[AffiliateHound]

I just read this thread and a couple of the linked articles.

New York, North Carolina, Rhode Island, Illinois, Arkansas, California, Alabama, Missouri, Pennsylvania, Louisiana - One by one, state after state is considering, and most are passing, an Affiliate-Nexus tax law, followed by a mass exodus of merchants.

Are the Amazons, Overstocks, Hammacher Schlemmers, CSNs, etc, etc knowingly engaged in a piecemeal closure of their affiliate programs?

Are they in a dream world, believing the plague will end and they will be left with 35 states full of sales-generating affiliates?

Are they waiting out a court battle that will take another five years, despite the loss of sales and good will in the interim?

Will they have an epiphany, realize they are effectively wiping out their own money-making programs, and reinstate terminated affiliates?

Will the pool of merchants available to affiliates be limited to a handful of low-paying national B&M operators like Walmart, KMart, Macys, and Sears?

I have a plan, but I am still depressed.

[Mr. Sal]

Originally Posted by AffiliateHound

Will the pool of merchants available to affiliates be limited to a handful of low-paying national B&M operators like Walmart, KMart, Macys, and Sears?

I have a plan, but I am still depressed.

I feel your pain, Hound...

But, if worse comes to worse...

We can forget about the pool of merchants available, and just fill our tub with good niche related independent merchants... There are still plenty of them, out there...

[AffiliateHound]

You make a good point (as usual) Mr. Sal.

Smaller merchants - for me, that are located in CALIFORNIA - are what I need to stake out.

(that plan just took a slight detour, but for the better)

In past years, I did use more, smaller merchants much more extensively than I do now, but having been burned by a few in the past, I now generally promote fewer but bigger merchants. By burned, I mean not just in losing commissions when some have disappeared, but even more so in the sense of having to do frequent change outs to replace links that die overnight when a tabletools.com or a cookbros.com or a kitchenetc.com or a brandsmall.com go out of business, or when a program closes with little notice.

As I think about this as I write, I now believe that smaller, in-state merchants programs are the way to go, at least for the next few years until the affiliate-nexus tax issue is resolved one way or another.

Thank you Mr. Sal.

[John Powell]

Originally Posted by Mr. Sal

We can forget about the pool of merchants available, and just fill our tub with good niche related independent merchants... There are still plenty of them, out there...

I'm missing something I guess, but it seems like the smaller merchants will be faced with the same problems as Amazon. Whether to collect the sales tax or dump the merchants. Illuminate me please.

[Convergence]

Many smaller merchants will fall under the sales cap within that State and may be excluded from reporting sales and collecting sales tax...

[AffiliateHound]

Originally Posted by John Powell

I'm missing something I guess, but it seems like the smaller merchants will be faced with the same problems as Amazon. Whether to collect the sales tax or dump the merchants. Illuminate me please.

That is why my interpretation is to join only small merchant's programs for merchants who are physically located in my state.

This may not work for affiliates in Montana or North Dakota, but it seems workable for California.

I wonder of New Yorkers with the most experience dealing with the issue have followed this to any extent (or if the pool of merchants available to them has largely become only the Walmarts and in-state merchants, [a slightly modified version of my original thought])?

[AffiliateHound]

Originally Posted by Convergence

Many smaller merchants will fall under the sales cap within that State and may be excluded from reporting sales and collecting sales tax...

That sounds good, but as more affiliates join such smaller programs and their sales rise, will they still keep their affiliate programs or will the trend be that once the threshold is met, they then dump affiliates?

[Gary-AvantLink]

You could also look closely at larger stores like REI, who has a physical presence already in a lot of states..

[markwelch]

Originally Posted by Convergence

Many smaller merchants will fall under the sales cap within that State and may be excluded from reporting sales and collecting sales tax...

Many small merchants will also "fly under the radar" of state sales-tax agencies, which will likely rely on public data in lists (like the Internet Retailer lists). This might especially benefit merchants who operate multiple distinct store identities, where the common ownership is not widely disclosed.

Most states' sales tax agencies are already under-funded. I'm not even sure if agencies in multiple states could legally pool resources to identify scofflaw merchants.

As we see more publishers excluded by Amazon and others due to the unconstitutional advertising-nexus laws, I don't think there's any significant impact on Amazon's sales to those states, and I'm confident that publishers in other states (and nations) will benefit. I expect that Amazon's payouts to its "Associates" are continuing to increase year-over-year, despite the impact of these laws. (It would be nice if Amazon could document the shift of advertising fees from "nexus" states to other states when these laws are passed.)

