Here in Colorado we’ve been battling a greedy bill from the state legislation that sought to tax all affiliate transactions by establishing a “nexus” for tax with any company that had any affiliate that sold more than $100 from that state. Effectively it would mean that all but the most unsuccessful of affiliate programs would then require those merchants to not only pay Colorado state tax on all transactions, but figure out that tax on a per city/county basis. From what I’ve heard, that’s over 400 tax zones in the state.
We fought it, I wrote letters to my representatives, and many of my friends camped out and testified in hearings, but it was obvious from their reports back to me that the zeal to raise money through closing a perceived tax “loophole” was greater than their interest in hearing how affilate merchants would leave the state, effectively meaning that there’d be no revenue and we affiliates would be screwed in the process.
The bill passed in a modified form, but Amazon.com’s Affiliate team still thinks it’s too onerous and as of today my account is shut down with them for the foreseeable future. Here’s the email I — and may other Coloradans — received:
In a nutshell, Amazon believes that the sales tax isn’t that onerous (indeed, the rise of Internet commerce has drastically affected tax revenue on transactions, as I have written about before) but that having to worry about hundreds of different taxation zones, and being potentially audited by any and all of these zones, is ridiculous.
Really, it’s something that we need to address on a Federal level. We need a Federal online sales tax that is then distributed through some sort of formula so that it’s easy to compute, easy to distribute, and helps alleviate the tax burden that brick and mortar stores face in an increasingly digital age.
Until then, well, Governor Ritter, I sure don’t appreciate losing a revenue stream because of short-sighted greed in the legislature. I encourage you and the rest of the Colorado legislatures to reconsider the issue of implementing HB-1193 and tweak it before more and more affiliates drop us hard-working small businesses or we are forced to change our corporate headquarters to be in another state that is more Internet business friendly.
Dave, what concerns me now is how many other networks will follow suite and drop Colorado affiliates. Greed blinds and no more relevant than this case. What’s amazing is how Ritter spoke at a CSIA technology conference saying that he wanted a new “technology corridor” and for all technology startups to succeed. He mentioned it was as important to the state as the oil and gas industry. It was a pillar of his election
Here’s the email I just sent to Colorado Governor Ritter:
Governor Ritter, the inevitable has occurred and Amazon.com notified me this morning that it’s cancelled my Associates account. That means that instead of generating tax revenue for the state, HB-1193 has actually cost me – and many other Coloradans – revenue, in an economy where we don’t have much leeway for paying our bills.
It’s not too late, however, because the bill still has to be interpreted and implemented. I entreat you and the legislature to consider how to work with Amazon so we don’t mark them as the first of many slowing down our economy and marking Colorado as a state unfriendly to Internet business.
I’ve also written about this issue on my business blog:
Thanks for your consideration of this important issue.
I am in Fort Collins and received the same email today.
I don’t receive much in the way of commissions from Amazon, so this doesn’t affect me much, but I’m afraid other affiliate networks will follow Amazon’s lead.
I have also sent Ritter and email and will do all I can to help defeat him no matter what political office he runs for in the future.
Southern Wyoming is looking more and more attractive 🙂
I just got into an argument with somebody over this. I think Amazon’s move is crummy because it punishes Colorado affiliates to make Amazon’s point to other state legislatures. Affiliate marketers don’t have the clout to change this law — not like the oil and gas interests who used TV ads to convince Colorado voters to defeat a proposed increase in the severance tax.
So y’all have a smaller revenue stream today, and that sucks.
However, we need to ask the larger question: why is “Internet Commerce” still treated like some fragile freakin’ flower that will wither without preferential treatment from state and local government?
We had this debate in the mid-’90s, when the industry was taking baby steps. It really doesn’t make sense now, with online purchasing huge and getting huger — and plenty of online buyers and sellers paying, collecting and remitting tax every day. It’s not that onerous, really.
I feel like commerce is commerce. If I buy a book at Tattered Cover, I pay sales tax. If I buy a MacBook at store.apple.com, I pay sales tax just as I would at FlatIron Crossing, because Apple has a brick-and-mortar presence in Colorado. By rights, if I buy a book at Amazon, I should pay sales tax. Why should Jeff Bezos be exempt?
Enormous online businesses like Amazon need to stop pretending that they’re still guys in a basement struggling to survive — or worse, pushing the burden of their political position onto real guys in real basements.
