Amazon recently terminated the affiliate accounts of every member of its program that lives in the state of Connecticut. Why am I writing this post? I am one of those people. I live in Connecticut. The Amazon affiliate program termination for Connecticut members was not due to mischief or malice on my part or anyone else. It was because of a new budget signed by Governor Dannel P. Malloy containing a sales tax provision that Amazon chose not to take part in. The new law “specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by Connecticut-based affiliates […] – even if those retailers have no physical presence in the state.”
My Initial Reaction
Jean-Claude Van Damme, Bloodsport
I was thunderstruck when I read the email. I was in disbelief. I didn’t want to believe it but I looked at the address it came from and the bottom of the email, with all its official accoutrements, and knew it was true.
The reason for my melancholy was that I have worked long and hard to increase my monthly margins via Amazon, as I am sure many Connecticut-based Amazon affiliates have. I wrote about that work here: Making Money with Amazon Associates on a Movie Website: Introduction. Having the rug pulled out from under me threw me into a state of shock, so much so that I emailed Amazon to confirm and later that same day a representative emailed me back and told me that it was indeed true.
I understand Amazon’s position: Why would they voluntarily offer to pay more taxes than they already do? They are the top dog online and can afford the no-Connecticut affiliate move that they have taken. Their margins can handle this hiccup and will adjust to the lost revenue. Unfortunately, some Connecticut affiliates work Amazon’s program so well that they earn a five or six figure annual income from it. Those are the people that I both envy and feel sorry for.
The Amazon Termination Letter
For well over a decade, the Amazon Associates Program has worked with thousands of Connecticut residents. Unfortunately, the budget signed by Governor Malloy contains a sales tax provision that compels us to terminate this program for Connecticut-based participants effective immediately. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by Connecticut-based affiliates like you – even if those retailers have no physical presence in the state.
We opposed this new tax law because it is unconstitutional and counterproductive. It was supported by big-box retailers, most of which are based outside Connecticut, 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 of the new law, contracts with all Connecticut residents participating in the Amazon Associates Program will be terminated today, June 10, 2011. Those Connecticut 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 today, June 10, 2011, 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 Connecticut. If you are not currently a resident of Connecticut, 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 after June 10, 2011, 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 Connecticut residents and will not affect their ability to purchase from www.amazon.com [http://www.amazon.com/ ].
We have enjoyed working with you and other Connecticut-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 Connecticut residents.
The Amazon Associates Team
The Connecticut economy must truly be in dire straights to tax a company’s affilate program that has no physical presence in the state.
Unlike some others, Amazon was only a percentage of my monthly profits, not its entirety. Now, like others in my boat, begins the tedious search for a suitable replacement that doesn’t really exist. What is great about Amazon is that when you send someone there, even if they do not buy the product you are advertising, they may shop around and buy something completely unrelated to product they clicked to get there. I sent people there who looked at a DVD then went and bought a new outdoor grill. Other online movie retailers do not have Amazon’s depth of ancillary products like that.
Best Buy’s Moment
Other online movie retailers are feeling the influx of Connecticut affilate seekers, most notably Best Buy.
Here is Best Buy’s response to the new taxes, Connecticut, and Amazon (which they never name openly).
Best Buy Issues Open Letter Inviting U.S. Small Businesses To Join Its Affiliate Program MINNEAPOLIS, March 3, 2011 – Best Buy Co., Inc. (NYSE:BBY), a leading retailer of consumer electronics, today issued an open letter to U.S. small businesses that participate in affiliate programs with online retailers:
Best Buy is aware of the uncertainty you are facing in this current economic environment. We know that some companies are reviewing their affiliate programs as activity increases in specific states considering e-fairness legislation. This legislation requires online-only retailers who utilize affiliates to collect sales tax due on purchases by residents in those states. Best Buy collects and remits sales tax, including from bestbuy.com, our online business.
We recognize that many of you are participating in multiple affiliate programs, and some of your partnerships may be terminated by some online sellers who wish to avoid obligations that require them to collect sales tax. We want you to know that the Best Buy affiliate program is not impacted by this legislation as we already collect and remit sales taxes in all states where they are due, and we remain committed to our thousands of small business affiliates across the country.
The appetite for purchasing consumer electronics online remains strong, and we expect it to continue to grow. We encourage you to visit our Best Buy affiliate program online if you are interested in joining our program.
Senior Vice President, General Manager
Best Buy saw this coming for awhile, notice the March 3, 2011 date on the press release.
The Other Alternatives
Walmart, Target, Barnes & Noble ( they sell Movies on DVD, Blu-ray, and Electronics online) and Fry’s must also be getting an influx of new affiliates within Connecticut from movie webmasters looking to sustain a percentage of their former Amazon Affiliate’s margins.
Gotta Keep on Trunkin’
Emmanuelle Chriqui, Elektra Luxx
This revenue stream blow will be weathered like any other monthly margin frivolity. There is no other way to approach it.
This is another, albeit minute, inducement to move out of Connecticut for a movie webmaster. *Beginning of unrelated tangent* The first being NYC, which is an hour and a half away. There are no movie press screenings in Connecticut. They are all in places like NYC and LA. I get invites to press screening all the time for NYC and some for LA and haven’t gone to 99% of them. I wrote about my first experience with a press screening here: My First Official Film Critics Film Screening. *End of unrelated tangent* Breathe in, breathe out. “Boys, steady.” – Mel Gibson, The Patriot.
Is there any other Connecticut webmaster out there feeling the Amazon affiliate sting?