I have suggested (on ABW) that merchants should seriously consider whether maintaining an affiliate program in the current climate is a wise business decision, given the "gotcha" risks (as in New York, whose law was retroactive). For merchants whose affiliate programs represent a very small source of sales, the risks of being forced to collect sales tax (or worse, pay sales tax for transactions where the tax wasn't collected) might far outweigh the benefit from the entire affiliate program.

An alternative strategy, for merchants seeking to avoid the impact of "nexus" laws, would be to exclude U.S. residents (or allow only residents from the five states which impose NO sales tax).

Of course, most merchants will continue their affiliate programs unchanged, merely excluding publishers in each state which enacts an unconstitutional "advertising-nexus" law.

[John Powell]

Originally Posted by AffiliateHound

This may not work for affiliates in Montana or North Dakota, but it seems workable for California.

I think Montana has no sales tax and come to think of it I would like to live there if it didn't get so cold.

[Chuck Hamrick]

Not sure that Amazon is significantly effected by losing affiliates in those states since they can still advertise directly. I compete with dealers for my biggest merchant and they have Amazon stores. I see Amazon advertising in AdWords for the trademark. Those sales go to the deals, Amazon and the merchant in a three way split.

I would think that Amazon gets less exposure without state specific affiliates but then it spreads to other affiliates. Its a game that Amazon is playing backed by the Supreme Court ruling.

It will take many years for studies to support that states using the tax nexus to shutdown affiliates are costing jobs and tax dollars (if it ever is proven). Since affiliates are largely invisible its difficult to show them on the news other than when they march on the capital. We need a more effective way to show our presence and the impact on tax revenue.

[affninja]

Finding in-state niche merchants is a viable back-up plan for some, but not everyone.

Imagine trying to run a valuable comparison shopping site without access to all the stores. It's not possible. I'm not sure what my back-up plan is, but it will probably involve moving out of CA to continue doing business in a way that is best for customers (which is of course best for me too).

I know this has been discussed before, but is there any way to legitimately establish a corporation and/or residency in another state to avoid the inevitable terminations?

[AffiliateHound]

Originally Posted by affninja

I know this has been discussed before, but is there any way to legitimately establish a corporation and/or residency in another state to avoid the inevitable terminations?

I would think only if you form the business as a separate corporate entity in another state, with a significant physical presence in that state, which would mean full time employees and an actual, fully-equipped office where the employees work. I would also think that the corporate officers (other than you) should be residents of that state.

Short of that or moving to another state, I doubt it.

[isellstuff]

Originally Posted by affninja

Imagine trying to run a valuable comparison shopping site without access to all the stores. It's not possible.

Exactly, it is not possible. My backup plan has always been to relocate to a "No Sales Tax" state.

You guys can move North to Oregon. Portland is a nice city.

[AffiliateHound]

I've lived in CA since Earl Warren was guv.

Hard to teach an ole dawg new living and cultural arrangements.

Oregon, huh? I've flown over it many times, but never been on the ground there.

[isellstuff]

If you think your income will take an very heavy hit, then it is something to consider. I know that I can not run my price comparison website without the online only retailers. So I might actually lose greater than 50% of my revenue because my conversion rates would be greatly reduced.

I used to live in Seattle and I drove down to Portland to visit friends or go to events (museums, concerts, hiking, beach) several times a year. I always liked visiting Portland because it is smaller than Seattle and I felt more relaxed. At the time I was living and working in downtown Seattle, so I had to deal with all of the inner city type problems (e.g. police helicopters, shootouts, drug dealers/users, prostitutes, etc).

Oregon and Washington have great scenic beauty. The Pacific Northwest is awesome, magical even.

[AffiliateHound]

I know Seattle pretty well - my daughter has lived there the past 5 yrs and we generally go up once or twice a year. But she & my son-in-law are not planning on staying there too much longer. When they move they've said they'd like us to move also, but none of us have any idea where that might be, though New England is a possibility. Any sales-tax-free states in NE?

Tying this in with income hits, my most important merchant is located in Mass (and they have terminated affiliates in other affiliate-nexus tax states), so that could possibly work out well.

[isellstuff]

The state I was going to move to is New Hampshire, which has no sales tax. I went on a scouting trip once and really enjoyed it. You can live pretty close to the Mass.. border. I think some people commute to Boston. We liked it because of the good public schools with low teacher/student ratios. Very cold though.

Delaware is also Tax Free. I wasn't too impressed with it though.