P.S. If you don’t approve of sales tax, vote for Libertarians and/or help state and local governments figure out new revenue mechanisms to pay cops, run schools and build roads. That’s an argument for another day. Today we have huge state (city, county, school district, fill in the blank) budget shortfalls, rising expenses, one of the lowest property tax burdens in the country, and TABOR constraining revenue sources.
Our legislators are more desperate than greedy.
I got my email first thing this morning too… I wish I could move out of the state, but circumstances are not appropriate at the moment… but as soon as I can I’m gonna… The sad thing is that the legislature was convinced that they would reap $4.6 million from this bill, but with affiliate programs withdrawing, they will loose that sales tax and loose the income tax that internet marketers that live in Colorado pay on their affiliate profits… a loose-loose situation… I’ve also received notice from seven other affiliate programs cutting me off, so it’s not just Amazon…
Well said Dave. Your proposal seems very fair.
Got the same email. Since this bill was introduced I have talked to somany lawmakers and it was like talking against a dead wall.
I wish Amazon would stop shipping products to Colorado residents to make a stand and to get the public notice what is going on.
I lost quite some income today + all the hundreds of hours of work to build websites and webpages that are now worth nothing. The state is going to lose a lot of revenue – for one that bill was so empty when it arrived at the governor’s desk due to modification and everyone involved in the process knew it. Second my business income is dramatically reduced which leads to lower tax incomce for the state and me spending a lot less with local merchants.
The fact is that Amazon did not have to do this. The bill that passed in Colorado is very different and unique compared to all the other bills of this kind that have passed in other states. Even though they made the statement about terminating affiliates in states that pass these kind of laws, that statement was (I thought) in the spirit of laws using the so called “affiliate nexus” ruling from New York as their foundation.
In fact, Colorado did not pass that kind of bill, and they were at least willing to listen to us and tried to spare us from being terminated by NOT mentioning the so called “affiliate nexus” in the bill. I cannot argue that the bill is controversial, but I can argue that Amazon did not have to terminate affiliates under this set of circumstances. If they had not terminated us, we would not have seen it as a recanting of their values or principles.
As Christoph stated, hundreds of hours of work is now about worthless due to this unnecessary move from Amazon. The fact is that they still have to deal with the bill in the very near future anyway, and what does terminating the affiliates here have to do with that?
Then to make the thing hurt even more, they brag in their letter that they fully intend to keep selling to Colorado residents through other channels and through the websites of other affiliates in states where there is no such law. They have tossed the associates under the bus to slow it down, but the bus is still running down the road.
Colorado’s bill, HB10-1193 is about all internet transactions, not just the ones generated by affiliates. It is really totally different and in my opinion should be challenged at some point. With no mention of affiliates or the so called “affiliate nexus”, there was no reason to terminate any accounts. Am I wrong Amazon? Then please correct me.
A national sales tax is a foolish idea because the federal government is already too big. Vote for Libertarians, or don’t vote at all.
Watching the landscape I can see a state electing a pro entrepreneurial state government that will fight for the rights of entrepreneurs. This state will be wildly successful as the productive members of society will flock to this state and not have to pay excessive taxes to incompetent politicians and bureaucrats.
The state will have a huge revenue stream, low unemployment, and happy residents.
States like Rhode Island and Colorado are making this scenario much more likely and will fall into economic disfavor by the productive folks.
I’m not sure about the details of the law, but it looks like it obligates Amazon.com to assist in collecting state level sales tax only at 2.9% for affiliate generated purchases only.
I agree that this issue could be solved in other ways, but I think Amazon.com’s move is akin to bullying. And I’m not a big fan of corporations using their affiliates, customers or others in this way.
If you are interested, you can sign this petition:
You can also contact Amazon.com directly:
I’m sorry to hear all this and I’m glad I visited this blog before I started posting to my new blog which I was planning to run from Colorado.
I live in the UK, but I am to host a blog in the US so it can rank well on google.com. Naturally, trying to make some money out of my efforts, for tax purposes I was going to register my company in Colorado state, but no longer.
Please, could you advise me which state to go for now.
I feel very sorry for all of you who put so much work into their web sites and now are hit with this new law.
Anyone know affiliates in Colorado, New York, North Carolina or other similarly affected states who do a significant amount of business? Would be interested to know if they ended up having to move or were able to find a workaround. South Carolina just announced they are discussing a similar law.