes for another state?
A: Federal judges in states such as Colorado, where an “Amazon tax” law was struck down, call it a “burden on interstate commerce,” to try to force businesses in one state to collect sales taxes in another state.
Q: What is an “Advertising nexus?”
A: Some states have passed “Advertising nexus” laws, in order to make it easier to collect sales taxes. These laws assert that affiliate programs represent a “nexus,” and that if a merchant in one state pays an affiliate in another state for advertising their products, then that person becomes an “agent” of that company, thus establishing a local nexus for that company in that state.
As a workaround for the slippery nexus issue, a few companies have ended their affiliate relationships with publishers (affiliates) in states which have passed these “Advertising nexus” laws.
Q: How is this issue affecting affiliate marketers?
A: Some affiliate marketers in states with “advertising nexus” laws have lost most if not all of their affiliate income when companies severed their affiliate agreements.
Q: What is the solution for affiliates who live in affected states?
A: The solution is as complex and changeable as the issue itself, therefore, affiliates should consult with their attorneys and tax professionals to help them to come up with the best solution to solve the problem. You will not be required to move away if you are living in an affected state, but consulting with your attorney and tax professional will help you to protect your affiliate income.
For more information about affiliate marketing and growing your online business, visit, http://mcreasite.com/blog where you will discover how you can leverage the power of the Internet to gain more exposure and reach more customers today.