We loved Seattle and of course Amazon is based in Washington. I would probably live in an outlying city though, maybe Woodinville, Issaquah, Redmond, or even Bainbridge, instead of living close in to the city.

[AffiliateHound]

I especially like Whidbey Island. That seems like it would be a really nice area to live, at least the southern part that is very "country". The northern part is much more commercialized.

My daughter lives in Maple Leaf, in NE Seattle. Its a very nice looking area, expensive houses, quiet, convenient to shopping, entertainment, restaurants, etc., but we were absolutely shocked to learn about the high crime rate there: Houses and cars broken into, packages stolen from porches, etc. One reason they want to move.

[affninja]

I grew up near Seattle and it's nice. You don't notice the rain until you move away and then go back to visit. But Oregon is probably safer since they have no state sales tax at all. Or a ski condo on the Nevada side of Tahoe...

Are you guys going to Affiliate Summit East? It would be great to meet up.

[isellstuff]

Originally Posted by AffiliateHound

My daughter lives in Maple Leaf, in NE Seattle. Its a very nice looking area, expensive houses, quiet, convenient to shopping, entertainment, restaurants, etc., but we were absolutely shocked to learn about the high crime rate there: Houses and cars broken into, packages stolen from porches, etc. One reason they want to move.

I guess these are big city type of problems, where there is a large disparity between income levels in high population density areas. Drug addiction probably plays a big part in it all. We had similiar experiences. Once had a swat team on our roof in order to get a clear shot on a neighbor across the alley who was wanted by the FBI for wire fraud and murder.... But yet, when we sold our house, we doubled our money. Best investment I've ever made.

[gcarson]

If you live close enough to another state, can't you legitimately move your business to that state baring you set up a proper office and spend a substantial amount of time in the office?

[markwelch]

Originally Posted by affninja

... I know this has been discussed before, but is there any way to legitimately establish a corporation and/or residency in another state to avoid the inevitable terminations?

Originally Posted by gcarson

If you live close enough to another state, can't you legitimately move your business to that state baring you set up a proper office and spend a substantial amount of time in the office?

No.

Here's my post from an earlier discussion thread:

Originally Posted by markwelch

I've said this a dozen times before on ABW, but here we go again:

No, you cannot remain in an "Amazon Tax" state and continue your advertising relationships with merchants who have decided not to collect sales tax and who have decided to terminate their relationships with in-state publishers.

No, you cannot legally use a mail-drop address in another state to trick the merchant.

No, incorporating or registering in another state (or offshore) will not solve this problem.

No, there is no benefit (for "Amazon Tax" purposes) in "hiring a Registered Agent and Virtual Office in Wyoming."

The only legitimate way for web publishers to avoid the impact of the "Amazon Tax" is to physically move your household and your business completely out of the "Amazon Tax" state(s). As noted, moving to a place which has a sales tax but has not yet enacted an "Amazon Tax" isn't a wise strategy, because other states are likely to jump on the bandwagon. Moving out of the U.S. might avoid the "Amazon Tax" but many merchants don't accept non-US affiliates.

There are five U.S. states which don't impose sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon.

Do not play "entity games" or "address games" in order to try to avoid the impact of a state's "Amazon Tax," while remaining a resident of that state.

The original suggestion here was "If I incorporate outside of NC... Hire someone outside of NC to run my websites.. And simply collect corporate profits as a shareholder in the corporation..." and I responded to this same idea in another discussion thread: in theory, it might work, but neither your merchants nor your state's tax agency are likely to believe you.

[gcarson]

I've read that post before and I've never consulted my lawyer and / or accountant on the issue as it hasn't affected me (yet). I guess it would depend on how the law was written in a particular state but your reply doesn't address setting up a real business, with a real office that you actually go to daily (or almost daily). Not a mail drop, not a registered agent, not anything but a real office that you actually go to.

So for instance, you live in MD on the MD / DE border. Its very possible for you to have an office to go to in DE daily.

Edit: Can you point to something where it explains why you have to move your residency? So for example, Tim Storm actually moved his family from IL to WI? Or just moved his office that he goes to everyday?

[affninja]

Originally Posted by gcarson

So for instance, you live in MD on the MD / DE border. Its very possible for you to have an office to go to in DE daily.

That seems more legitimate. Like if Tim Storm had continued living in IL instead of moving to WI.

Unfortunately NV is 3 hrs and Oregon 6 hrs, so that would make a tough daily commute. Until I can afford that private jet.